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Carrier’s Incentives Revealed in Trump Deal

Carrier’s Incentives Revealed in Trump Deal

Is this the start of Trumponomics featuring the “Art of the Deal”?

Our talented Mary Chastain blogged on the deal reached between President-Elect Donald Trump and Vice-President-Elect Mike Pence and HVAC company Carrier. Rather than exporting jobs, Carrier will remain in Indiana, saving approximately 1,000 jobs.

Mary expressed concern that if this was a firm-limited approach, Trump would be simply picking winners. The exact details about the deal have been slow to emerge.

“The incentives offered by the state were an important consideration,” to staying, Carrier said in a statement Wednesday. Pence is the governor of Indiana.

Carrier didn’t specify what the incentives were. Trump threatened Carrier with stiff tariffs during the campaign, but Carrier’s statement depicted a friendlier negotiation.

However, it must be noted that another Indiana plant is closing…and that Pence did not hesitate to act to take back incentives previously given.

Carrier’s announcement in February that it was eliminating the 1,400 jobs was paired with grim news from another Indiana company, United Technologies Electronic Controls, that 700 jobs would be eliminated at its facility in Huntington.

…After the [original] February announcements, Gov. Mike Pence and the state legislature went after the two companies to claw back hundreds of thousands of dollars in grants from the Indiana Economic Development Corporation, a quasi-state agency that made grants to the companies to train new and existing workers and to keep jobs in the state.

Perhaps the deal included allowing Carrier to keep the grants? What is known is that Carrier will get roughly $700,000 a year for a period of years in state tax incentives.

No matter the reason, it is a pleasant bit of news at the start of the holiday season for average Americans. Interestingly, consumer optimism has surged since Trump’s concluded his successful run for the White House with a stunning upset of Hillary Clinton.

The initial reaction of consumers to Donald Trump’s victory was to express greater optimism about their personal finances as well as improved prospects for the national economy, according to the University of Michigan Surveys of Consumers.

The post-election gain in the Sentiment Index was 8.2 points above the November pre-election reading, pushing the index 6.6 points higher for the entire month, according to U-M economist Richard Curtin, who directs the surveys.

The post-election boost in optimism was widespread, with gains recorded among all income and age subgroups and across all regions of the country, according to Curtin.

“The upsurge in favorable economic prospects is not surprising given the president-elect’s populist policy views,” he said. “And it was perhaps exaggerated by what most considered a surprising victory as well as a widespread sense of relief that the election had finally ended.”

Tied to that optimism is consumer behavior. It appears that Trump’s election may have made last Friday Black again.

Holiday spending rose 9 percent Thursday and Friday combined, compared with the same two-day period last year, according to First Data.

The bump was fueled by shoppers turning to online deals.

E-commerce sales rose 10.8 percent for the two-day period, while sales at physical stores grew 8.6 percent, according to First Data, which analyzed online and in-store payments across different forms of payment cards from nearly one million merchants Thanksgiving and Friday. The data captures about 40 percent of all card transactions in the U.S. but excludes cash.

The positive economic news is now being described as the result of“Trumponomics”.

Big banks such as Bank of America (BAC), UBS (UBS) and HSBC (HSBC) are bumping up their predictions for U.S. growth and stock market gains. The reason? Trumponomics.

“Following Donald Trump’s election victory, we have altered our GDP forecasts as we are now expecting a modest fiscal stimulus from lower tax rates and higher government spending,” wrote HSBC chief U.S. economist Kevin Logan in a recent report.

It’s a stunning reversal from the days before the election when economists and market experts at many Wall Street banks were forecasting dire consequences — a recession and a swift market drop — if Trump were elected president.

Now many are saying the opposite: Trump is good for growth.

Looking back, the core of Reaganomics was the reduction of taxes and the promotion of unrestricted free-market activity.

Looking ahead, perhaps Trumponomics will be a blend of Reagonomics and the “Art of the Deal”?

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Comments

Whatever happened to the idea of allowing companies to repatriate cash on earnings that have already been taxed overseas? Or at least not tax them [net] higher than if the money had all been earned domestically.

    From my humble standpoint, the idea has not gone anywhere at all, and the appointments Trump has announced features people interested in implementing such policies.

      I’d be ok if Trump used this for foreign policy leverage over the EU.

      The exodus of cash would decimate what’s left of their credit ratings.

    It’s coming.

    It will likely be a BIG part of the tax-package that will be proposed in the early days of the Trump administration, along with the corporate tax rate cut. I don’t think they’re going to get to the 15% mark, but they might make it to 16.5% if they can get a nudge.

    I’m hearing whispers through some of my back channels that the drafting of the corporate tax reduction legislation is already proceeding with an eye toward having it largely ready to go the minute Congress gets back into session, so that it can be ram-rodded through the committees, forced to a floor vote and then put on President Trump’s desk the day of the inauguration, so that he can discuss how its waiting for him on his desk during his speech.

    The optics of THAT would be great, to be able to say on day one, that he’s signed the most important tax reform since Reagan, and how this is only the beginning.

Scott Adams has an interesting take on this subject. I am giving Trump room to be the President. I hope he does well for America

http://blog.dilbert.com/post/153905823756/the-new-ceos-first-moves-and-trump

    snopercod in reply to mrtomsr. | December 1, 2016 at 2:04 pm

    Scott Adams’ piece was good. Thanks.

    Olinser in reply to mrtomsr. | December 1, 2016 at 7:12 pm

    That’s part of it, but there’s even more than even Adams gives him credit for.

    This deal lets Trump make Obama look like a total fool.

    https://news.grabien.com/story-flashback-obama-mocks-trump-promising-keep-carrier-plant-us

    Back in June, Obama was asked directly about Trump’s promise to keep Carrier in the US by one of the workers at the plant.

    Obama literally told him, “Those jobs of the past are just not going to come back”, and mocked the idea that Trump could do anything about it, asking if he had a ‘magic wand’ to do it.

    Trump not only pulls the New CEO move and gives concrete completion of one of his promises, but makes Obama look like a total fool while doing it.

By enabling Carrier’s Indianapolis plant to stay open, the deal spares about 800 union workers whose jobs were going to be outsourced to Mexico, according to federal officials who were briefed by the heating and air conditioning company. This suggests that hundreds will still lose their jobs at the factory, where roughly 1,400 workers were slated to be laid off.

Also, neither Trump nor Carrier has yet to say what the workers might have to give up or precisely what threats or incentives were used to get the manufacturer to change its mind.

“There’s excitement with most people, but there’s a lot of skepticism and worry because we don’t know the details,” said TJ Bray, 32, who has worked for Carrier for 14 years and installs insulation in furnaces.

“There’s a few that are worried. And there’s still a few that don’t even believe this is real. They think it’s a play, a set-up or a scam.”

Smart fella.

“Trumponomics” is just straight-up crony capitalism as it’s evinced here.

As one wit observed, now every Carrier in America knows how to play T-rump.

    murkyv in reply to Ragspierre. | December 1, 2016 at 7:11 pm

    Or, we could just let them go so the workers get NOTHING.

    First of all, the workers do not have to give anything up.

    Here is the deal. Carrier, and its parent company, stood to gain about $65 million dollars a year, if it moved its 2 plants to Monterrey Mexico. In order to do this, it entered nito deals with various Mexican politicians and business figures and began construction on a plant in Monterrey. The State of Indian revoked all of the incentive grants which it gave to United Technology/Carrier. This failed to stop the planned move. Then Trump won the election for President. Now, United Technology is looking at losing its existing government contracts, which make up approximately 10% of its yearly income, as well as future government contracts. And, it found itself looking at a potential 35% tariff on its products imported from Mexico, in the future. So, it agreed to retain the furnace manufacturing unit in Indiana and to upgrade the plant there. To offset these expenses, somewhat, Indiana agreed to reinstate the grants and tax incentives of $700000 a year for 10 years.

    So, the bottom line is that, for the moment, 1000 jobs, which were going to Mexico, are staying in the US. It is costing the American taxpayer little or nothing. It keeps these employees off the public welfare rolls, thereby saving the public a substantial sum. And, it brings much needed money into the US economy. Now, what is wrong with that. Even if United Technology changes its mind later and closes the plant, what harm has been done? None. And, this sends a message to other businesses which may be thinking about relocating or have already relocated all of their manufacturing capability out of the country.

    I’m sorry, but I really do not see the down side to this.

      ronk in reply to Mac45. | December 1, 2016 at 7:44 pm

      isn’t that what NEW York State was doing to get businesses to move there

      Ragspierre in reply to Mac45. | December 1, 2016 at 9:49 pm

      What’s funny is that you are rationalizing plain old crony capitalism, and using a variation on the broken windows fallacy as your argument.

        What’s funny is that you failed to point out where I was incorrect and, instead, chose to refute my statement using tired old buzz words which you failed to show applied to the situation in any way.

    inspectorudy in reply to Ragspierre. | December 1, 2016 at 7:40 pm

    Wow! Talk about no hope! Have you considered that other companies might feel the force of patriotism and love of country? Sure there has to be something in it for the companies but these are people, not numbers that will keep their jobs. Who does the CEOs of all these companies think will be buying their products when they are all built offshore? The middle class is shrinking faster than an ice cube in Yuma and the unemployment rate is climbing (Not the phoney one the labour dept uses). Our manufacturing jobs are leaving and are not being replaced. obama figured if you lost a factory job but got a burger flipping job that it was a wash. There has to be a change in attitude as well as conduct by the corporations of America if we are to survive as a nation. Trump has made a start. Give him some credit for that.

      Ragspierre in reply to inspectorudy. | December 1, 2016 at 9:54 pm

      First, there’s no chance that “all their products will be built off-shore”.

      Second, it used to be clear to conservatives that a company’s business was business. Making good returns on the assets entrusted to them is their sole concern.

      Not any form of social bullshit.

      It’s amazing how thin some of you guy’s thinking is. Did you ever really believe a lot of the “conservative” stuff you used to pretend?

        I’ve pondered this question a lot over the past eight years, Rags, and I’ve come to the conclusion that a lot of people who used to identify as conservatives were really identifying as right-wing in some capacity (be it the economy, jobs, social issues, taxes, education, whatever). In other words, they said they were conservative because they were not progressives . . . not because they were actually conservatives.

        You and I and a few others who comment here are what is now being ridiculed and disdained as “principled conservatives.” A redundant term to most, one might think, but not to this new group of right-leaning people (even as they lean so far right they spiral around to the extreme left). Censorship is bad when it’s against conservatives or the right, but it’s perfectly justifiable when it is against the LSM, the Dems, random snowflakes, whomever. Sending the IRS, EPA, DOJ, or whatever other alphabet agency after Obama’s enemies is a gross abuse of power, appalling, unconscionable . . . sending the IRS, EPA, DOJ, and etc. after whining progressive snowflakes, SJWs, and assorted skittles-pooping unicorn riders is draining the swamp and taking our country back. I could go on, but you know the drill.

        That’s why we see Trump fans (and for the time being, I will call myself a supporter of Trump) ignore the Obama-inspired trillion dollar infrastructure Trumpulous, the make everyone pay for other people’s daycare deal, and a host of assorted other crap that Bernie and Lizzie are drooling over.

        I used to get so frustrated, beyond words and stutteringly frustrated, when my Dem friends would just shrug and smile when I pointed out that Obama had kept all the warrantless wiretaps (and even added more to it) that the devil incarnate George W. Bush had in place; that the leader of the Black Congressional Caucus stated that if Obama weren’t the one in the WH, they’d be marching against him because of the horrific unemployment rate among black people; and that while Obama claimed that Bush’s national debt was unAmerican, his own tripled Bush’s and exceeded that of all previous presidents combined. Obama did not deliver on a single campaign promise he made (we can debate about the “fundamental transformation” if America is still the world’s laughingstock, ObamaCare is still entrenched, and the military remains gutted in a couple years), and though he didn’t deliver, he’s still excused, awash in explanations of his failure that include everything from Fox News to the weather.

        Obama was not “the One,” he didn’t do a damned thing but stall our economy and marginalize the majority and middle class, but do they care? Nope.

        My guess? We’ll see that same with Trump and his more fervent followers.

        As to conservatives, we’re still here, but the “label” has a new meaning now . . . rather like when “liberal” stopped meaning liberal and started meaning socialist and became in public parlance “progressive.” We’re now that old thing, that crazy remnant of a failed past. It’s passe now to believe that something is wrong no matter who does it or to rally to those old, tired cries like “I might not like what you say, but I’ll defend to the death your right to say it.” Now, if it’s “if Obama says some speech should be banned, he’s an evil tyrant dictator hell bent on taking over the world,” and if it’s Trump saying the same exact thing, it’s “hey, I need to be able to sue anyone who says unkind things about me,” he’s such a savvy leader who knows how to manage and humiliate the media.

        We’re relics, Rags. We think right is right and wrong is wrong based on . . . well, what is right and wrong; they just don’t see right and wrong in that way. To them, what “they” do is wrong, and what “we” do is right. Always. The end.

          Ragspierre in reply to Fuzzy Slippers. | December 2, 2016 at 7:19 am

          Too much truth in all that, Fuzzy.

          For a lot of these guys, it’s unprincipled power, and a tribal identity. It has nothing to do with understanding correct ideas and applying them to government and economics.

          I’ve been appalled at some of the crap I’ve read here over the last nineteen months, including the aping of bullshit gleaned from some of the worst “thinkers” on the internet, and how it is often supported by regular posters here.

          Any push-back is dealt with by a clique of haters/cultists in full-tilt ThoughtPolicing mode, a clique that includes some of the weakest minds ever to post here, and using some of the most vile tools of propagandists.

          I’ve also watched as people who I know know better in the right media become pom-pom gurls for what they know is antithetical to what they’ve SAID they believe in their bones for decades…and were against only months ago. I won’t waste my time with them any longer. They disgust me.

          It’s a sad, dark time in America. Especially so when you consider what might have been, and should be.

          inspectorudy in reply to Fuzzy Slippers. | December 2, 2016 at 11:47 am

          Wow! Stereotype much fuzzy? I did not want Trump for president but now that he is I would like to see some things change for the better. “Principled Conservatives”? What the hell does that mean? That you cannot allow any variation of your beliefs and that like the “Never Trump” crowd would have allowed a hillary presidency? Is that what you mean? It is rigid people like you on either side of this question that are the problem and the rest of us have to work around the stones in our way. You remind me of the old British military that would not allow the soldiers more than a fixed amount of ammo until they ran out. That was the rule and by God, it was fixed in stone! The fact that they all ran out at the same time didn’t seem to matter to the rule setters. Already Trump has opened up an avenue of hope and as I learned in the USMC when something needs to get done, do it!

          Ragspierre in reply to Fuzzy Slippers. | December 2, 2016 at 12:24 pm

          You use the fallacy of false equivalence, which is really beneath you.

          Understanding and promoting solid conservative values is nothing remotely like a hide-bound rule in the British military.

          If you don’t know what “conservative principles” means…or pretend not to…you’re really not worth the time it takes to write a comment. You should invest some time in learning.

          You could make something like the same false argument about the laws of aerodynamics as applied to safe flying. Using a good pre-flight is not the same as some stupid arbitrary rule. Is it?

          Conservatives are not the problem. No more than a good, safe pilot.

          Wow thanks Fuzzy, you hit the nail on the head.

          I only recently started to really understand conservatism and it was easier to grasp with such a foil as Obama in office to contrast with. I had high hopes for this election coming into it, thinking that after so many years of seeing what shouldn’t be done that Americans were ready to try policy based on principle. Unfortunately, it’s more about “our guy” vs “their guy.” It’s big government and crony capitalism for “us.” Things have gotten so warped and apparently it’s only getting started for the right.

“No matter the reason, it is a pleasant bit of news at the start of the holiday season for average Americans.”

The KEY here-average Americans!

Thank you President-elect Trump

I did see an article on Yahoo that the President of Mexico is all upset and bitching about this.

No matter what the underlying economics and politics, that gave me a warm and fuzzy feeling.

Seven things:

1-we pay football teams zillions in incentives to move to a city, or stay in one (it pays off) – same thing with Carrier. It’s not just Carrier workers getting jobs, it’s also the surrounding city getting the benefits of their spending these wages.

2-Trump is keeping his promises.

3-Trump is making Obama look like the malignant idiot Obama is.

4-Perception means a lot. The nation is gaining hope – and shedding the disease of ‘Barack Hussein Obama’ (or whoever the hell he really is)

5-Given Putin’s and the ChiCom’s enthusiasm for Trump, there hasn’t been a sweep of hope for peace the WORLD with hope for many decades.

6-Obama is a traitor and has sabotaged the nation and the West for the past 8 years. Without even being sworn-in yet Trump has clearly demonstrated it .

7-The GOPe has been Obama’s willing accomplice for the past 6 years. They need to share the shame and the blame – and the penalties. Hear that Boehner, Ryan and McConnell?

Remember, keeping more of the money you make is NOT a subsidy.

    Ragspierre in reply to mailman. | December 2, 2016 at 7:29 am

    It certainly CAN be a subsidy, if it only applies to a very select few.

    As here, apparently. Chosen winners and losers. All at the whim of BIG GOVERNMENT.

      Well, Carrier and UT were enjoying incentives [mostly relief from taxes] from the State of Indiana prior to their announcement, in February of 2016, that they were closing the plants in Indiana and moving the jobs to Mexico. I do not know how much those incentives amounted to, so there is no way to gauge whether the announced incentive package is any larger than the original.

      The incentives are also spread out over 10 years and are dependent upon UT maintaining the jobs in Indiana. They will also help UT off-set the $16 million in improvement that it will make to the Carrier plant.

      As to $700,000 being a meaningful subsidy to UT, this is hardly the case. For a company the size of UT, whose yearly earnings are in the neighborhood of $65 BILLION with Carrier earnings being in the neighborhood of $3.8 BILLION [adjusted PROFIT around $650 MILLION], $700 THOUSAND in tax credits is insignificant. And, we already know that the suspension of the Indiana incentives had no effect on the company’s decision to relocate the jobs to Mexico. However, when you look at all the government business that UT could have lost by not keeping these jobs in place and how easily a 15-20% reduction in corporate income taxes will allow them to off-set the increased cost of maintaining the carrier plant in Indiana, it becomes a no-brainer for UT.

      This was simply a brilliant application of economic leverage which will ultimately benefit UT, its US workers and the country-at-large. And, Trump is not even in the White House yet.

      Ragspierre in reply to Ragspierre. | December 2, 2016 at 2:20 pm

      http://www.nationalreview.com/article/442665/trump-carrier-bailout-economically-unsound

      That neatly refutes your rationalizing BS.

      Williamson is not only quanta smarter than you, but a great deal more honest.

How about we start the new year off with no little boy name calling? Can we just debate/argue like friends do and stop the insults?

What Williamson conveniently ignores is the fact that Carrier was enjoying tax and other incentives, in Indiana, when it announced it was relocating. Those incentives were then rescinded, by the state. So, some, if not all of the tax incentives, which were announced by Trump, were in existence previously. So, if the amount of tax incentive is the same, no tax revenue was lost. He also fails to consider the loss of FUTURE tax revenue IF the company moves outside the country. Money earned and spent outside the US, but subsidiaries which are incorporated in a foreign company are usually not taxable in the US. And, any tax revenue which may have been obtained from the income and spending of the workers is also lost. Then, of course, there is the glaring fact that he ignores the tax revenue generated from the workers and service companies which do business with Carrier and its employees, in the US. And, his worst mistake is thinking that $700,000 a year in exempted taxes will actually harm the federal budget. Just eliminate five or six study grants in such things as the amount of methane released by cattle belches, the mating habits of the banana slug, etc. and it will be paid for in no time. It might also be nice if we stopped making grants to foreign parties, some in the multiple $100,000 range, to study things which do not impact the US at all.

As to manufacturing competitors not having the same incentive benefits, they probably could have them; if they moved to a US state or remained in the US. And, remember, $700,000 a year is almost insignificant for a company which grosses 100 times that. 1% is not going to make or break companies of that size. And, it should be noted that Carrier was willing to lose the Indiana incentives to move to Mexico.

Where Carrier is truly vulnerable to economic leverage is in the government contracting done by it parent company, United Technology. Through its other subsidiaries, United Technology realizes nearly 20% of its gross income from government contracts; most of which are federal government contracts. So, it is in the interests of UT to keep their single biggest customer happy. That is simply good business. Then there is the potential for high tariffs on products manufactured outside the US and imported.

It is not strictly reductions in the corporate tax rate which will produce positive economic results, but a comprehensive reworking of the economic laws of this country which is needed. And, trump has promised to attempt to accomplish this.

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