News & Politics

Was Trump’s Deal with Carrier Crony Capitalism?

On November 29, it was announced that President-elect Donald Trump and Carrier Corporation, an air conditioning and heating manufacturing company, reached a deal to keep some jobs at its Indianapolis plant that the company had planned to move to Mexico. The move would have affected approximately 2,100 workers at two different locations.

As a sign of the times, Carrier announced the deal on Twitter writing, “We are pleased to have reached a deal with President-elect Trump & VP-elect Pence to keep close to 1,000 jobs in Indy. More details soon.”

The recent Carrier news release is the latest episode in what has been a rough year for the company since making its original announcement on February 9. Carrier’s decision to move to Mexico immediately became presidential campaign fodder. Democrats, including candidate Bernie Sanders, responded in the typical liberal manner, citing corporate greed and anti-union bias as the primary reasons. Donald Trump decided to use it as a major talking point, threatening to tax every Mexican-built Carrier unit at a rate of 35%.

Understandably, politics invokes emotional energy and those whose jobs have been saved and those who have a vested interest in Trump have much to be emotional about. In fact, if you briefly scan headlines and social media posts concerning the Carrier deal, you will see Republicans crowing about Trump’s deal with Carrier as an example of Trump making America strong again even before he became president.

This is reminiscent of Barack Obama’s nomination victory speech given on June 3rd, 2008:

… I am absolutely certain that generations from now, we will be able to look back and tell our children that this was the moment when we began to provide care for the sick and good jobs to the jobless; this was the moment when the rise of the oceans began to slow and our planet began to heal; this was the moment when we ended a war…

All those great accomplishments happened before Obama became president. So, if Trump can save one company before he becomes president, imagine what he will do after he is inaugurated. As Yogi Berra used to say, “It is déjà vu all over again”; if Obama got a Nobel Peace Prize, why not Give Trump the Nobel Prize in Economics?

Considering how the right has mocked the left’s elevation of President Obama to a god-like status, this admiration for Trump should be a bit disconcerting to most limited-government conservatives who have to be asking, “What was the deal Trump made and why is he even making deals one-on-one with companies?”

There’s a name for when government officials make individual deals with private firms: It’s called crony capitalism, and unfortunately it happens way too often with members of both parties. It also happens in more subtle ways. In the case of Carrier, the company was awarded a $5.1 million grant under Obama’s stimulus package. Although the company claims it never took the money, many companies did, knowing the strings to the money were tied to local, state, and national politicians.

Next Page: Why crony capitalism actually hurts the little guy in the long run.

In the long run, crony capitalism hurts the little guy because it interferes with the best job producer in the world – the free market. But that message is lost when you’re the little guy losing your job. Robin Maynard, a 24-year Carrier employee, during a news interview, issued the following message to Trump and Vice President-elect Pence for the deal:

I would like to tell him thank you for going out of your way and taking your time away from your family, working on the Carrier and employees’ deal. Sticking to your word and going to bat for us all at Carrier and keeping our jobs here. I’d like to thank him and Mike Pence for doing it so quickly.

Like Maynard, other Carrier employees whose jobs will be saved aren’t talking about the evils of crony capitalism.

But the question of whether Trump is guilty of crony capitalism is valid. Remembering that Trump wrote the book on deal making, the answer depends on the details of the deal. Trump made keeping manufacturing jobs in the United States one of his signature economic issues. It may be that Trump’s meeting with Carrier looks like the same old government ops that many have come to know and hate…or love. But in an earlier Breitbart News interview dealing with job losses, Trump said:

There’s only one way you’re going to reverse it, and that’s that you’re going to have to make it more expensive to do business that way. First of all, you’re going to have to look to lower taxes [for those who do business inside the United States]—and we may very well have to charge taxes at the border, when somebody drives a car through the border to sell it in the United States. But look, we’ve closed our plants. We’ve lost our jobs. They’re not going to build cars in Mexico and sell them in the United States, okay? We can lower our taxes, and we’re probably going to have to charge a surtax at the border. Otherwise we’re going to lose a fortune. And that will help Ford and other people make a decision to buy in the United States, to build in the United States.

Trump is then consistent when he threatened Carrier with a 35% tax, and in line with Trump’s economic plans that include tariffs and renegotiating trade deals. Experts smarter than me will argue about the pros and cons of Trump’s tariff and trade policies.

Concerning the Carrier deal itself, at this time, there doesn’t seem to be a direct quid pro quo. However, Carrier officials have expressed worry over possible fallout from future defense contracts if they didn’t stay. That is bothersome because the deal influences the company to act in a certain way because it fears its government instead of what it thinks is best for the company.

Along those same lines, a statement made by a Trump transition spokesman, Jason Miller, is also worrisome. Miller alluded to the power of the presidency to create and save jobs. A president doesn’t have authority to create and save jobs, unless Miller is referring to his or her powers to lower taxes and create a friendlier business environment within the office’s constitutional administrative authority. But I don’t think that’s what Miller was thinking.

Miller was echoing the now common opinion that presidents are benevolent dictators that go around and put out brush fires and hold beer summits with their subjects.

Given all of these concerns, God invented time so everything didn’t happen at once, so if Trump manages to pass just a few of his tax reductions and regulatory changes, then lowering the oceans and healing the planet will be a cinch.