The Carrier Deal and Trump’s Challenge to Democrats
As the Carrier deal indicates, when it comes to the economy and jobs, Donald Trump doesn’t intend to abandon his aggressive campaign rhetoric. Credit Photograph by Jabin Botsford / The Washington Post via Getty
There have been a range of reactions to the deal that Donald Trump and Mike Pence struck with Carrier Corporation, in which the century-old manufacturer of heating and ventilation systems agreed to keep hundreds of jobs at a plant in Indianapolis, Indiana, rather than moving them to Monterrey, Mexico. As I was reading some of these responses, I recalled a presentation that Stan Greenberg, the veteran Democratic pollster, gave during the Democratic National Convention, in July.
Greenberg had carried out some research for the Roosevelt Institute, a liberal think tank. His findings showed that the public’s attitude toward big businesses and their chief executives was extremely negative. Just twenty per cent of Americans, Greenberg explained, had a positive opinion of C.E.O.s. Many people regarded the country’s top executives as members of a self-enriching élite, which lines its pockets by cutting wages and shifting jobs overseas.
Then Greenberg moved on to politics. Attitudes toward “corporations and C.E.O.s are the entry point for what is happening in the country,” he said. Especially with Donald Trump having captured the Republican Presidential nomination, he argued, it was imperative for Democratic candidates to respond to the widespread antagonism toward the corporate plutocracy by promising to rewrite the rules of the economy. “We thought we were running against trickle-down. We now find ourselves running against a nationalist message focussed on making work for people.”
Carrier is a subsidiary of United Technologies, a Fortune 500 conglomerate with interests ranging from defense to domestic appliances. Last week, its chief executive, Louis Chenevert, left the company with a retirement package worth a hundred and seventy-two million dollars, most of it in stock and options. The Carrier plant in Indianapolis wasn’t losing money. But shutting it down and moving production to Monterrey, where workers earn about fifty dollars a week, would have juiced United Technologies’ earnings a bit. That, in turn, could have given a boost to the firm’s stock price—and further enriched the huge remuneration packages enjoyed by Chenevert and other top executives.
In the past few days, liberal commentators have condemned the Carrier agreement as a public-relations exercise, a bribe (the state of Indiana, where Pence is still governor, agreed to give Carrier about seven million dollars in tax breaks), and a one-off gesture that won’t do anything to arrest the larger trend of offshoring and outsourcing. These criticisms have merit. In a statement this week, Carrier made clear that the tax breaks, which it negotiated with Pence’s staff, played an important role in its decision.
According to the Wall Street Journal, the deal will save eight hundred jobs that would have been moved to Monterrey, and three hundred additional administrative jobs that could have been moved to somewhere else in the United States. Carrier, however, is still planning to relocate six hundred jobs from the Indianapolis plant to Mexico, plus seven hundred jobs from a second plant in Huntington, Indiana, which will be shut down. Taking the two plants together, more jobs will go than will be saved. And, as the Times reported on Thursday, plenty more manufacturing firms across the Rust Belt are still planning to relocate.
Still, it would be dangerous for Democrats to dismiss the Carrier deal as merely a stunt. Three weeks after his election victory, Trump has confirmed that, in the key area of the economy and jobs, he doesn’t intend to abandon his aggressive campaign rhetoric. In place of the traditional Republican bromides about the wonders of the free market and free trade, he’s using a language of economic nativism and nationalism that harkens back to Pat Buchanan in the nineteen-nineties, when the current wave of globalization was just kicking into high gear. And not just that. Trump is making it personal, singling out individual corporations and chief executives for cajoling and threats.
“Companies are not going to leave the U.S. anymore without consequences,” he said during his visit to the Carrier plant in Indianapolis on Thursday. “Leaving the country is going to be very, very difficult.” Pence, who is usually regarded as a more orthodox conservative, is evidently on board with the new approach. “The free market has been sorting it out and America’s been losing,” he told the Times. As Greenberg indicated back in July, the Democrats are going to have to adapt to this new reality, and a number of options present themselves.
The first option, which all Democrats should be able to agree on, is to point out what a grotesque farce it is for Trump to pose as the defender of the working man and the foe of corporate plutocrats. He made some of his fortune by parting ordinary Americans from their hard-earned cash in his gambling parlors and at his fake university. He is determined to repeal Obamacare, which could deprive millions of working families of health insurance. He has proposed a tax cut that would give the very richest households in the country—those in the top 0.1 per cent—an annual handout of more than a million dollars. And he’s assembling the wealthiest cabinet in modern U.S. history.
At least two members of Trump’s incoming cabinet have, like the President-elect himself, extensive experience stiffing the working stiff. Wilbur Ross, Trump’s nominee for Commerce Secretary, made billions of dollars buying up troubled companies, relying on the bankruptcy court to void their labor contracts, rolling them up with other similarly stricken firms, and eventually selling them at a profit. Steven Mnuchin, the former Goldman Sachs banker whom Trump has tapped for Treasury Secretary, ran a big mortgage firm that foreclosed on tens of thousands of low-income homeowners.
But simply calling out Trump’s hypocrisy is not enough. What should be the Democrats’ policy response? Bernie Sanders and his supporters advocate taking Trump’s populist challenge to corporate America and outflanking him on it. In an op-ed piece for the Washington Post on Thursday, Sanders pointed out that, during the campaign, Trump “was insisting on very steep tariffs for companies like Carrier that left the United States and wanted to sell their foreign-made products back in the United States. Instead of a damn tax, the company will be rewarded with a damn tax cut. Wow! How’s that for standing up to corporate greed?”
Rather than handing out goodies to companies that hold the country hostage, Sanders went on, “we need to send a very loud and clear message to corporate America: The era of outsourcing is over. Instead of offshoring jobs, the time has come for you to start bringing good-paying jobs back to America.” The Vermont senator added that he intended to propose an “Outsourcing Prevention Act,” which would force companies that shift jobs abroad to pay an “outsourcing tax equal to the amount of money they expect to save by moving factories to Mexico or other low-wage countries. If Donald Trump won’t stand up for America’s working class, we must.”
Centrist Democrats, and their corporate donors, are likely to find Sanders’s proposals too extreme. In responding to Trump, they may well be tempted to fall back on a version of the Obama Administration’s approach, which was generally supportive of globalization, while also recognizing some of its human costs. In his 2012 State of the Union speech, President Obama proposed a series of measures designed to discourage outsourcing. They included eliminating the tax deductions that companies can take when they shift jobs abroad, and expanding tax breaks for investment in domestic manufacturing. (The Republican-controlled Congress blocked these proposals, of course.)
Unlike Sanders, however, the Obama Administration never suggested that it would be possible, or even beneficial, to stop offshoring entirely. Instead, it stressed the need to educate the workforce; develop industries of the future, such as clean energy; and retrain displaced manufacturing workers. Speaking at a town-hall meeting in Indiana in July, where he was asked about the Carrier plant, Obama said, “What we have to do is to make sure that folks are trained for the jobs that are coming in now, because some of those jobs of the past are just not going to come back.” Obama also said that Trump had “no answer” to the question of how to prevent some jobs from going abroad.
In economic terms, Obama was largely right. So was his spokesman, Josh Earnest, who pointed out earlier this week that, since the start of 2009, when Obama took office, the economy has created more than eight hundred thousand manufacturing jobs. But politics doesn’t always follow the logic of economics. Sometimes it rebels against it—a fact that Trump has seized upon. Despite the admonitions of the commentariat, the Carrier deal is likely to prove popular. That will encourage Trump to try to repeat the trick, and Democrats need to settle on a response. What it is will say a good deal about the Party’s future.
