Donald Trump’s Carrier Deal Is A Model For Crony Capitalism

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Before Election Day, the corporate owners of Carrier wanted to close their Indianapolis plants and manufacture furnaces in Mexico. Reality show star-turned-President elect Donald Trump wanted Carrier to keep those jobs in America, and on Tuesday he tweeted in triumph to let America know that the jobs are saved, yay!

But as always with Trump, this apparent victory is less substantial than it appears — and also different in character than what is being presented. As Sen. Bernie Sanders writes in an op-ed at the Washington Post today, “Trump has endangered the jobs of workers who were previously safe in the United States.”

Why? Because he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives. Even corporations that weren’t thinking of offshoring jobs will most probably be re-evaluating their stance this morning. And who would pay for the high cost for tax cuts that go to the richest businessmen in America? The working class of America.  

There are three salient facts to know here. First, only 1,000 Carrier workers will get to keep their jobs, so more than half the original 2,100-strong workforce is still out of work. Second, because Mike Pence never stopped being governor of Indiana to run for Vice President, he can throw taxpayer money at the situation. And lastly, Carrier’s executives seem to understand that Trump has their best interests in mind — not the workers.

In exchange for keeping the factory running in Indianapolis, Mr. Trump and Mr. Pence are expected to reiterate their campaign pledges to be friendlier to businesses by easing regulations and overhauling the corporate tax code, according to a spokeswoman for Mr. Trump.

The state of Indiana also plans to give economic incentives to Carrier as part of the deal to stay, according to local officials.

Where once he vowed to make Carrier “pay a damn tax,” now Trump is doing just the opposite. Contrary to all that tough campaign talk about confronting United Technologies, the parent company of Carrier, Trump has switched from stick to carrot. Sen. Sanders is angry about it, saying that “United Technologies took Trump hostage and won.” But is that really the case?

These kinds of ‘incentives’ are not new. Since the 1980s, southern states have used them to win the manufacturing jobs that have drained out of the Rust Belt, competing with Mexico and China in the corporate relocation game. But tax abatements are hardly the sweetest morsel Trump has apparently offered Carrier’s executives. You see, company boardrooms will only give up two pennies a share in profits for something really special — like, say, a welcome mat at the White House.

The other concession under discussion, according to the Journal, is indulging the company’s desire for favorable changes to the tax code. One particular offer could be a tax holiday on overseas profits, given that United Technologies held 85 percent of its total cash, coming to more than $6 billion, overseas as of the end of last year.

Profits will be privatized, costs socialized, and politicians patronized. This is the definition of crony capitalism, and it will be a feature of the Trump administration, not a bug.

In order to consecrate their triumph, Trump and Pence are having a big photo-op today with Carrier workers. These men and women are understandably happy to keep their jobs now, whatever the cost they must pay later as taxes for the privilege of not being put on the unemployment line. At least not immediately, like so many of their colleagues. Only time will truly tell, and by then Trump will be untouchable.

As Prince Potemkin set up cardboard villages to greet Catherine the Great wherever she traveled, Trump can reproduce this optical illusion of a manufacturing renaissance over and over again if he wants. There is certainly no shortage of outbound businesses in America, or even just in Mike Pence’s home state. Actually, there are so many Indiana factory workforces in trouble right now that they already compete for the attention of the new administration.

Trump hasn’t said anything about Rexnord, and the company said after the election that it was committed to its offshoring plan.

Sen. Joe Donnelly (D-Ind.) told The Huffington Post that he had a meeting earlier this month with the company to see if anything could be done to make it stay in Indiana.

“There was very little interest,” Donnelly said.

[…] Chuck Jones, president of the United Steelworkers Local 1999, which represents workers at both Rexnord and Carrier, said he hopes he gets a chance to tell Trump about Rexnord on Thursday.

“It’s wonderful that he got involved, that these jobs look like they’re going to be saved, but there’s a lot more after it that’s soon to go,” Jones said in an interview.

These optics will surely delight White House strategist Steve Bannon, who aims to assert a new economic nationalism on a resistant Republican Party. Donald Trump will see a boost in his approval ratings when media report the good news without caveats or context. Yet American manufacturing jobs will continue bleeding away, while those which remain shall increasingly be only the ones that serve Donald Trump’s interests. See how that works?

Carrier has built a new plant outside of Monterrey, Mexico. The mayor of Santa Catarina, the suburb where the plant is located, said he expects the factory to open.

“Carrier announced an important investment, to generate 2,000 jobs, and I expect the Carrier plant to continue working in a normal manner, and I hope soon to see some official communication from the company,” Mayor Hector Castillo Olivares told The Washington Post.

When push comes to shove, the new president wants to be loved, not feared. In his mind, power is inseparable from profit.

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