What Was The Cost?

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December 1, 2016 by Chris Kite

I want to be clear that I’m very happy for the 1,000 workers at Carrier that have kept their jobs. This is a good thing for them and their families. But before we get too carried away with excitement about this deal, let’s consider a few things.

First and foremost, let’s consider that Carrier definitely got special tax breaks to keep the jobs here. Apparently Indiana Governor Mike Pence was instrumental in crafting tax incentives that encouraged Carrier to keep some of the jobs in Indiana, rather than moving them to Mexico.

But If I’m the owner or executive of a manufacturer in Indiana, wouldn’t I also try to hold the state hostage for similar tax breaks? It has been reported that the company received about $700.000 in annual tax benefits from the deal. On the surface, that sounds like a pretty good deal. Only $700 a year in tax breaks per job saved, for jobs that can pay as much as $70,000 a year is a good deal. But who is going to make up this lost revenue? Or will state programs suffer? Will this come from roads? Education? Health care?

And what about the 1,100 jobs that are still going to Mexico?

And let us not forget that the city of Indianapolis already is giving Carrier roughly $1.2M in tax breaks back in 2011, and Carrier is apparently now having to pay that money back since they didn’t keep the jobs there.

Finally, there is the reality of labor costs. Reportedly, the workers in Mexico will be paid about $3 p[er hour. That works out to $6,240 per year for a full time worker putting in 8 hours a day, five days a week, 52 weeks a year. There is a reality here that cannot be denied. No tax incentive in the world and no ending of union contracts is going to make the US more attractive. Workers in the US simply are not going to build something at an hourly labor rate of $3 an hour.

While the media is reporting this as a huge victory for Donald Trump, it really isn’t. It IS a victory for Mike Pence, who as Governor of Indiana was uniquely positioned to make this deal. But these kinds of deals are nothing new. States and cities make special tax deals all the time to land or keep businesses.

And let’s not forget that back in 2009, as the auto industry looked likely to completely collapse around the bankruptcies of GM and Chrysler, President elect Barack Obama and President Bush stepped in and “bailed out” the auto industry and parts manufacturers, saving an estimated 1.5 million jobs.

So let’s not get too excited about how great Donald Trump is, or how great he is for workers. This is one deal that saved about 1,000 jobs. It appears to have been engineered by Indiana Governor (and vice-President elect) Mike Pence, with little actual involvement or deal making by Donald Trump.

Not that the ego maniac in chief won’t take full credit for the saving of 1,000 jobs, while simultaneously taking no responsibility in the loss of 1,100 jobs by the same company!

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