Mike Pence and Donald Trump touring the Carrier plant on Thursday. (Photo by Jabin Botsford/The Washington Post via Getty Images)
On Tuesday, President-Elect Donald Trump announced some very good news for roughly 1,000 factory workers in Indianapolis: After talking to executives at conglomerate United Technologies, which owns the air conditioner manufacturing company Carrier, Trump had persuaded them to not move the factory to Mexico as planned. Trump hasn't even taken office yet, and here he was saving jobs, keeping manufacturing in the US, fulfilling one of the core ideas of his campaign. He was cheered on the factory floor when he toured the place on Thursday, reported the New York Times.
"This is the way it's going to be," Trump told that paper. "Corporate America is going to have to understand that we have to take care of our workers also.
To get this PR coup, Trump and his vice president, Indiana Governor Mike Pence, had to take care of corporate America: The state of Indiana gave Carrier $7 million in tax breaks and incentives in exchange for keeping the plant in its current location. (United Technologies likely also wanted to maintain good relations with the incoming administration, since Carrier's parent company gets billions in Pentagon contracts.) And that, economists say, is the cloud hovering over this silver lining.
It's nice that jobs have been saved, but what do you do about the other companies set to leave the country for cheaper pastures? What about the 300 or so workers at a nearby Indianapolis factory whose jobs are Mexico-bound? Or the 1,300 workers at that Carrier facility whose livelihoods weren't saved by Trump? As the economist Jared Bernstein wrote, does this mean that the government is now in the habit of subsidizing factories the way, say, France subsidizes organic yogurt farms? Has Trump, as Bernie Sanders said in an op-ed, "signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives"?
Cladue Barfield, a trade policy specialist at the conservative American Enterprise Institute, told me he has a number of problems with the deal. The government cutting deals with individual companies or industries is the kind of "crony capitalism" true free marketeers reject, but more broadly, Trump is "certainly not going to bring back jobs through trade policy." Most of the manufacturing jobs lost in the last few decades have disappeared because automation has made them unnecessary—and that's not something Trump, or anyone, can negotiate away.
The government could help retrain workers, Barfield suggested, and help them by making adjustments to the social safety net—but he acknowledged that this is far from a perfect solution when it comes to middle-aged or older people who might have difficulty learning new skills and aren't as open to, say, moving to areas where there's more economic opportunity. That's a hard, hard thing to tell those older workers, however. "I think it's not likely that people will be this honest if they're running for office in northern Indiana or southern Ohio or someplace, but there's not a lot, at that point, that you can do," Barfield told me.
Josh Bivens is the research and policy director at the Economics Policy Institute, a left-leaning think tank on the other end of the spectrum from the American Enterprise Institute. He agrees with Barfield that the Carrier deal wasn't a recipe for the economy as a whole, however. "A world in which your job depends on whether or not you're useful as a public relations prop for the President is not a recipe for broad-based security," Bivens wrote on the EPI website.
I called Bivens and asked him what the federal government could do if it were serious about protecting the manufacturing industry as a whole. For starters, he said, the US could combat the currency manipulation measures of countries like China, which make their products cheaper than American-manufactured goods. (Trump brought up Chinese currency manipulation many times on the campaign trail.) "I hope he would focus on the currency issue" rather than trade agreements or tariffs, Bivens said. "If policymakers could focus on the currency issue, they might actually get somewhere."
Another way to create jobs and boost the economy would be to embark upon the kind of massive infrastructure program that many experts say the country needs. To help manufacturing in Indiana, Bivens told me, rather than giving Carrier $7 million, "I'd build roads and bridges and public buildings that were needed and used a lot of manufacturing inputs. That would not only help create jobs in manufacturing, it would give the state an actual economic asset."
Trump has promised an infrastructure program, but many economists are skeptical of the details, which involve giving tax breaks to private companies that want to build toll roads and bridges.
" often tackle the right things, but kind of screw it up," said Bernstein, a senior fellow at the Center on Budget and Policy Priorities. "It's actually sorta hard to screw up an infrastructure program. You actually have to bend yourself into a pretzel not to simply allocate money for public goods, and yet that's what they've done."
"If Obama tried to do this, I guarantee Republicans would pillory him as a horrible socialist who was rejecting capitalism and globalization."
–Jared Bernstein
But these kinds of policies—the difference between infrastructure plans, the mechanism by which currencies are manipulated—can seem a bit abstract, as economic policy often does. And the effects of government interventions in the private sector are often not obvious to ordinary people. This week, Sam Stein of the Huffington Post called up a variety of Indiana businesses who had benefitted from government contracts doled out under Barack Obama's stimulus package. Many of them didn't know where the money had come from. The Obama administration's bailout of the auto industry saved 1.5 million jobs according to one study, but it was a less obvious PR victory than Trump's much, much smaller Carrier deal.
"If Obama tried to do this, I guarantee Republicans would pillory him as a horrible socialist who was rejecting capitalism and globalization," said Bernstein, who was a member of the Obama administration's economics team in the aftermath of the financial crisis. "At that point the unemployment rate was 7 percent headed for 10. It's much harder to convince people that your interventions are working when the message is, 'Yes the unemployment rate went to 10 percent but absent our intervention it would have gone to 12.'"
Steven Mnuchin, the former Goldman Sachs banker Trump has nominated to run the Treasury Department, has said that the administration will continue to negotiate directly with businesses to keep jobs in the US. Giving corporate handouts to companies on a case-by-case basis and saving jobs depending on which factory captures Trump's personal attention that day seems like a shoddy, piecemeal economic plan to say the least.
Trump's political talent, however, is that he understands the sort of gesture that catches the public's imagination. He knows people like thinking with their hearts and with their guts. Creating 178,000 jobs—the number that the US economy added in November—is a matter for a spreadsheet. Saving a single job means that you can point to a hard-working middle-aged laborer supporting a family and say, "Look everyone, I rescued him!" And you wouldn't be wrong.
"This is really smart politics on Trump's part," Bernstein said. "These are jobs for real people that he saved. That is unquestionably great for them. One can easily imagine someone who lost one of these $20- to $25-an-hour jobs at the Carrier plant having far inferior alternative opportunities... My point is that this is not a sustainable, expandable, systemic approach to pushing back on the downsides of globalization."
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