The recent news that Carrier Corp., an air conditioning company, will keep approximately 1,000 jobs in Indiana is being touted as further proof that President-Elect Donald Trump and Vice-President-Elect Mike Pence are already making America great again.
Trump supporters say that this is further proof that the incoming president will put together better trade deals, bring back manufacturing jobs and ensure American companies stay within the United States. But are Trump’s negotiating skills really the reason for Carrier to stay in the U.S.?
Let’s take a gander what the real story is.
First, Carrier is still sending about 1,000 jobs to Mexico. Second, the only reason why Carrier is keeping jobs in Indiana is because the company is receiving a massive tax break – the details are still unknown at this time but some suggest it is a tax credit. Third, Trump is reneging on a campaign promise to penalize outsourcing and will ostensibly offer tax breaks instead.
Big day on Thursday for Indiana and the great workers of that wonderful state.We will keep our companies and jobs in the U.S. Thanks Carrier
— Donald J. Trump (@realDonaldTrump) November 30, 2016
To the layman, this was a victory for Trump and America. To the analyst, this was a great public relations stunt for the president-elect. To the free market economist, however, when you start scratching the surface, you’re not seeing a victory, but a negative result and economic manipulation.
It is true that tax credits, in theory, are a great idea because you’re getting some of your money back. Unfortunately, tax credits have morphed into something else. Tax credits are part of the government’s attempt to manipulate the economy and encourage people and companies to do certain things they may not otherwise have done. Remember, a tax cut is far different than a tax credit.
This is prevalent in Republican-led and Democratic-led governments and has been around for a long time.
Another thing to examine is the economic Law of Comparative Advantage. By essentially bribing a corporation and not allowing Carrier to relocate its operations to Mexico, you negate the forces of the free market and you potentially reduce the standard of living for both Mexico and the U.S.
Indeed, this kind of news story is just more of things to come over the next four years.
Many libertarian pundits warned during the election that Trump’s lack of principles and convictions would pose significant harm to the marketplace. This is just further proof.
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