Carrier Dust

The initial “cloud of dust” that surrounds breaking news can obscure some of the facts that become apparent if you just wait a bit. This happened in the case of the jobs saved at the Carrier plant in Indianapolis, Indiana. Let’s explore.

Back in February Carrier announced that it was going to shutter its plant in Indianapolis and move its operations to Monterrey, Mexico. That would have put some 1,500 to 2,000 Hoosiers on the street without a job. On December 1st President-elect Donald Trump and Vice President-elect Mike Pence (who not coincidentally is at that point still the Governor of Indiana for a few more days) visited the plant to announce that they had brokered a deal with Carrier saving 1,100 jobs, possibly a few more. No details of the deal were given other than Trump had gotten on the phone with the big boys at Carrier. The obvious implication was that Trump would make an effort and make deals that the lazy, incompetents like Obama were simply unwilling or unable to do. All it took was this smart guy to pick up the phone and your jobs are secure forever. Well, look again.

The shine started to come off the “apple” when it was leaked that Carrier had been given a $7 million incentive package to keep the jobs in Indiana. $5 million of that was in the form of tax credits to be used over the next decade. The other $2 million consisted of grants that were tied to Carrier’s investment in the plant, (more about that investment later.)

The outcry, especially from conservatives (the real conservatives not the right winger who have appropriated the term) was this was a giveaway of tax dollars that simply could not continue to be repeated and would only incentivize other companies to threaten to move jobs in anticipation of an incentive package.

There appears to have been a “stick” (as well as the incentive) “carrot” in this deal. Carrier’s parent corporation is United Technologies which does significant business with the federal government. It is safe to assume that Trump threatened to use his influence to cancel those contracts. In reality Trump probably couldn’t cancel current contracts but if the President has it out for a company I can see how that would adversely affect their ability to be awarded future federal government contracts and so could United Technologies. For that part of the gambit I compliment the President-elect.

Things started to even more sour for Trump and company when multiple sources revealed that the total of jobs saved was more in the neighborhood of 800. Trump’s reaction was to unleash two nasty tweets about United Steel Workers Local 1999 President Chuck Jones after Jones told the truth on him when he said Trump, “Lied his ass off.”

One of the conditions for receiving the $7 million is that jobs have to be preserved – although importantly no time frame is specified – and an investment must be made in the plant. Carrier announced they would be making a significant investment in the plant by developing robots that would eventually replace most of the 800 workers whose jobs Trump had just “saved”. In case you got lost in the details: Carrier is going to use the $7 million in Indiana taxpayers’ money to develop, purchase and install machines that will replace those 800 workers/Indiana taxpayers.

It is wonderful that 700 or 800 jobs were saved albeit temporarily. The problem (in addition to Trump’s lies) is that the solution is neither scalable nor sustainable. During the last 80 months under President Obama the economy has averaged creating 187,500 jobs per month. At 800 a day that is still only 24,000 jobs per month. Keep in mind that I think the recovery under Obama has been too slow and too jobless. Not every jobs deal will have the stick component this one did so the monetary cost will be considerably higher.

Unions, workers and wages are not the primary challenges. The economy is becoming increasingly global and automated. As long as those at the top place greed above everything else and want to eliminate labor in favor of automation – discarding people like so much trash – huge numbers of low and unskilled manufacturing jobs are not coming back.

Many of those on the factory floor who cheered Trump and Pence those few days ago thinking their jobs were saved now feel very differently when they learned that their jobs either weren’t being saved or weren’t being saved for long.

There is a lot of buyer’s remorse coming for Trump voters in the Rust Belt. Deceit and tweets won’t solve this problem and bribes will prove to be money wasted. The dust is settling and Trump isn’t looking like much of a genius or hero!

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