The deal put together by Donald Trump and Michael Pence to save 800 manufacturing jobs in Indianapolis and the accompanying visit to that factory offers a ripe opportunity for cynicism.

After all, this plant owned by Carrier Corp. is a marginally profitable, mid-20th-century assembly plant with a modestly educated workforce — just the sort of situation where automation, if not outright moves to factories abroad, have wiped out millions of American factory jobs in recent decades. Even if Trump announces a deal like this one every day of an eight-year presidency, the United States will still have fewer manufacturing jobs than now, and close to 9 million less than the peak manufacturing employment year of 1977.

This surely is a triumphant moment for some Carrier workers, and yet it is easy to make the claim that this was a meaningless piece of political theater. But embedded in this deal is a much stronger signal about the urgency of the Trump-Pence economic policies that the skeptics overlook. It starts with a backstory about American manufacturing.

Nationwide, manufacturing employment has been on the decline since 1977, and here in Indiana since 1973. In contrast, American manufacturing production hit a new peak in 2015 (the latest year for which we have data). Experts argue over whether automation accounts for either eight or nine out of every 10 jobs lost in this sector. No matter how you slice the numbers, the outsourcing of American manufacturing is a sideshow to the productivity-induced employment declines.

“ Even if Trump announces a deal like this one every day of an eight-year presidency, the United States will still have fewer manufacturing jobs than now ”

The Carrier deal, with its $7 million of state tax credits and training grants spread out over 10 years, wasn’t about keeping 20th-century jobs in Indianapolis, where the booming manufacturing sector is desperate for trained workers. After all, this deal is no better than what the company was offered last spring. This is about making the U.S. business landscape ready for the 21st-century jobs that are quickly replacing the assembly plants of the 1960s.

Whether these new jobs are in advanced manufacturing or software development, employers face common issues regarding business costs, especially regulations and corporate taxes. In the spring, executives at Carrier parent United Technologies Corp. US:UTX said they were moving 2,000 jobs to Mexico, where they could pay wages of $3 instead of $30 per hour. That they would reverse that decision now suggests they believe regulatory and tax relief is imminent. That is likely what financial markets also believe, which is why the Dow Jones Industrial Average DJIA, -1.92% is booming in the wake of Trump’s election.

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How important is this? A recent study for the U.S. Small Business Administration reports that regulation adds more than $10,500 to the cost of each worker annually. Other studies find the aggregate impact of the ever-growing pile of regulations seriously slowing U.S. economic growth for decades.

Anecdotally, there is abundant evidence that regulatory intervention impacts costs for businesses. Take, for example, the Obama administration’s favorite industry — higher education, where I work. The handbook for simply reporting (not implementing) the federal campus safety rules runs past 255 pages. It’s difficult to imagine what the regulatory torment is like in industries the current administration disfavors.

The letter Carrier officials handed out to workers Thursday echoed their concern over the U.S. business climate, saying plainly: “Today’s announcement is possible because the incoming Trump-Pence administration has emphasized to us its commitment to support the business community and create an improved, more competitive U.S. business climate.” The effort to raise the very real hope that regulatory costs will now be a center point of the Trump-Pence administration come January.

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Still, the biggest evidence that this is about the future of American manufacturing involves actions by Carrier and the state of Indiana. Carrier will add $18 million investment to this plant, which will surely boost production and, yes, automate much of the assembly process. The Carrier letter admitted as much noting “this announcement is good news for many, we recognize it is not good news for everyone.”

The new investment by Carrier will eventually lead to technology-related job cuts, including 700 in Indianapolis. Moreover, the decision to consolidate operations in Indianapolis, while eliminating those in the small town of Huntington, is wholly related to the availability of a 21st-century workforce.

The company is also preserving its research and development presence in Indianapolis, within an hour of four research universities: Purdue University, Indiana University, Ball State University and Indiana University-Purdue University-Indianapolis.

I have been a longtime critic of capital incentives. These tend to speed automation-related unemployment faster than market forces alone would do while robbing local governments of school and infrastructure dollars. Yet I can find little to complain of in this tax-incentive package. Indiana offered very modest tax credits of about $700 per worker for training for each of 10 years and another $2 million over all in assorted technology incentives. These incentives will pay for themselves in income-tax revenue that Indiana otherwise would have lost in year one, and are among the smaller state tax incentives in the country. This is a fraction of the money Carrier will pay to retrain current and displaced workers, and had been offered to the company last spring, when Gov. Pence worked to keep the factory open.

This decision wasn’t about threats, presidential cajoling, or tax incentive packages. If it were, the company would have quietly asked for more incentives. Carrier made a smart decision to go public earlier this year with its very real suite of business climate complaints, that were quietly dismissed by the Obama administration. Executives hadn’t expected that to change, particularly if Hillary Clinton had been elected president.

Carrier decided to keep production in Indiana because its leaders now expect a better business climate to emerge in the Trump-Pence administration, supported by Republicans that control both the House of Representatives and the Senate. That is damned fine deal-making.

Michael J. Hicks is the George and Frances Ball distinguished professor of economics and the director of the Center for Business and Economic Research at Ball State University in Muncie, Ind.

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