Donald Trump and Mike Pence just struck a deal to keep about 1,100 jobs in Indiana. The President-Elect and Vice President-Elect have agreed to give $7 million in tax breaks to United Technologies Corp., parent company of air conditioning and heating manufacturer Carrier, to keep Carrier from moving its plant from Indiana to Mexico. On the surface, that looks like a big political win for Trump. But what’s the catch? Is there a downside to this deal?
Is There A Downside To Trump's Deal With Carrier?
Perhaps the biggest piece of Trump’s election campaign was keeping jobs in America. So convincing a company to keep 1,100 jobs in Indiana instead of moving the plant to Mexico looks great for our soon-to-be commander in chief. However, Trump is glossing over a key component – he had the government roll over to make that deal. Can the new president afford to continue to give every company who considers moving operations a tax break?
Trump’s jobs promise is a noble vision. But how will the new administration boost jobs and incomes for America’s middle class? And how can they sustain that growth? It’s fantastic that those 1,100 people can keep working and feeding their families. But there are roughly half a million manufacturing jobs in Indiana. 1,100. That’s 0.22 percent.
The state of Indiana needs a lot more than one plant staying put to build a strong middle class. Mike Pence and the state of Indiana offered the company $7 million in tax benefits, most likely lined with promises of future federal help as well. Full details aren’t yet known, but United Technologies is a clear winner here.
I am working hard, even on Thanksgiving, trying to get Carrier A.C. Company to stay in the U.S. (Indiana). MAKING PROGRESS – Will know soon!
— Donald J. Trump (@realDonaldTrump) November 24, 2016
Trump celebrated the deal in Indianapolis during his victory tour after promising during his campaign to call the head of Carrier directly if he won the election. Trump made that call. Yet, the result of that call is he’s giving Carrier $700k a year in incentives from the state of Indiana – exactly the kind of corporate excess Trump promised to correct. While full details of the deal are unknown, there doesn’t seem to be any provisions in place to ensure Carrier actually spends the money on jobs. The company could very well give the money to its executives as bonuses.
The big flaw in Trump’s “victory” is it’s corporate welfare. The same kind he promised to reduce. Instead, he’s encouraging it before even taking the oath of office. What’s to stop larger, more profitable companies from making the same threat to reap the same reward? Indiana could have used those funds to improve infrastructure and resources for the middle class, creating new jobs and opportunities for residents to not only earn jobs, but create them as well.
For now, this is a public relations win for our incoming president. But the real winner here is United Technologies Corp. (UTX). While shares may be down (0.22%), investors can expect to see a healthy spike UP as Trump will continue to promote the company until his inauguration.
Watch the full Indianapolis speech of President-Elect Donal Trump in his Carrier Plant Announcement here:
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