Trump’s deal to save Carrier jobs encourages others to game the system

Let’s start with the good. The deal President-elect Trump and Vice President-elect Pence negotiated with Carrier will help hundreds of people in Indiana keep good-paying jobs and maintain self-reliance and dignity.

It is nice to see a leader in this country stick up for the long ignored little guy and seek to find ways to keep jobs in America. It is a nice change after too many administrations of both parties seemed to barely notice the impact of so many of those losses.

I appreciate the attitude and the focus. I just don’t like the solution.

The Carrier deal is, to me, nothing to celebrate, because while it saved some American jobs, it sets a dangerous precedent and will — assuming nothing changes — actually be more harmful to the economy in the long run if more deals like this are cut.


Well first, it is a corporatist, crony capitalist buy-off. We are essentially giving Carrier a $7 million tax break to send 1,300 jobs to Mexico, just because they are keeping about 800 here.

Now, I should be clear, I like tax cuts. And you will never find me offended that the government takes less money from a person or a company than it used to. I reject the idea that tax carve-outs are “subsidies.” Subsidies are direct payments by the government to corporations to encourage industries or products that wouldn’t otherwise prosper.

Lora Olive | Zuma Press | TNS

Lora Olive | Zuma Press | TNS

Taking less of a company’s earnings in taxes is not the same, which is why I’m less offended by this than I was with the nefarious loan guarantees, direct payments and real subsidies in the 2009 stimulus program.

The reason that the Carrier deal still bothers me, though, is that it represents a continued commitment — just in a different way — by the government to interfere in the free market and artificially provide one company a market advantage.

This is dangerous. When the government starts picking winners and losers, it sets up a system whereby favored companies — perhaps favored because they financially supported certain political leaders, or are in pet niche industries those in power want to promote — artificially succeed because of government-granted benefits.

By contrast, other companies that don’t have the right friends in the government or aren’t in favored industries, but are good companies that would otherwise thrive, are not afforded the same favors, and thus are put at a market disadvantage.

Thus, the market is polluted and perverted, and success and failure begin to be dictated by connections to powerful government officials and bureaucrats rather than having a better product or more innovative company.

The other problem is that this type of corporate buyoff sets a disturbing precedent. Threatening to move overseas gets you perks and concessions from the government, and special gifts and carve-outs will be given out.

Maybe you don’t think that’s a big deal. The amount of carve-outs for Carrier certainly weren’t all that large compared to other deals. The problem is what happens in the aggregate when this happens a lot more frequently.

This also means overall taxes will be higher than they could have been. When some companies get deals, the ones that don’t will be required to “pick up the slack,” so to speak.

I would rather see corporate taxes lower across the board, without the carve-outs for anyone. Fair, simple rules everyone can live by, with low taxes rather than complex rules only the powerful and connected can navigate.

This is not free market economics, and it opens the door to all sorts of meddling. Imagine that, as a condition of getting a government contract, companies could be required to set CEO pay at a certain level, or accede to a particular union contract.

They might be required to get out of a particular industry, or comply with environmental standards beyond those set by law, or stop giving to organizations of a particular ideological persuasion.

Vesting this much power over corporate activity in the executive branch ought to alarm you. This type of deal encourages companies to game the system.

The thing that does fill me with a bit of hope, though, is that Trump has said he wants to significantly cut corporate taxes, curtail regulations, and create a simpler system.

So while this deal bothers me, I have some hopes that the system itself may be repaired, making deals like this irrelevant. I hope Trump is serious about making that happen.

Matthew Gagnon

About Matthew Gagnon

Matthew Gagnon, of Yarmouth, is the Chief Executive Officer of the Maine Heritage Policy Center, a free market policy think tank based in Portland. Prior to Maine Heritage, he served as a senior strategist for the Republican Governors Association in Washington, D.C. Originally from Hampden, he has been involved with Maine politics for more than a decade.