Friday, December 2, 2016

The Carrier Deal

Let me begin this blogpost with an apology to any of you who hate economics. I do too, actually. But, every once in a while something happens which forces me, kicking and screaming, to examine the murky world of tax and spending policy, subjects about which I am certainly no expert. So, much of what follows may sound contradictory. Welcome to the counter intuitive Fun House ride at the Washington DC fair!

The big story yesterday was Trump "saving 1000 jobs" at an Indiana Carrier factory, jobs that had been slated for outsourcing to Mexico. There was the President-Elect standing in front of jubilant Carrier employees, already making good on campaign promises, fifty full days before taking office. Details of the deal he made with Carrier were not released, but tax relief of some kind was offered to the company as an inducement to keep the jobs stateside, no doubt. Thus began a firestorm of thoughts and feelings inside my head. First, it's almost impossible not to be happy for the men and women whose jobs got saved. Imagine how terrible it would be to be entering the Christmas season knowing that you were headed for the unemployment line in January? So, lots of happy thoughts. But then I start thinking about...the deal. Reports were that tax incentives worth nearly $800 per job were given to Carrier. Here's where the murky starts.

Our nation has both a unbalanced budget problem and a national debt problem. That means that the $800 in taxes per saved job not paid by Carrier will either have to be paid for by someone else or will simply make both of the aforementioned problems worse. The someone else in my last sentence might end up being Carrier's competitors like Trane, York, or Bryant. I wonder how those three companies felt hearing the news that their number one competitor just got wheelbarrow's full of cash from the government? I suppose the lost revenue from this deal could be made up by simply cutting spending by the exact amount of the lost revenue...but who am I kidding? That conservatives would be hailing this as some sort of victory for America is odd since what it looks like to me is government putting its awkward thumb on the scales, the very definition of crony capitalism. Many of the same conservatives gleeful over this deal were furious when Obama did the same thing for Solyndra. Granted, Carrier is a profitable company which makes stuff people actually want to buy, whereas Solyndra did neither, but the principle is the same.

Soon another head scratcher will come to pass. When Trump announces his infrastructure stimulus plan, I assume that conservative Republicans will approve the plan no matter how much new debt it piles on top of the 20 trillion we already have. Suddenly, government spending money it first has to borrow will be ok again. My son will once again ask me why the national debt is such an awful thing since, "nobody on either side is talking about it." And I will be left with nothing to say except, at some point 20 trillion dollars in debt has to be serviced and you keep adding to it and one day it's going to wipe you out. To which, big government types counter with, "Oh yeah???" as they crank up the money printing machine at Treasury.

It's not that I want jobs to go to Mexico or anyplace else for that matter. But how is it a good thing to bribe someone to do something with money you don't have? And where does the bribing stop? If you decide as a country to erect barriers to the free flow of capital, you ultimately wind up with...Cuba, right?

But, what do I know?