President-Elect Trump announced that Carrier, a subsidiary of the United Technologies Corporation, has decided to keep operations running in Indiana, rather than letting approximately 1000 jobs be outsourced, presumably to Mexico. From all appearances, it seems the Trump administration effectively blackmailed United Technologies, holding government contracts and tax breaks over Carrier’s parent corporation to force compliance. Republicans across the nation are still celebrating Trump’s 180 on decades of traditional, GOP free market rhetoric. For years, most Republicans have argued against government interventionism, criticizing subsidies, bailouts, and economic extortion in the name of laissez-faire economics. Now that the GOP controls the White House and Congress, the developing Trump administration seems to be reversing its party’s tradition.
This comes as no surprise, as the majority of Trump’s fiscal policy has been centered around a “trade war” with Mexico and China. Before election day, and unfortunately afterward, Trump has been a proponent of an absurdly high tariff on imported goods, one that would start at 35%. Even going back to February, when Carrier announced the close of two Indiana factories, Trump threatened to “tax the hell” out of companies that outsource jobs abroad before selling the foreign (and cheaper) goods back in America.
What does come as a surprise is the virtually unanimous support from the rest of the GOP. Even conservative powerhouses, including Sen. Ted Cruz and Gov. Mike Pence, have come out in support of the Carrier deal, exemplifying the radical departure from GOP tradition since election day and establishing a hopefully short-lived practice of bowing down to Trump. Trump is not even president yet, and he has already removed a central tenet of conservatism from the GOP’s agenda.
This tenet, one that emphasizes the morality and success of a free market, is being replaced by interventionism, something both Hillary Clinton and John Maynard Keynes would support. In fact, Obama did the exact same thing throughout his two terms. He bailed out the auto industry, “saving” over 1000 times as many jobs as the Carrier deal did; propped up Solyndra, the tax-sucking abomination that would make Milton Friedman roll in his grave; and forced healthcare providers and their clients into government-mandated insurance contracts via the Affordable Care Act. Since the Carrier announcement, Trump has not backed down, and he took to twitter to continue his misguided tirade.
Aside from the moral issues with Trump’s actions, in which government action inherently violates the rights of a business, Keynesian economics have been shown to fail repeatedly (*cough* Smoot-Hawley Tariff *cough*). Despite what Trump says, his fiscal policy so far is not making America “open for business.” For one, the Carrier deal, as mentioned above, is minuscule in its scope, and it will not function as a long term solution to job loss in the manufacturing sector. Automation and competition will force domestic manufacturers to lay off workers, downsize, shut down, or raise prices; which, ironically, happened before the Carrier deal was even announced. About a week before the deal was made public, Carrier announced it would raise prices on conditioning units by as much as 5%. Now, no one can prove that this increase is a result of the impending Carrier deal – even Carrier denied the theory – but when a RINO (Republican in name only) interventionist wins the presidency, mere months after swearing to “tax the hell” out of companies like Carrier, it hardly looks coincidental.
On a broader level, Trump’s preliminary fiscal policy will have negative economic implications. Shielding domestic companies from competition abroad breeds inefficiency and price hikes,as well as higher labor costs, submission to restrictive American regulations, and forgone savings all at the expense of consumers and the companies themselves. Carrier itself was slated to save $65 million a year by relocating, but that figure is a thing of the past.
At this point, the best we can hope for is Trump’s Republican congress to shoot down any such policies, but, so far, the prospects are grim.