Bribe bully beg borrow steal: is Donald Trump a crony capitalist? Or is he something worse?

AuthorHenderson, David R.

ON FEBRUARY 10,2016, the Indiana-based furnace company Carrier announced that it would close two factories in the U.S.--one in Indianapolis and one in Huntington--and shift production to Mexico. Just three days later, presidential longshot Donald Trump bragged on Twitter: "I am the only one who can fix this. Very sad. Will not happen under my watch!" Then on April 20, just 13 days before the May 3 Indiana primary, he promised to impose stiff taxes on companies that moved jobs out of the country, singling out Carrier as part of the problem. On July 12, he attacked Carrier again.

On November 8, of course, Trump won the presidential election. Less than three weeks later, on Thanksgiving, he tweeted that he was "working hard" to keep the plant in the United States. On November 29, Carrier announced that it had reached an agreement with Trump to keep about 1,000 jobs in Indianapolis.

"Donald Trump's Carrier Deal is Pure Crony Capitalism," read the headline of a Newsweek op-ed by American Enterprise Institute fellow Claude Barfield. Trump supporter Sarah Palin denounced the deal as "crony capitalism," too, insisting in a op-ed of her own that "intrusion using a stick or carrot to bribe or force one individual business to do what politicians insist...isn't the answer." Certainly they had a basis for that reaction, especially after Vice President-elect Mike Pence's statement that "the free market has been sorting it out and America's been losing."

But a closer look reveals Trump's up to something a little different, and potentially more damaging. His actions will almost certainly lead to more cronyism than we have now. But his behavior in the Carrier case looks more like President John F. Kennedy's treatment of U.S. Steel in the early 1960s and President Barack Obama's treatment of General Motors and Chrysler bondholders in 2009. And it has disturbing implications both for our economic well-being and for our freedom.

BRIBE

THE DAY BEFORE Trump's triumphant press conference, Carrier gave two reasons for its decision: first, that "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," and second, that the "incentives offered by the state [government] were an important consideration." Carrier did not specify which incentives it had in mind.

By December 2, one of the incentives was publicized: a $7 million tax credit over 10 years from Indiana's state government. Now, $7 million might sound like a lot. But stretched out over 10 years, it's really not. It's hard to believe that this amount was enough to keep 1,000 jobs in town. The tax credit amounts to [section]700 per job per year. Is that enough, on its own, to keep Carrier from moving the jobs? It seems unlikely. Companies don't relocate factories on a whim; the firm would have expected significant and lasting gains from the move. In fact, according to a Washington Post story, Carrier had claimed that its move to Mexico would have saved $65 million per year. That's two orders of magnitude more than the new tax credit. Moreover, Indiana's governor, Vice President-elect Mike Pence, claimed that...

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