Friday, December 2, 2016

Reality Check for the Left - Trump's and Pence's Carrier Deal

It's been fascinating seeing all of the various reactions by people over the deal that has been worked out between the incoming Trump presidential and current Pence gubernatorial (and incoming vice-president) administrations over keeping approximately 1,000 jobs in Indiana that Carrier had previously said would be moving to Mexico.  The howls from the left, whose political marketing and spin agents tried to use Carrier's plans as criticism of the Indiana Republican Gubernatorial administration (but somehow not the Federal government and Obama administration?) are now howling that some corporation is getting what they believe, because they don't know how things work*, "freebies" from taxpayers.  It's funny when the biggest proponents of "freebies" howl about somebody getting "freebies", but I digress.

There are some economic forces at work over the last 20 years that are affecting our economy overall, like how software, automation and centralization are eating big parts of the economy. But, we must also acknowledge that it is true that the economy is global now and we compete intensely with other countries for labor and manufacturing resources. In the future the biggest markets for products will no longer be the United States, but China and India who collectively have around eight times as money people. Those screaming the loudest about this deal (to keep roughly 1,000 people employed) fail to acknowledge a few things...
(a) capital flows where capital is treated best. Don't like people setting up their corporate HQ or stashing cash/profits in the Caymens? Don't threaten to take 30 or 50 percent of it!
(b) if you create and maintain an environment where capital is treated well and your workforce is competitive capital will stay or flow there [low taxes, low regulation, low barriers to market entry, protection of private property rights, educated population]
(c) the federal government controls the greater portion of regulations, mandates and tax levies
(d) states MAY be having to offer extraordinary incentives to offset Federal overreach, mandates and one of the highest corporate tax rates in the developed world.
**IF** you support confiscatory taxation, massive government imposed benefits, unreasonable or internationally uncompetitive regulations, outrageous wage demands, continue to oppose massive updating and reform in the education system and believe anyone with pooled capital that can be put to use in the economy is evil ... well, YOU might be the problem.
Companies are morally obligated to be competitive and earn a profit, to not do so jeopardizes EVERYONE's job at the company regardless of geography AND every cent of investors' money (which for publicly traded companies might include public sector pension funds, 401ks, IRAs, trusts, other institutional investors and individuals.
So, also remember, you can hate big public corporations all you want, sometimes they do absolutely deserve criticism, but a lot of those profits and capital gains end up being used to expand a company or update its capabilities. Some of those gains end in your neighborhood teacher's, firefighter's or even a co-workers retirement fund not just some CEO's pocket.

*ADDENDUM: Many of the incentives in these kinds of deals are not "freebies". They often come in the form of rebates on future tax liabilities in exchange for hiring or retaining a certain number of workers, training workers and other things.  I have been a close party to these kinds of economic incentive discussions before.  It generally isn't just a check written from taxpayers to a company, it is a deduction on their future taxes for investing long-term in the city or state they reside in.  I'm not necessarily addressing specifics of this deal and this is not necessarily an endorsement of these kinds of deals, but isn't like a lot of welfare programs where money is stolen from one taxpayer and just handed over to another who has not earned it.