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DividedQuantum
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Donald Trump's deal for American jobs doesn't look as good in the light of day
#23884099 - 12/01/16 10:14 AM (7 years, 1 month ago) |
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Quote:
Donald Trump’s deal for American jobs doesn’t look as good in the light of day
by Tim Fernholz
http://qz.com/849078/donald-trumps-deal-with-carrier-for-american-jobs-doesnt-look-as-good-in-the-light-of-day/
President-elect Donald Trump and his future VP Mike Pence will say today that they convinced the Carrier Corporation to keep 800 jobs in the US rather than move them to Mexico, but their deal demonstrates how much leverage corporations have to force the president-elect to do their bidding.
Another way to put it is that Carrier will move 1,300 jobs to Mexico, keep 800 in the United States, and be paid for their troubles. The heating and air conditioner company’s original plan, was to close two plants in Indiana and move their workforce to facilities in Mexico. There, they could pay workers as much as $23 less per hour, for a potential income loss of $67 million, state officials estimated, and a total loss of $108 million in the surrounding economy.
Trump made the loss of the Carrier plants a theme of his campaign and promised to save every job. Now, after talks with Carrier’s parent company, United Technologies (UTC), they’ll be keeping a furnace manufacturing plant open, a true win for the 800 workers who keep their jobs, but laying off 600 workers there, and closing an electronics factory where 700 people work, still a painful loss for their community. As details have leaked about the deal made to preserve those jobs, its broader aspects aren’t very reassuring. Here’s what’s at play:
State tax breaks
The most tangible part of the deal is an as-yet unspecified set of tax breaks for the company negotiated by Pence, still the governor of Indiana. Pence’s ability to do this now raises questions about what he was doing about this issue as governor for the previous year. Regardless, it is a classic move for state leaders when companies aim to leave town—throw money at them. And it sends a message to any company: Threaten to leave town, and you’ll get paid. Relying on subsidies like these rather than market forces is something that conservatives like Pence often call “picking winners” when they’re not doing it.
The Wall Street Journal reports that the tax breaks come out to $7 million over ten years, or about $7,000 per job. That’s clearly not going to make up the cost savings implied by the move, so there are other factors to consider.
Threats
It’s more than just bad publicity. UTC’s other divisions make jet engines and other airplane parts, and the company earns billions of dollars from contracts with the federal government. Indiana officials have speculated that the company is accepting a loss in the Carrier matter in order to protect its more lucrative arrangements. Populists like Senator Bernie Sanders have praised holding contractors accountable for keeping jobs in the US, but at least they hope to codify a legal standard limiting contracts for companies that outsource jobs. Trump’s ad-hoc system promises crony capitalism instead.
“Imagine giving an administration the potential to rule whether a given transfer of funds would endanger job creation or job maintenance in the United States,” economist Tyler Cowen writes. “That’s not exactly an objective standard, and so every capital transfer decision would be subject to the arbitrary diktats of politicians and bureaucrats. It’s not hard to imagine a Trump administration using such regulations to reward supportive businesses and to punish opponents.”
Promises of huge federal tax cuts
The final piece of Trump’s seduction was the promise that his administration will cut taxes to save major multinational companies like UTC hundreds of millions of dollars, far more than could be saved by moving workers to Mexico. It’s important to think about what this mean for workers. Trump has promised to reduce the top corporate tax rate by 20 percentage points to 15%, and create a special low repatriation rate to encourage companies to bring home overseas cash they have deferred taxes on. He hopes these policies will increase business investment in the US, and jobs.
Yet if there’s one thing we learned from George W. Bush’s repatriation holiday in 2004, it’s that it didn’t bring back US jobs (paywall). Corporations believe that they will be able to wait for the next repatriation holiday if they are patient enough. Congress is also likely to look askance at a repatriation holiday: Republicans there have been working on a more drastic overhaul that would end taxes on the foreign income of US companies entirely. Advocates of such a “territorial” system—like Trump transition official Curtis Dubay—argue that this system is neutral, and will neither encourage nor discourage investment in the US.
But many economists point out that even with lower rates in the US, American companies will still be able to find lower taxes and cheaper workers abroad. If the current system leads corporations to send money abroad simply because they hope they can defer it into the future, a system where they know it will be untaxed is likely to encourage further investment outside the US. Republicans recognize this threat, and intend to tax perhaps 5% of foreign income. Tax fairness advocates and labor leaders fear that this is not enough, and will simply empower the tools that major corporations are using to shift profits and jobs overseas already.
***
Ultimately, 1,000 jobs are still less than 1% of what the US economy created last month. To solve the US jobs problem, broader solutions will be needed, from education to infrastructure to, yes, sensible corporate tax reform. So far, Trump’s deal-making skills in this arena appear to be mostly giving corporations what they want; in this case, cash out of the public coffers. The hope is that by doing so, the companies will decide to create jobs in the US. The fear is that they will take the money, and run.
As Carrier ominously noted in its statement on the deal, “This agreement in no way diminishes our belief in the benefits of free trade and that the forces of globalization will continue to require solutions for the long-term competitiveness of the US and of American workers moving forward.”
This post has been updated with the latest details of the Carrier negotiations.
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Tmethyl
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: DividedQuantum]
#23884154 - 12/01/16 10:37 AM (7 years, 1 month ago) |
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I'd like to say I'm surprised.
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qman
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: Tmethyl] 1
#23884208 - 12/01/16 11:06 AM (7 years, 1 month ago) |
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Because the better alternative is to bend over and take it up the ass like Clinton, Bush and Obama did the past 30 years?
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qman
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: qman] 1
#23884224 - 12/01/16 11:12 AM (7 years, 1 month ago) |
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And what kind of jobs has the US economy been creating the past 8 years? Low wage and part-time, that doesn't create economic prosperity.
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DividedQuantum
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: qman]
#23884239 - 12/01/16 11:21 AM (7 years, 1 month ago) |
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Well I really think this is window-dressing. It's propaganda. I mean, come on, 800 jobs is nothing in a country in which tens of millions are unemployed or underemployed, not to mention the disingenuousness in the fact that 1,300 of the 2,100 jobs in question are going to Mexico. This is more Trump bullshit, and we're going to see a lot of it coming up.
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qman
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: DividedQuantum]
#23884259 - 12/01/16 11:31 AM (7 years, 1 month ago) |
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Quote:
DividedQuantum said: Well I really think this is window-dressing. It's propaganda. I mean, come on, 800 jobs is nothing in a country in which tens of millions are unemployed or underemployed, not to mention the disingenuousness in the fact that 1,300 of the 2,100 jobs in question are going to Mexico. This is more Trump bullshit, and we're going to see a lot of it coming up.
Of course it's political rhetoric, by at LEAST the issue of outsourcing of jobs has come into focus for the population.
Would you prefer to just not even discuss the subject that is causing the deterioration of the US middle class?
Bush said it was "good" to ship manufacturing jobs out of the US because the US was going to be a "high tech" economy, how did that workout?
Obama said NOTHING about the issue for 8 years, in fact he promoted the worst trade deal (TPP) in US history!!
BTW, did anyone claim this single act was going to save the US economy or are you just using a straw man argument?
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DividedQuantum
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: qman]
#23884330 - 12/01/16 12:08 PM (7 years, 1 month ago) |
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No, I just think it's one of the early manifestations of the impossibility of Trump living up to his campaign promises. Easily ninety percent of what he said he would do is administratively impossible in Washington. Yeah, he's acknowledging the issue, but government isn't business, and there's not a lot he's going to be able to do about it, frankly. Just another hollow promise. It's perfectly legal for companies to move elsewhere, and most of the ones that want to will do so.
You also speak as if outsourcing has been invisible for the last several years, and it hasn't. People talk about it all the time, and there's nothing anyone can do about it. And some ridiculous tariff is not going to fly domestically or internationally.
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qman
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: DividedQuantum]
#23884550 - 12/01/16 01:46 PM (7 years, 1 month ago) |
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DividedQuantum said: No, I just think it's one of the early manifestations of the impossibility of Trump living up to his campaign promises. Easily ninety percent of what he said he would do is administratively impossible in Washington. Yeah, he's acknowledging the issue, but government isn't business, and there's not a lot he's going to be able to do about it, frankly. Just another hollow promise. It's perfectly legal for companies to move elsewhere, and most of the ones that want to will do so.
You also speak as if outsourcing has been invisible for the last several years, and it hasn't. People talk about it all the time, and there's nothing anyone can do about it. And some ridiculous tariff is not going to fly domestically or internationally.
"ridiculous tariff"
It doesn't have to be ridiculous. just tie it into a balance of trade. Once the trade deficit is balanced, all is well again. How long do you think we can function with almost a $1 trillion trade deficit per year?
There's a breaking point, either we address it or nature will address it. When nature addresses the unbalances it won't be pretty.
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DividedQuantum
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: qman]
#23884621 - 12/01/16 02:07 PM (7 years, 1 month ago) |
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Maybe so, but there's the possibility that a tariff could do more damage to the economy than allowing the trade situation to remain the same. You're right that we have to address the trade deficit. I have yet to be shown that a tariff would accomplish that.
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finalexplosion
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: qman] 1
#23884653 - 12/01/16 02:22 PM (7 years, 1 month ago) |
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qman said: Because the better alternative is to bend over and take it up the ass like Clinton, Bush and Obama did the past 30 years?
The cucks want to bitch and complain by doing nothing. If he is getting a single fucking job back here in America, the greatest country in the world, it is one more job America did not have beforehand thank you Obama & Clinton admin.
If Clinton is in office, we are in a war with Russia.
-------------------- The light of wisdom is driving away the darkness. Look at the ground. Now you can see your own shadow. If you are scared by the shadow that follows you, just remember, wherever shadows fall, light is always nearby.
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qman
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: DividedQuantum]
#23884674 - 12/01/16 02:30 PM (7 years, 1 month ago) |
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Quote:
DividedQuantum said: Maybe so, but there's the possibility that a tariff could do more damage to the economy than allowing the trade situation to remain the same. You're right that we have to address the trade deficit. I have yet to be shown that a tariff would accomplish that.
"do more damage to the economy"
It would damage the high profit margins generated by the corporate elite, but it would give employment and higher wages to US workers.
"allowing the trade situation to remain the same"
It you want low wages, high unemployment and strong profits margins, then yes you want the status quo.
You do realize that when US workers lose jobs and real wages decline a demand problem results? That demand issue is beginning to affect they very corporate elites that have instituted the policy!!
This issue will resolve itself with or without government intervention.
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DividedQuantum
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: qman]
#23884872 - 12/01/16 03:26 PM (7 years, 1 month ago) |
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I'm not arguing for the status quo, I was simply saying that it might be safer than instituting a tariff, which could have a chain of consequences that weren't envisioned.
And yes, I realize that as the middle-class shrinks there's a demand problem. I agree that it will resolve itself one way or another, a phenomenon that historically has not been pretty.
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SirTripAlot
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: DividedQuantum]
#23885175 - 12/01/16 04:56 PM (7 years, 1 month ago) |
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Yes its only 800 jobs....if one were in that family however, having said job saved is meaningful than us on the outside, counting.
What I do like about this is the direct contact or the willingness for the executive to directly communicate with Carrier. There is a far road to hoe....time will see if this type of communication will be continual and effective.
-------------------- “I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.”
Edited by SirTripAlot (12/01/16 04:57 PM)
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Falcon91Wolvrn03
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: DividedQuantum]
#23885878 - 12/01/16 09:15 PM (7 years, 1 month ago) |
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I think the media is being overly critical of Trump for this (and most of the things he does). When he does something seriously wrong, that's the time to raise a stink.
-------------------- I am in a minority on the shroomery, as I frequently defend the opposing side when they have a point about something or when my side make believes something about them. I also attack my side if I think they're wrong. People here get very confused by that and think it means I prefer the other side.
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DividedQuantum
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: Falcon91Wolvrn03]
#23885917 - 12/01/16 09:25 PM (7 years, 1 month ago) |
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You might be right, but I think it illustrates the overall futility of one of the pillars of Trump's campaign. He's not going to be able to stop the continued off-shoring of jobs. If he thinks he's going to do it by negotiating on business-terms he's wrong, because government is not business. He can't just make economic deals without congressional approval.
I think we're finding out already that Trump's vision and the sober reality of modern politics are not compatible. You feel we should cut him some slack, and that's fine, but I feel that it's not trivial to point out that some fundamental deficiencies are appearing in Trump's agenda before he's even been inaugurated.
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Crumist
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: DividedQuantum]
#23889591 - 12/03/16 02:37 AM (7 years, 1 month ago) |
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I'll leave this here.
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hostileuniverse
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: Crumist]
#23889854 - 12/03/16 07:48 AM (7 years, 1 month ago) |
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How interesting it leaves out the last 15 years
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The Ecstatic
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: qman] 1
#23889980 - 12/03/16 09:13 AM (7 years, 1 month ago) |
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qman said: Because the better alternative is to bend over and take it up the ass like Clinton, Bush and Obama did the past 30 years?
Take it up the ass like giving corporations the green light on threatening to move overseas?
He just told every business in the nation that you'll get a hefty tax break if you just keep half the jobs for a few more years.
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qman
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: The Ecstatic]
#23890007 - 12/03/16 09:22 AM (7 years, 1 month ago) |
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The Ecstatic said:
Quote:
qman said: Because the better alternative is to bend over and take it up the ass like Clinton, Bush and Obama did the past 30 years?
Take it up the ass like giving corporations the green light on threatening to move overseas?
He just told every business in the nation that you'll get a hefty tax break if you just keep half the jobs for a few more years.
"green light on threatening to move overseas"
Yeah, because they already haven't been moving out the last 30 years. 
"get a hefty tax break it you just keep half the jobs"
Whatever it takes, keeping jobs in the US should be a #1 priority, this sitting back a watching the destruction of the middle class isn't going to work anymore.
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The Ecstatic
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Re: Donald Trump's deal for American jobs doesn't look as good in the light of day [Re: qman]
#23890017 - 12/03/16 09:26 AM (7 years, 1 month ago) |
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So shifting even more of the tax burden onto them is gonna save them?
Trump isnt going to save these jobs. And neither is crony capitalism.
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