Reflections on the Carrier deal.

• Author: Slaper, Timothy

November 24, 2016 wasn't a typical Thanksgiving Day in Indiana news. The then-president-elect tweeted about making progress on keeping jobs in Indiana that Carrier had announced earlier in the year were leaving the state.

On Tuesday, November 29, President-elect Trump and Governor Pence announced that on December 1, they would unveil the deal that would result in keeping some 1,000 jobs in Indiana.

Then the phone started ringing. Broad outlines of the negotiation were reported and state-based reporters wanted to know "if it was a good deal for Indiana."

What they didn't ask, perhaps wisely, is if the deal made sense and was a good economic idea. The chattering class had plenty to say about that, so one's contribution on those particular questions would have been marginal at best. Esteemed conservative economists like John Cochrane and Tyler Cowen were resolutely against the action, considering it crony capitalism where firms make money off the government. The deal represented baby steps to a dysfunctional economy like France or, worse, Venezuela. On the opposite end of the political spectrum, the likes of former Treasury Secretary Larry Summers and former Enron advisor Paul Krugman likened it to a government protection racket and presages of a scary economic and political future. (1)

The Electoral College had not yet met and both the right-wing Never Trumpers and the left-wing Clinton apparatchiks were still in high dudgeon.

The hand wringing and contempt for the deal was well expressed across the political divide. (Perhaps Trump would pull the country together after all!) Left-leaning radio news program guests and call-in listeners were suddenly discovering the wisdom of the government not picking winners and losers. They definitely did not approve of Trump winning a deal at taxpayer expense.

Which brings us back to the question of the reporters: Was it a good deal? To me, that question translated into this: What do the numbers say? Or better still, what is the cost-benefit? I had an envelope handy so I went to work.

These sorts of calculations require several assumptions and are done quickly. The annual cost to the state was reported at that time to be about $1 million a year for 10 years and the number of jobs to be saved was 1,000. Assuming each job is full-time with no overtime hours, that is about 1,960 hours per job per year, or about $0.51 an hour cost to the state. Does the state extract any financial benefits? State income taxes...