CARRIER AND THE SLIPPERY SLOPE

“Companies are not going to leave the United States anymore without consequences.” – Donald Trump

The reaction to Trump’s deal to keep 1,100 Carrier jobs in Indiana has ranged from outrage to adoration. There are so many layers to this Shakespearean drama that all points of views have some level of credence. I’m torn between the positive and negative aspects of this deal. If you’ve read Bastiat’s The Law and Hazlitt’s Economics in One Lesson, you understand the fallacies involved when government interferes in the free market. Politicians and their fanboys always concentrate on the seen aspects of government intervention, but purposely ignore the unseen consequences.

First, I wholeheartedly agree with Scott Adams’ assessment of Trump’s move as a brilliant, visible, memorable, newsworthy ploy to sway public opinion and sending a message to corporate America that he means business. Trump beat Carrier like a rented mule during the entire presidential campaign for announcing they were closing their plant in Indiana and moving the jobs to a new plant in Mexico. The publicity was so bad, I ended up getting a substantial rebate when I had a Carrier air conditioner installed in the Spring.

I’ve seen Trump worshipers trying to show what a fantastic economic deal this was for Indiana and the country. They are only looking at the scenario of staying versus leaving. The other scenario is what exists today versus what will exist tomorrow. Those 1,100 jobs already exist in Indiana. They are already paying taxes and spending money in Indiana. The taxpayers of Indiana currently have no obligation to Carrier or the employees of Carrier.  With this new “fantastic” deal, the employees of Carrier are still employed, but now the the taxpayers of Indiana have a $7 million obligation to Carrier.

This isn’t a zero sum game. The $7 million is taken from the pockets of taxpayers and will not be spent in the greater economy of Indiana. This deal is absolutely a net loss for Indiana versus where they were before the deal. The people of this country are hypocritical when it comes to keeping jobs in the U.S. They want cheap electronics, gadgets, appliances and air conditioners. Therefore, they have been buying cheap foreign made products by the trillions for the last couple decades.

Carrier was moving to Mexico for the low labor and regulatory costs. This would have allowed them to sell the air conditioners made in Mexico at a lower price than if they are made in Indiana. Therefore, the consumers of these products would have spent less money on the air conditioners, leaving excess funds to spend on other products. The purchasers of Carrier air conditioners are not benefiting from this deal.

It is true that if Carrier had sent those jobs to Mexico, there would be a short-term negative economic impact on Indiana. The 1,100 people would have lost their jobs and would have utilized unemployment and probably food stamp benefits. Eventually, most of these people would have obtained employment elsewhere – some at lower paying jobs, some at higher paying jobs. Indiana has an unemployment rate of 4.4%, so there are jobs out there. Another company might be able to buy the existing Carrier plant for a great price, start a new production plant, and hire new employees. This is the unseen part of the picture.

The real issue here is why Carrier and thousands of other corporations feel the need to move operations out of this country. Since the passage of NAFTA in 1994 and China’s decision to provide slave labor to foreign corporations around the same time frame, American conglomerates have embraced the “benefits” of globalization:

  • Close your plant in the U.S. and fire Americans.
  • Open a plant in Mexico or China and hire locals at slave wages to do the same job as the fired Americans.
  • Sell cheap products back into the U.S., undercutting the prices of smaller domestic producers and eventually putting them out of business – resulting in more American job losses.
  • American conglomerate Ivy League educated CEOs listen to the advice of criminal Wall Street bankers and use their excess profits to buyback their stock and drive their personal compensation to astronomical levels.
  • Capital investment by American conglomerates becomes virtually non-existent.
  • Meanwhile, China steals the American technology and product designs and eventually produces knock-off products, undercutting American conglomerates.
  • The Federal Reserve provides cheap and plentiful debt to Wall Street scum bankers, while Madison Avenue maggots convince Americans to accumulate debt to purchase the cheap foreign made goods.
  • The production jobs shipped to China and Mexico are replaced with low paying service jobs in the retail and restaurant sector, sustained by the Federal Reserve debt machine.

Many, if not most, of those voting for Donald Trump want less government in their lives. Trump railed against corruption, government favoritism, crony capitalism, and special deals. For the last eight years we’ve witnessed Obama favor green energy frauds like Solyndra, use taxpayer funds to save union jobs at GM and Chrysler, provide tax breaks to wealthy buyers of Tesla luxury cars, purposely destroy the coal industry, and not prosecute one Wall Street criminal banker. This Carrier deal is just a different version of the government carrot and stick game used by every president.

This high profile deal is a symbolic message to Trump voters and American corporations, but it can’t become the standard operating procedure for his presidency. Government picking winners and losers, aligning with particular companies or industries, or attempting to manage the economy is nothing but an expansion of the corporate fascism we’ve been experiencing for decades. Trump needs to create an economic climate which will convince American companies to expand, invest, and hire more workers. He has already documented what really needs to be done:

  • Reduce corporate and individual tax rates. If corporations are allowed to keep more of their profits, they are more likely to hire and invest in their facilities. Many new businesses are started by individuals, so lowering their taxes provides more resources for growing their businesses.
  • The regulatory nightmare strangles small business owners, giving an unfair advantage to conglomerates. Wiping out thousands of useless Federal regulations will save existing businesses billions and allow fledgling businesses to get off the ground.
  • Repealing Obamacare and replacing it with a more market oriented competitive healthcare system which reduces the outrageously high costs to companies and individuals would free up billions of investment or spendable funds for companies and individuals.
  • Existing trade deals need to be renegotiated to make sure global trade is truly free. Wage arbitrage cannot be the sole basis for why companies decide which country to build their plants. China makes it extremely difficult for American companies to do business in China from a tax and regulatory basis. Any fair trade deal would address these inequities.

Donald Trump is successfully winning the public relations aspects of his new job, even before assuming power. I think he understands the bigger picture of what needs to be done to revive our stagnant, over-taxed, over-regulated, and government suppressed economy. Tax simplification, reducing the size of the Federal government, getting the Feds out of education, not policing the world, and cutting Federal spending would provide some of the resources to implement tax cuts and deal with Obamacare repeal.

Trump continues to infuriate ultra-liberals like Larry Summers and Paul Krugman with his wheeling and dealing, even before ascending to the presidency. Lame duck Obama looks even more lame, as Trump engineers deals as a private citizen benefiting the country. Time will tell whether this Carrier deal was just a symbolic line in the sand, or whether it is a sign of future government interventionist policies which will ultimately backfire. In the long run, the less government, the better.

“Practically all government attempts to redistribute wealth and income tend to smother productive incentives and lead toward general impoverishment. It is the proper sphere of government to create and enforce a framework of law that prohibits force and fraud. But it must refrain from specific economic interventions. Government’s main economic function is to encourage and preserve a free market. When Alexander the Great visited the philosopher Diogenes and asked whether he could do anything for him, Diogenes is said to have replied: “Yes, stand a little less between me and the sun.” It is what every citizen is entitled to ask of his government.”Henry Hazlitt

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Uncultivated
Uncultivated

Due to an 80 year old aunt visiting from out of state, my wife and I recently attended a get together at a multi-generational farm a few hours from where I live.

Although I had never met the hosts, the 79 year old patriarch and I hit it off and the next thing you know, he and his son insist on giving me a tour of their operation.

So – we leave the womenfolks to their incessant chatter, hop into the old man’s brand new F250 quad cab 4 x 4 and go muddin’.

Several thousand acres over 4 separate locations, 1200 head of cattle, a rock quarry, woods, rivers and streams. We stopped once so the son could check and adjust the settings on one of their dryer units not far from the quarry. Next, they showed me me a field where the grandson was working in conjunction with a state university regarding dual cropping techniques.

These were some of the most intelligent, hard working dudes I ever met. Salt of the earth. Great family.

Definitely not hicks. Just sayin’. For whatever it’s worth.

hardscrabble farmer

Great thread, FWIW. Made me think.

Google “Carrier” and “Cronyism” and you’ll see that the entire MSM got their marching orders. There are about 75 articles that looked like they were written by the same guy but everyone has a different by-line. The term Banana republic is mentioned quite frequently, they having slept through the past eight years, must have suddenly realized it plays both ways.

Admin is always ahead of the curve.

Mercedes Jack
Mercedes Jack

“No one gets a free pass on TBP”
Administrator 12-5-2016

anon
anon
llpoh
llpoh

HSF – please tell me again how this:

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is not the reason for reduced ag workers, who used this type thing in 1880:

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And how about this re harvesting:

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Sure beats what they had in the 1880s.

anon
anon

HAHA!

That picture is priceless! Reminded me of a Blue Oyster Cult song.

Don’t Fear the Reaper.

BTW I know that’s a combine in the picture

Stucky

PICTURES !!! FANTASTIC visual aid !!!!

I must say, I was rather shocked — really, shocked I tell you — when I read HF’s stance minimizing technology. To be honest, I’ve never heard that argument made anywhere else. I’m glad you called him out on it.

Granted, he gives his reasons ….. BUT, those reasons pertain mostly to the USA. How would he account for similar if not identical productivity increases throughout the world?

I’m placing odds at 50-50 that he’ll answer. When challenged, sometimes he puts up a helluva fight — like the flat-earth and no-moon-landing stuff. Good fighter, too. But, there are other occasions where he simply decides to not engage any further.

llpoh
llpoh

Stuck – I understand the point he is trying to make. But by claiming it was not tech that killed agriculture jobs is just plain ridiklus. Sure, other things played a part, but seriously, look at the differences in equipment, in strains of seeds (not even counting genetically modified poisonous stuff) developed, in the use of irrigation systems, etc. All that stuff is tech advancement.

I do not think they had this in 1880:

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Or auto-lasered and leveled fields, etc.

I just want to point out that tractors/combines no longer need drivers! Yup – they can be operated by GPS. Just tell ’em the co-ordinates of what you want plowed, and bingo, plowed it is.

I know he can fight. But he is in for a hiding if he stands by the tech was not responsible” position. I mean, there is real data out there, and it is not on his side.

TPC
TPC

@LLPOH – He’s wrong in some ways, right in others.

The Big Ag push has completely crushed reasonable business models because they can’t fail. A Big Ag farmer never fucking loses money. Ever. Its all a tax write off, and they all have accountants on staff who can twist every year so that they “lose” money.

Its hard to compete with established companies that already have the capital investment and a government preventing them from losing. These BigAg farmers can put all their eggs in one basket because they know if they get caught with their pants around their knees the government will bail them out. Meanwhile the start-up costs to farm continue to grow to outrageous levels thanks to this same market manipulation.

If you remove the farm/corn subsidies you won’t magically increase the amount of arable land in the US, but you WILL increase the number of people who are working it as large mega-conglomerates are forced to sell off farmland to help pay the bills when they lose their shirts on stupidity.

Gayle

I am reminded of Nancy Pelosi’s explanation that it is good to be unemployed, because it gives you freedom to explore your creative side.

anon
anon

It gets better!

https://www.washingtonpost.com/news/wonk/wp/2016/12/06/he-got-up-there-and-lied-his-a-off-carrier-union-leader-on-trumps-big-deal/?utm_term=.263404200984

MAGA!

Still better than Hillary.. She was certainly channeling Obama during the election.. If you like your guns, you can keep your guns.

TampaRed
TampaRed

I saw this on one of the posts here somewhere & ignored it,thinking that they were exaggerating but no,they were correct.
Do we really want to take it this far?Building military jets in India?
http://dailycaller.com/2016/12/06/on-obamas-nod-major-defense-contractors-plan-to-build-jets-in-india/?utm_source=WhatCountsEmail&utm_medium=TheDC%20Morning&utm_campaign=TheDC%20Evening

And btw,one of you commented above about GMO foods.The Republican Congress,you know,the one that talks about liberty,state’s rights,etc,has made it illegal for states to require GMO labeling,thus overriding Vermont’s labeling law.

Stucky

Llpoh

Looks like your farm machinery pictures stumped HF.

Thought occurred to me …. maybe he does not recognize farm machinery?? lol

Maybe he’ll show up tomorrow with an answer. But, I wouldn’t place a bet on that.

RiNS

Stucky

Yesterday I was trying to point out that this yearning to return to a simpler time, the Beaver Years if it ever existed, isn’t going to fix the underlying problems we have. Automation and mechanization is the reason for our high standard of living. Hard work too, but a fella needs to at least have a fighting chance to make money. Agriculture is no different than manufacturing when it comes right down to it. These days to make make money now one has to scale up to compete. Most of the farms in this province were 1/4 section at best. Hardly enough land to compete with industrial farms in West and California. Maybe once the peak oil thing happens and food localizes again things will change. Maybe. And now we have China entering the landscape and what immediately strikes the observers is the scale and scope of their enterprise. In everything they undertake.

They don’t build Hotels they build cities.

comment image

My cousin runs small beef operation. About 80 head. The difference between making money and not for him might come down to losing a couple of calves each year. Working harder after something like that happens isn’t going to help one break even. That was the reason why my Dad left the farm behind for good. And why so many farms in this province have gone by the wayside.

Still we should applaud anyone who has courage and fortitude to make a go of it. Even better if they can make a living doing it.

Michael Powe
Michael Powe

A nugget of truth surrounded by a shell of nonsense. The CEO of Carrier has announced that he made no commitments, no “quid pro quo” regarding the movement of manufacturing to Mexico. 300 of the 1,100 jobs “saved” were never going to Mexico in the first place, so the actual number of jobs “saved” was 800. But, the Carrier CEO made clear today (6 December 2016) that those jobs might be moved, eventually.

All empirical evidence points to a basic fact: lowering corporate taxes will not spur growth, or jobs. Companies do not expand because they have more money in the bank. They expand in order to meet DEMAND. (Doh!) Leaving aside the fact that NAFTA resulted in a net gain of jobs in the US, and not a net loss, corporate job shifting did not even necessarily result in lower prices for consumers. The Apple product line is the obvious example. Yeah, you can buy an $89 DVD player at Walmart, but it’s a piece of crap; and if you want to buy one of decent quality, you’re still going to be spending real money for it. The ratio of product value to dollar spent hasn’t changed that much.

If lowering corporate taxes would create jobs, we should have a glut. Our effective corporate tax rate is 1/3 what it was in the 1950s, and 1/2 what it was in the 1980s. Where are the jobs? Further, many of the multinationals are making profit hand over fist. Where are the jobs?

Today, in inflation-adjusted dollars, I make about 40% more than my dad made in the 1960s. My Federal tax rate is 40% lower than his rate was at that time. 40% LOWER. Everybody’s effective tax rate is LOWER than it was 50 years ago (again, in inflation-adjusted dollars). So, why isn’t this glut of money resulting in a glut of entrepreneurial job creation?

These notions that tax cuts will solve the nation’s economic problems are so outdated they’re ridiculous. They have no empirical basis — the research and the empirical facts show exactly the opposite to be true. Any competent economist would tell you as much — if you asked.

Llpoh
Llpoh

Michael Powe – do you run a business? I do. And you are a clueless dolt.

The question is not how high the rate is in the US. It is how high it is elsewhere. And in Mexico, it is less. Imagine that.

The US rate is near world’s highest. Capital is liquid and flows where it is most advantageous.

TampaRed
TampaRed

“Today, in inflation-adjusted dollars, I make about 40% more than my dad made in the 1960s. My Federal tax rate is 40% lower than his rate was at that time. 40% LOWER. Everybody’s effective tax rate is LOWER than it was 50 years ago (again, in inflation-adjusted dollars). So, why isn’t this glut of money resulting in a glut of entrepreneurial job creation?”

Michael,
Does that 40% account for a higher fica tax,medicare tax,increased health/retirement benes and any other costs today that employees of yesteryear either paid at a lower % or did not pay at all?
What is the inflation adjusted difference before deductions & after deductions?If your dad has any old pay stubs that show both his gross & net pay ,I bet that it’s not a 40% difference.

Zarathustra

Michael Powe, in addition to what other posters said, your dad made a killing off of Social Security. He paid next to nothing in contributions but assuming he lived up to the actuarial tables sucked off that pig for a few decades.

yahsure
yahsure

Life is a big circle.People without decent jobs can’t buy shit. Trump and his pro America stance seems great to me. Fuck the big companies that move overseas to get slave labor and get away from safety and EPA Style regs.

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