Guest Opinion: Carrier deal bad for free markets
President-elect Donald Trump’s negotiated deal with the Carrier heating, air-conditioning and refrigeration company to keep hundreds of manufacturing jobs in Indiana, altering the company’s prior plan to move those jobs to Mexico, may have been a brilliant political move, but it does not bode well for free markets and the principle of equal treatment under the law.
Under the deal, the company agreed to maintain roughly 800 of the 1,400 workers at its Indianapolis plant and invest $16 million in its Indiana operations in exchange for $7 million in state tax credits over a 10-year period. So, even before he takes office, Trump has not only started to make good on his campaign promise to keep manufacturing jobs in the country — and to threaten companies that move their operations abroad with a stiff 35 percent tariff on goods imported back to U.S. — he has crafted an image of himself as a white knight riding in to save hundreds of blue-collar, American Heartland jobs just before Christmas.
Yet, about 600 jobs will still be relocated to Mexico, as will 700 additional jobs at the Huntington, Ind., factory of Carrier’s parent company, United Technologies, which was not part of the deal. In addition, that $16 million investment in the Indianapolis plant will be used “to automate to drive the cost down so that we can continue to be competitive,” United Technologies CEO Greg Hayes explained last week during an interview on CNBC’s “Mad Money with Jim Cramer.” “But what that ultimately means is there will be fewer jobs.”
What was likely a larger concern for the company was the fact that United Technologies derives about 10 percent of its revenues — somewhere between $5 billion and $6 billion — from the U.S. government, particularly defense contracts. This would explain why it gave up an expected $65 million in savings from completely relocating to Mexico in exchange for $7 million in tax incentives, which is similar to a package it had already rejected earlier in the year.
The deal serves as a terrible lesson that businesses will be subject to the capricious rule of the government, not equal treatment under the law. And while it may preserve hundreds of American jobs — at least, temporarily — it will also ensure that the prices of Carrier air-conditioners, furnaces and other products remain higher than they otherwise would be. This harms countless individual and small-business consumers, and ultimately makes Carrier less competitive, threatening the company’s future growth and employment prospects. But that is a much more difficult photo op than the sympathetic worker who just found out he won’t have to spend the holidays looking through “Help Wanted” ads.
It is not that we are unsympathetic to the poor workers who suddenly find out that their jobs may be moving south of the border, but we have to consider the larger picture, both in terms of the long-term economic damage and the harm to the rule of law, that such a feel-good policy entails.
Rather than berating, threatening or bribing businesses to stay, the Trump administration would do much better to focus on the taxes, regulations and other policies that unnecessarily raise the costs of doing business and prompt companies to seek out greener pastures in the first place. Removing these barriers would truly lead to economic growth — for all businesses.