Trump: Working-class, or wealthy-class, hero?
Howard Goodman
Give Donald Trump credit. As candidate, he said he would stop Carrier, the giant maker of furnaces and air conditioners, from shipping 2,000 Indiana jobs to Mexico. And as president-elect, it looks like he has followed through.
Last week, Carrier and the Trump transition team announced that about 1,000 jobs would be staying put.
This is great news for those workers and that community. And it’s a big political win for the incoming president. Trump had crowed that his personal powers of persuasion can result in better deals for the American people, and here, more than 50 days before his inauguration, he can say he did it.
As Fortune reported, Trump called the CEO of United Technologies Corp., Carrier’s parent company, a week after the election and asked him to reconsider closing the Indianapolis plant. Trump assured the CEO that the $65 million UTC would save in cheaper Mexican labor costs would be dwarfed by the corporate tax-rate reductions Trump plans to put in place.
Stepping in to save the Carrier jobs could prove as potent symbolically for Trump as firing striking air-traffic controllers did for first-term President Ronald Reagan. That move in 1981 let labor unions know their power was ending. This time, it’s corporations that are meant to get the message: Try moving your plants overseas, and the White House will call you out.
“Companies are not going to leave the United States anymore without consequences,” Trump declared at a victory visit to the Carrier plant in Indianapolis on Thursday. “Not gonna happen. Not gonna happen.”
But in this case, what consequences is Trump talking about?
For months, he talked tough about slapping stiff tariffs on Carrier if it tried to sell made-in-Mexico furnaces in the U.S. But his actual negotiating technique was to offer sweeteners, mostly from the state of Indiana and its still-governor, Mike Pence: $7 million in tax incentives from Indiana along with Trump’s promise to reduce federal regulations and taxes on corporations. In exchange, Carrier makes a $16 million investment in its facility.
United Technologies had good reason to stay on Trump’s good side. Big in aerospace and defense, the company collects about $5.6 billion from the government every year, about 10 percent of its overall revenue.
Trump snared a triumph for those 1,000 workers. But as Sen. Bernie Sanders of Vermont wrote in the Washington Post, “Instead of a damn tax, the company will be rewarded with a damn tax cut!”
Obviously, you can’t give incentives to every company that threatens to pull up stakes — soon, every company will make the threat. Nor can you endlessly slash regulations without incurring huge public costs. If the price of reviving coal-country jobs is a rise in CO2 levels, that’s too much to pay.
Yet Trump clearly is on to something. The fervor of his supporters shows how much thirst there’s been for a national leader to stand tall for the little guy. For too long, the political classes simply stood by as manufacturers fled for lower-wage countries and registered huge profits while the working class and middle class lost ground. If he can slow the exodus over the next few years, that’s a good thing for the country.
And if Trump follows through on his vow to spend $1 trillion to rebuild roads, bridges, tunnels, airports, water systems and other infrastructure, that could be better still. If he succeeds in tweaking trade deals like NAFTA to get more favorable terms for American workers, even better. The luxury-loving billionaire would indeed turn out to be a middle-class hero.
The potential is there. Trump owes so little to anyone else in politics, his one-of-a-kind presidency is in position to upset the prevailing orthodoxies of the Republican Party as well as the Democrats.
A Hillary Clinton or Barack Obama could not so easily interfere with a corporation’s operations; they’d be accused of meddling in free enterprise. Remember how George W. Bush and Obama were criticized for saving Detroit’s auto industry — by, among others, Mitt Romney (the son of the chairman of an automaker!) and by Trump, once he became a candidate? That taxpayer-funded bailout, which the revived industry largely paid back, produced some 250,000 jobs.
Trump will never be accused of hating capitalism. He has all the political cover he needs to make American corporations remember that they have a patriotic duty to the country that gave them the ability to prosper.
So it’s within Trump’s means to surprise a lot of his critics and actually deliver for those “forgotten Americans” he cultivated on the campaign trail.
But the president-elect has a funny way of being a populist. He is in the midst of appointing the wealthiest presidential cabinet in American history.
His ambitions for rebuilding America’s infrastructure could put him on a par with President Franklin D. Roosevelt and the New Deal — if he weren’t talking about privatizing the whole thing. Instead of having the federal government borrow the $1 trillion at cheap rates, he wants to give businesses billions in tax credits for approved projects, which they’d end up owning.
This would be crony capitalism writ large, allowing wealthy pals of the president to get even richer and turning public assets like highways into private profit centers.
His pick for health and human services secre- tary, Rep. Tom Price, of Georgia, wants to kill Obamacare and roll back Medicaid expansion. He supports Rep. Paul Ryan’s Scrooge-like scheme to turn Medicare into a voucher system — reckless ideas that would seriously hurt the very people who voted Trump in.
His nominee for Treasury comes straight from Goldman Sachs — the very death star of the “global elites” Trump railed against on the campaign trail. Steven Mnuchin did tell CNBC there will be “no absolute tax cut for the upper class” and that Trump’s proposed tax cuts will primarily serve the middle class. But that’s the very opposite of the tax breaks for the rich that congressional Republicans want.
And the quote doesn’t square with the nonpartisan Tax Policy Center’s analysis of Trump’s tax plan, which found that the highest 0.1 percent of taxpayers would gain 14 percent in after-tax income; the middle tier of taxpayers, less than 2 percent.
Put another way, if you are in the top 0.1 percent, Trump would save you over $1 million in yearly federal taxes. If you are in the middle tier, you save an average $1,010. And almost 8 million middle-class families with children, most of them headed by single mothers, would actually pay more income tax, the Tax Policy Center found.
For Trump, saving those jobs is grand theater. But away from the spotlight, his administration looks ready to shred the safety net that working people desperately depend on and to stack tax policy even more in favor of the super-rich. Whenever the wizard is talking, it’s best to look behind the curtain.