INDIANAPOLIS — President-elect Donald Trump on Thursday
warned that the government would punish companies seeking to move operations
overseas with “consequences,” setting the stage for an unusual level of
intervention by the White House into private enterprise.
Trump’s remarks came as he triumphantly celebrated a decision by
the heating and air-conditioning company Carrier to reverse its plans to close
a furnace plant here and move to Mexico, helping keep 1,100 jobs in
Indianapolis. About 800 of those were manufacturing positions that had been
scheduled to move south of the border, said a person familiar with the
negotiations.
An additional 300 to 600 Carrier positions at that plant, as
well as roughly 700 jobs at another facility in the area, will still be cut.
Under the terms of the agreement, which have not been finalized,
Carrier would receive a $7 million tax incentive package from the state of
Indiana in exchange for making a $16 million investment in the facility —
although Trump said Thursday that amount would probably be higher.
In remarks delivered inside the Carrier facility, the
president-elect said more companies will decide to stay in the United States because
his administration will lower corporate taxes and reduce regulations. He also
warned that businesses that decide to go abroad will pay a price through a
border tax on imported goods.
“Companies are not going to leave the United States anymore
without consequences,” Trump declared Thursday. “Not gonna happen. It’s not
gonna happen.”
Trump said he decided to intervene after watching a television
news report that reminded him that he had vowed during the campaign, “We’re not
going to let Carrier leave.”
Trump’s determination to use a mixture of incentives and tariffs
to keep jobs from going overseas represents a sharp break with the free-market
wing of the Republican Party, including senior congressional leaders. On
Thursday, top Republicans offered careful responses to the Carrier deal.
“I think it’s pretty darn good that people are keeping their
jobs in Indiana instead of going to Mexico,” said House Speaker Paul D. Ryan
(R-Wis.), emphasizing that the party is hoping to pass comprehensive tax
changes that would be a boon to all businesses. Ryan has repeatedly criticized
President Obama for allegedly trying to pick “winners and losers” in his
stimulus package and other economic policies.
[Why lots of people
think Trump’s deal to save 1,000 Indiana jobs was a bad idea]
The Carrier deal was sharply criticised by some conservatives,
who viewed it as government distortion of free markets, as well as liberals,
who derided it as corporate welfare.
“I think it sets a pretty bad precedent,” said Dan Ikenson, director
of the Herbert A. Stiefel Center for Trade Policy Studies at the Cato
Institute, a libertarian think tank. “I don’t think we should be addressing
issues like this on an ad hoc basis. It certainly incentivizes companies to
make a stink and say: ‘We’re going to leave, too. What are you going to do for
me?’ ”
Sen. Bernie Sanders of Vermont, who ran for the Democratic
presidential nomination, accused Trump of reversing course on a pledge to
punish companies that outsource manufacturing jobs. In the case of Carrier,
Trump had said he would force the company to “pay a damn tax” if it closed the
plant.
“Instead of a damn tax, the company will be rewarded with a damn
tax cut,” Sanders wrote in an op-ed for The Washington Post. “Wow! How’s that
for standing up to corporate greed?”
Privately, some business leaders were also unnerved.
“It is uncharted territory for a president-elect to get involved
personally in social engineering with a single company,” said an adviser to
major corporations, who spoke on the condition of anonymity in order not to
anger the incoming administration.
Now that Carrier “is no longer the political piñata,” the
adviser added, chief executives “are asking, ‘Who’s next?’ ”
Timothy Bartik, an economist at the nonpartisan W.E. Upjohn
Institute for Employment Research in Kalamazoo, Mich., said that vague threats
from the president-elect could stymie corporate investment as firms seek to
avoid decisions that could draw the ire of the White House.
“What are these consequences? Who’s in charge of them?” Bartik
asked.
“One of the worst things for corporate investment is
uncertainty,” he added. “You would hope that the government would not add to
the uncertainty.”
In Indianapolis, where Carrier has been a staple of the business
community since the 1950s, the deal was celebrated.
[The trick to persuading
Trump? Flattery, proximity and snappy pitches]
“Our union at every level, including our local union leadership,
fought to keep that plant open,” said Leo Gerard, international president of
the United Steelworkers, which represents the factory’s workers.
Gerard said that although it did not endorse Trump, the union
supports crucial aspects of the president-elect’s agenda, including
preservation of manufacturing jobs, scrapping free-trade deals and spending on
infrastructure.
“If this step is any indication of what’s to come, we look
forward to working with him,” Gerard said.
Jennifer Volheim, a bartender at Sully’s Bar and Grill, down the
street from the factory, said she was “heartbroken” when it was on track to
shut down. But, she said, she voted for Trump and knew he would make a
difference.
“We knew Trump was on it,” she said. “He’s not even in office
yet and he’s saving . . . jobs.”
In fact, by Trump’s own telling on Thursday, he had no plans to
intervene in the Carrier case until he watched an evening news segment
featuring a worker who expressed confidence that the president-elect would
save the Indianapolis plant. He said his campaign vow to save the plant was “a
euphemism” for other companies.
Regardless, Trump — known for his tendency to react to TV news
reports — said he immediately picked up the phone and called Gregory Hayes, the
chief executive of Carrier’s parent company, United Technologies.
“I said, ‘Greg, you gotta help us out here. You gotta do
something,’ ” Trump recalled Thursday.
Standing in front of a wall blanketed with Carrier’s
blue-and-white logo, Trump lavished praise on the company for its decision,
promising that the sales of its air-conditioning units would soar “because of
the goodwill you have engendered.”
Experts said no modern president has intervened on behalf of an
individual company. Although Obama stepped in to rescue car manufacturers after
the 2008 financial crisis and President John F. Kennedy intervened to prevent
steel producers from increasing prices, these actions affected entire
industries — not decisions at a specific plant, Bartik said.
Jeff Windau, an analyst at the investment firm Edward Jones in
St. Louis, said that Trump might not have the “bandwidth” to keep up this kind
of dealmaking once in the Oval Office.
“Having a current president-elect focus on a specific company
and a specific location — it’s a pretty micro view of the world,” he said.
[Trump is shocked that
Carrier workers took him literally. That doesn’t bode well for his many
promises.]
But Trump said Thursday that he planned to personally call other
companies that are contemplating moving operations out of the country, even, as
he said, if critics felt such outreach was not “presidential.”
“I think it’s very presidential. And if it’s not presidential,
that’s okay because I actually like doing it,” Trump said. “But we’re going to
have a lot of phone calls made to companies when they say they’re leaving this
country, because they’re not going to leave this country.”
Trump’s aggressive stance toward outsourcing comes despite the
fact that his family companies profit from low-wage laborers around the globe
who produce Trump-branded merchandise. His daughter Ivanka has her own separate
brand of jewelry, shoes and clothing, much of which is produced in China.
Abigail Klem, president of Ivanka Trump’s company, said in a
statement that the brand has “consistently expressed that we share industry
[leaders’] interest in bringing more manufacturing opportunities to the US and
are looking forward to being a part of the conversation.” A representative for
the Trump Organization did not respond to requests for comment.
On the campaign trail, Trump repeatedly attacked specific
companies for outsourcing, drawing huge cheers from his crowds. He blasted Ford
Motor Co. for opening factories in Mexico, criticised a U.S. drug company that
moved its headquarters offshore and said he would not longer eat Oreo cookies
because its maker, Nabisco, moved part of its production to Mexico.
He also mocked politicians who offered low-interest loans and
tax abatements to keep factories in the United States.
“These companies don’t even need the money, most of them,” he
said at a rally in Wilkes-Barre, Pa., in October. “They take the money. There
were a couple instances where geniuses with great lawyers gave them money, and
then they moved anyway.”
Trump repeatedly pointed to Carrier’s planned move to Mexico as
a prime example of the perils of globalisation: The company told Indiana
officials it would save $65 million a year by shifting production to a
645,000-square-foot factory under construction outside Monterrey, where wages
are far lower.
Carrier rejected a tax incentive package the state offered
earlier in the year to keep the Indianapolis plant open. But that was before
Trump won the election and Indiana Gov. Mike Pence became the vice
president-elect.
On Thursday, Hayes said that discussions with Trump and his team
gave the company “a renewed confidence in the future of manufacturing” in the
country.
(scroll down to see the more images.)
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