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.
From Washington Post
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.
The Carrier deal was sharply criticized 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.
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