The generous tax incentives offered in exchange for the Carrier plant keeping manufacturing jobs in the US are unsustainable on a large scale, critics warn

This article is more than 3 years old

This article is more than 3 years old

Donald Trump has claimed an agreement to keep 1,100 manufacturing jobs in Indiana from being shifted to Mexico would be a harbinger of deals to come and is proof that he could deliver on his bold campaign promises.

“Companies are not going to leave the United States any more without consequences,” he told workers at the Carrier furnace and fan coil plant in Indianapolis. “It’s not going to happen. It’s simply not going to happen.”

But critics warned that the arrangement struck with Carrier – which had planned to shift its operations at the plant to Mexico before Trump’s intervention – is unsustainable on a large scale and could set a dangerous precedent for companies looking for tax concessions.

Trump was returning to public speaking for his first major appearance since his election victory. He will begin a so-called “thank you tour” of key states where he won in November on Thursday night in Ohio.

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“These companies aren’t going to be leaving any more. They’re not going to be taking people’s hearts out,” he said in Indianapolis. “They’re not going to be announcing, like they did at Carrier, that they’re closing up and they’re moving to Mexico.”

Carrier’s parent company United Technologies had planned to close the plant and shift production of about 1,400 jobs from Indianapolis to Monterrey, Mexico, by 2019, along with a United Technologies factory in Huntington, Indiana, with 700 employees.

Under the new deal, Carrier will keep 1,100 jobs at the Indianapolis plant, where the highest-paid employee can make as much as $26 an hour, or $70,000 a year with overtime. Seth Martin, a spokesman for Carrier, said that Indiana offered the air conditioning and furnace manufacturer $7m in tax incentives after negotiations with Trump’s team, which covered “multiple years, contingent upon factors including employment, job retention and capital investment”, the Indianapolis Star reported.

The Huntingdon plant will still close.

On the stump, Trump campaigned aggressively for preserving and restoring manufacturing jobs to the United States, and promised to persuade Carrier to keep its operations in Indianapolis or punish the company with fines if they refused. Trump had said he would impose a 35% tariff on companies who exported operations to countries where labor is cheaper.

On Thursday neither Trump or Pence expanded on the vague details of the arrangement.

Facebook Twitter Pinterest Donald Trump on a factory tour. Under the new deal, Carrier will keep 1,100 jobs at the Indianapolis plant rather than shifting them to Mexico. Photograph: Mike Segar/Reuters

During his roughly 15-minute remarks, some of which rambled off course, Trump told his audience that his interest in the plant’s fate was piqued by a news segment featuring a Carrier employee who believed Trump would save their jobs.

Vice-president elect Mike Pence, the outgoing governor of Indiana, who played a key role in shaping the deal, praised Trump “for picking up the phone, for keeping his word” and he called deal the beginning of a “renewed day for manufacturing in America”.

“When Donald Trump was running for president he said that if he was elected president of the United States America would start winning again,” Pence said. “Well today, America won and we have Donald Trump to thank.

“I got a feeling, working beside this extraordinary man, this is just the beginning.”

While Trump notches up a victory for delivering on a campaign promise before being sworn in as president, the impact will be narrowly felt. Since 2000, Indiana has lost 150,000 manufacturing jobs. Nationally, 5m manufacturing jobs disappeared over the same period.

The White House on Thursday applauded the deal but noted that it was small in scope – and hardly comparable to the number of manufacturing jobs created under President Obama, which he put at 804,000.

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“That’s obviously good news and an announcement that we would welcome,” said White House press secretary Josh Earnest. “But ... Mr Trump would have to make 804 more announcements just like that to equal the standard of jobs in the manufacturing sector that were created in this country under President Obama’s watch.”



Economist Paul Krugman said on Twitter that Trump would have to negotiate a similar deal with manufacturing companies every week for the next four years to restore just 4% of the total US manufacturing jobs lost since 2000.

The deal drew criticism from some Democrats, who said it set a dangerous precedent that corporations can threaten to move operations abroad and would be rewarded with tax concessions.



In an op-ed for the Washington Post on Wednesday, Senator Bernie Sanders, of Vermont, slammed the president-elect for using tax breaks and incentives to rescue a small fraction of Indiana’s manufacturing jobs from being sent to Mexico. Sanders, who railed against the country’s trade policies on the campaign trail, said Carrier’s parent company, United Technologies, “took Trump hostage and won”.

“Just a short few months ago, Trump was pledging to force United Technologies to ‘pay a damn tax,’” Sanders said. “He 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?”

Facebook Twitter Pinterest Senator Sanders has slammed Trump’s deal, saying the company ‘took Trump hostage and won’. Photograph: Phillip Faraone/Getty Images

In a statement on Wednesday, Carrier said the incentives offered by Indiana were “an important consideration” in its decision.

“This is all terrible for a nation’s economic vitality if businesses make decisions to please politicians rather than customers and shareholders,” James Pethokoukis, the DeWitt Wallace Fellow at the conservative thinktank American Enterprise Institute, wrote in The Week Magazine. “Yet America’s private sector has just been sent a strong signal that playing ball with Trump might be part of what it now means to run an American company.”

Trump spoke after touring the factory with vice-president-elect Pence. Trump observed the machinery, waving and flashing thumbs up to employees who lined the industrial concrete pathway to capture photos of the incoming president. Some wore his trademark red hats while others wore campaign T-shirts.

Trump relished the moment. He walked over to one employee named Mario and squeezed the man’s shoulders.

Turning to reporters, Trump said: “They’re going to have a good Christmas.”