In this issue, criticism of the Carrier tax-break deal, whether jobs still make sense, the dangers of inequality, and the political choice of poverty.
Let's start with a cartoon from the Columbian:
President-elect Donald Trump made headlines this week for brokering a deal with the air conditioner company Carrier that would keep around 1,000 jobs in the state of Indiana even as the company moves others to Mexico. But deal, which includes tax breaks for the company, garnered critics from the right and the left. In the National Review, Kevin Williamson called it "economic stupidity":
Our government runs deficits, which means that a federal tax credit of $1 million given to Smith is $1 million in taxes that eventually will have to be paid — by Jones, and Wilson, and Humperdink — with interest. Carrier is a division of United Technologies (the Otis elevator and Pratt & Whitney engines people), which is first and foremost a government contractor, a firm that derives at least a quarter of its revenue from government contracts, and 10 percent of it from Pentagon contracts alone. It is a company that has competitors — competitors who employ Americans and pay taxes, just as Carrier does. These firms and their employees are put at an economic disadvantage by the subsidies paid to Carrier thanks to Trump and Pence. That means that some of these companies probably will be less profitable, and that they will not hire people they otherwise would have hired. But you’ll see no Trump press conference celebrating that.
Over at Slate, Henry Graber argued Trump's action was the same "bad deal politicians always make":
[W]hat happened in Indiana represents exactly the problem, not the solution, in America’s approach to corporate negotiation. There is literally another factory across town from Carrier waiting for the same kind of attention. It’s not good that the geography of large offices and factories is a function of public money doled out by cities, states and in Washington. It’s been a great boon to companies with the size and flexibility to uproot or locate their operations at will, or at least make a convincing threat they’ll do so. And a big loss for the rest of us.
In hundreds of cases, state and local governments have offered more in subsidy than the $65 million Carrier hoped to save in Mexico.
According to a review by Good Jobs First, a resource center for accountability in economic development, there have been more than 240 such deals, worth a collective $64 billion, in the last 35 years. Manufacturing facilities are the most common recipient. The average cost per job is $465,000.
Sen. Bernie Sanders was amongst the critics on the Carrier issue and authored an op-ed in the Washington Post:
Trump has endangered the jobs of workers who were previously safe in the United States. Why? Because he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives. Even corporations that weren’t thinking of offshoring jobs will most probably be reevaluating their stance this morning. And who would pay for the high cost for tax cuts that go to the richest businessmen in America? The working class of America.
Another high profile case in the news this week is Boeing. In the latest round of a longstanding trade dispute between Airbus and Boeing, the WTO just ruled this week that Boeing $6 billion in tax breaks in 2014 that violated WTO free trade provisions. How did Boeing get these tax breaks? Threatening to leave Washington state amidst a labor dispute.
Speaking of corporate threats, recall Aetna’s CEO earlier this year warning Obama that if the justice department blocked its proposed merger with Humana, the company would suddenly find its participation in certain Obamacare markets unprofitable, a threat which it actually followed through on, reports Jonathan Cohn and Jeffery Young in the Huffington Post:
While some insurers are making money on Obamacare, most of the large, publicly traded national insurers now offering coverage on the exchanges are losing money, basically for the same reasons that Aetna cites. Aetna’s shift in strategy followed similar maneuvers by UnitedHealth Group, Humana and some smaller insurers.
If the exchanges do not attract more participants who are in relatively good health, then companies will likely have to keep raising rates ― to the point where some people who have to pay for insurance directly, especially those who receive little or no federal subsidies, would decide it’s too expensive...[S]trengthening these marketplaces and making coverage more secure for the low- and middle-income people who rely on it likely will require changes in the law. Given the relentless political toxicity afflicting anything Obamacare-related, legislative solutions aren’t likely in the near term.
The Jobs Disappearing Act
Part of the narrative of the election has to do with what is going on with American jobs and whether globalization and trade is to blame. In the Washington Post, Ana Swanson notes that factories in America are doing just fine even as work has declined:
American factories actually make more stuff than they ever have, and at a lower cost. Manufacturing accounts for more than a third of U.S. economic output — making it the largest sector of the economy. From that perspective, it’s hard to argue that American manufacturing today is anything but a success.
The issue is that the fortunes of factories themselves and of manufacturing workers have diverged, as Muro’s chart below shows. U.S. factories now manufacture twice as much as they did in 1984, with one-third fewer workers, according to the Federal Reserve.
Over at Aeon, Rutgers history professor James Livingston says literally says FU to work and offers hilarious suggestions on why Americans might need to get over their love affair with jobs:
[W]e’ve believed that, even if it sucks, a job gives meaning, purpose and structure to our everyday lives – at any rate, we’re pretty sure that it gets us out of bed, pays the bills, makes us feel responsible, and keeps us away from daytime TV.
These beliefs are no longer plausible. In fact, they’ve become ridiculous, because there’s not enough work to go around, and what there is of it won’t pay the bills – unless of course you’ve landed a job as a drug dealer or a Wall Street banker, becoming a gangster either way...
Certainly this crisis makes us ask: what comes after work? What would you do without your job as the external discipline that organises your waking life – as the social imperative that gets you up and on your way to the factory, the office, the store, the warehouse, the restaurant, wherever you work and, no matter how much you hate it, keeps you coming back? What would you do if you didn’t have to work to receive an income?
And what would society and civilisation be like if we didn’t have to ‘earn’ a living – if leisure was not our choice but our lot? Would we hang out at the local Starbucks, laptops open? Or volunteer to teach children in less-developed places, such as Mississippi? Or smoke weed and watch reality TV all day?
Such discussions come as the fight for higher wages continues. Despite a recent court ruling blocking the Obama administration's attempt to raise the threshold from $23,660 to $47,476 for wages covered under overtime rules, some companies like TJMaxx are choosing to voluntarily raise the bar, reports Greg Ryan in the Boston Business Journal. But in not so good news, McDonald's is threatening to replace workers fighting for a $15 minimum wage with digital kiosks. "It brings me no joy to write these words," CEO Ed Rensi writes in Forbes. "The push for a $15 starter wage has negatively impacted the career prospects of employees who were just getting started in the workforce while extinguishing the businesses that employed them." He went on to say:
Customers have a limit to what they will pay for service. Voters in Washington, Colorado, Maine and Arizona voted to raise minimum wages on Election Day, convinced of the policy’s merits after millions of dollars were spent by union advocates. In the immediate aftermath, family-owned restaurants, coffee shops and even childcare providers have struggled to absorb the coming cost increase—with parents paying the cost through steeper childcare bills, and employees paying the cost through reduced shift hours or none at all.
The out-of-state labor groups who funded these initiatives aren’t shedding tears over the consequences. Like their Soviet-era predecessors who foolishly thought they could centrally manage prices and business operations to fit an idealistic worldview, economic reality keeps ruining the model of all gain and no pain.
In the Guardian, Stephan Hawking argues inequality is making the world a very dangerous place:
The concerns underlying these [Brexit and U.S. election] votes about the economic consequences of globalisation and accelerating technological change are absolutely understandable. The automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining...
For me, the really concerning aspect of this is that now, more than at any time in our history, our species needs to work together. We face awesome environmental challenges: climate change, food production, overpopulation, the decimation of other species, epidemic disease, acidification of the oceans.
Together, they are a reminder that we are at the most dangerous moment in the development of humanity. We now have the technology to destroy the planet on which we live, but have not yet developed the ability to escape it.
To do that, we need to break down, not build up, barriers within and between nations. If we are to stand a chance of doing that, the world’s leaders need to acknowledge that they have failed and are failing the many. With resources increasingly concentrated in the hands of a few, we are going to have to learn to share far more than at present.
With not only jobs but entire industries disappearing, we must help people to retrain for a new world and support them financially while they do so. If communities and economies cannot cope with current levels of migration, we must do more to encourage global development, as that is the only way that the migratory millions will be persuaded to seek their future at home.
In more post election news, Trump is assembling the richest cabinet in the nation's history, reports the Washington Post:
Their collective wealth in many ways defies Trump’s populist campaign promises. Their business ties, particularly to Wall Street, have drawn rebukes from Democrats. But the group also amplifies Trump’s own campaign pitch: that Washington outsiders who know how to navigate and exploit a “rigged” system are best able to fix that system for the working class.
Trump's win has been a boon to nonprofits such as the ACLU and the Anti-Defamation League, reports Colby Itkowitz. "Yet, perhaps no group was more surprised by the surge in new support than the Council on American-Islamic Relations, a Muslim civil rights group," she writes. "[A]fter the election, CAIR received donations and volunteer offers from people of all faiths who saw it as a way to protest Trump’s pledge during the election to ban Muslims from coming to the United States." You also might be interested in this letter to CEOs from spice retailer Penzeys, which took a stand against bigotry:
Willing to take a hit for what is right, we did what we did. In the two weeks since, online sales are up 59.9%, gift box sales up 135%. And we didn't have a catalog arrive in this window this year, while last year we had 1.1 million! Yes, maybe for the moment we have lost 3% of our customers because of the so-called "right wing firestorm." And, yes, they send emails of rage, and ALL CAPS, and bad language with the hope of creating the perception that they are bigger than they really are. But what we learned is that, in terms of retail spending, Donald Trump simply has no one supporting his views for America. He has no constituency. America's Values, on the other hand, have a really sizable constituency, and that constituency moves quickly to support those that stand up for the values of America.
Did you know how easy it was to hide $400 million? Well, in the New York Times, this woman scorned reports on how her husband attempted to do just that to get out of paying her much in their divorce. Meanwhile, a bunch of wealthy tech folks got together at the White House to have a summit on poverty reports Deadspin's Hamilton Nolan, who argues politics not technology is the solution:
In a rich country, which America is, poverty is a distribution problem. Which is to say: it is a political problem. It is conventional wisdom that other problems are essentially political in nature—for example, you don’t need to be employed by the UN to know that global hunger is not due to a lack of global food, but instead to corruption and war and broken governments and other things that prevent food from being distributed to everyone who needs it. Likewise, it is not a shortage of money causing poverty in America. The U.S. per capita income is more than $56,000, more than enough to offer everyone a middle class lifestyle. The problem is the distribution of that money. And that is a political problem. You may believe our current level of economic inequality is justified, or you may not. But maintaining that inequality—with its accompanying riches and poverty—or changing it is a political decision.
The structure of taxes that allows money to accumulate at the top or redistributes it downwards; the regulations or lack thereof that allow industries of varying degrees of unfairness to wither or flourish; the strength or weakness of the social safety net; the rules that determine the power relations of labor and capital. All political choices.