USA TODAY International Edition
Boon for Carrier workers could have chilling effects
You’ve got to hand it to Donald Trump. He said he’d save American manufacturing jobs at a Carrier factory in Indiana, and he has delivered on that campaign promise even before he takes office. The air conditioner maker now says that it will retain 1,000 jobs slated to move to Mexico.
That’s terrific pre- Christmas news for workers at the Carrier plant, and the president- elect traveled to Indianapolis on Thursday to announce the deal and warn that other companies would not leave U. S. shores “without consequences.”
Amid the powerful symbolism and celebratory atmosphere, however, it’s important to put the deal in context.
For one thing, this kind of jawboning will be difficult to replicate elsewhere. Carrier happens to be in the home state of Gov. Mike Pence, the vice- president elect, and its parent company, United Technologies, is a major defense contractor that can’t afford to alienate a big customer, the federal government.
Even if the deal could be easily replicated, Trump would have to do 804 Carrier deals to match the number of manufacturing jobs created since 2010, as White House spokesman Josh Ernest pointed out. In fact, Trump would need to repeat his Carrier feat 5,379 times to make up for the net loss in manufacturing jobs in the last 18 years — including the jobs gained since 2010.
By making a play for these 1,000 Carrier jobs — with $ 7 million in tax breaks offered by the state — Trump could make companies think twice about moving jobs abroad. But he could also be creating potential problems.
For starters, he is creating false hope that will come back to bite each time a factory cuts jobs or the Labor Department reports a decline in the manufacturing economy. The simple truth is that manufacturing employment is likely to be flat or declining for the foreseeable future thanks to the strong dollar, which makes U. S.- made goods less competitive.
The Carrier deal could also create an endless line of imitators, just as settling lawsuits can invite more lawsuits. If a state or the federal government cuts a special arrangement with an individual company, others will come forward, wanting in on the action. This is actually happening within the United States, as companies play one state against another to see which will give it bigger breaks to stay or relocate.
Pressure from the White House might also make companies reluctant to invest in the United States if they think they won’t be ably to respond to rapidly changing business conditions.
Job losses in manufacturing are a painful reality driven by automation, globalization and the strong dollar. The best way to mitigate these relentless trends is not through individual interventions but to reduce and simplify corporate taxes.
Trump’s proposal, to reduce the maximum corporate tax from 35% to 15%, merits serious consideration as a way to make U. S. companies more competitive. If Trump could pull off such sweeping tax reform, he would not bring back the millions of manufacturing jobs lost in the last two decades, but he might slow the losses in a way that doesn’t require heavy- handed intervention from Washington.