The deal that President-elect Donald Trump and Vice President-elect Mike Pence brokered to keep Carrier jobs in Indiana likely hinges on its parent company’s fear about losing business with the federal government, said an official who will play a critical role in approving the agreement.
Trump and Pence will visit Indiana on Thursday to announce they’ve delivered on a campaign promise to keep about 1,000 factory jobs from moving to Monterrey, Mexico. The agreement reportedly includes $700,000 in state tax breaks offered by the Indiana Economic Development Corporation, a quasi-public entity that doesn’t require legislative approval for its deals.
But John Mutz, a former Indiana lieutenant governor who sits on the agency’s 12-member board, told POLITICO that Carrier turned down a previous offer from IEDC before the election. He said he thinks the choice is driven by concerns from Carrier’s parent company, United Technologies, that it could lose a portion of its roughly $6.7 billion in federal contracts.
“This deal is no different than other deals that we put together at the IEDC to retain jobs, but the fact is that the difference is that United Technologies depends on the federal government for lots of business,” Mutz said.
“The major factor that’s changed is we had an election,” Mutz said.
Even before Trump and Pence can take their victory lap, the deal — the first major test of the anti-trade stance that helped them win the Rust Belt and the election — is already coming under fire. Economists are pointing out that saving 1,000 positions with state tax credits does nothing to stem the global economic forces that are moving an estimated 300,000 U.S. factory jobs abroad annually. And Indiana lawmakers and union officials are bristling at being kept in the dark.
Carrier issued a statement Wednesday crediting the state aid package and the Trump administration’s support for business.
“Today’s announcement is possible because 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,” the statement said. “The incentives offered by the state were an important consideration.”
Carrier added: “This agreement in no way diminishes our belief in the benefits of free trade and that the forces of globalization will continue to require solutions for the long-term competitiveness of the U.S. and of American workers moving forward.”
United Technologies, which also manufactures aerospace and defense products, received the seventh-highest level of federal funding among private companies in fiscal 2015.
Mutz said he has not reviewed the specifics of the deal, but was briefed on it Tuesday afternoon.
“United Technologies is a huge company, and the Carrier deal is a very, very small part of it,” he said. “This is a much different set of circumstances if you’re talking about all of the contracting work that United Technologies does for the federal government. That’s a big deal.”
Transition officials have been mute on the specifics of the deal, but said Pence played a central role in negotiations, at Trump’s direction.
Pence had conversations with both the chairman of United Technologies and the CEO of Carrier, a senior transition aide said.
The IEDC board, which is chaired by Pence, will meet on Dec. 13 to review the deal, Mutz said.
“I do know that when we meet we’ll run this through the same rigorous process that we normally follow,” he said. “My goal is to be as transparent as possible on this. It’s taxpayer money we’re dealing with.”
If Trump tries to pursue this strategy more broadly to keep other companies from moving jobs abroad, he could run into trouble with Republicans.
Claude Barfield, an expert on international trade at the American Enterprise Institute, said brokering aid packages with individual companies is far from a conservative approach.
“For market-based economists or analysts, this is really a version of crony capitalism, and it’s the kind of thing you really don’t want to get into or have government get into,” Barfield said. “This gets back to who … actually has the ear of the government. So you get the situation where decisions are not made in terms of their economic sense, but in terms of gaming the political system.”
Meanwhile, some Indiana state officials are bristling at the lack of transparency around the deal.
“It’s welcome information that some of those jobs may be remaining, but there hasn’t been any transparency,” said Scott Pelath, the Democratic leader in the Indiana House. “Nothing is known of what might be expected of taxpayers, nothing is known of what is expected of Indiana and what may be expected of the federal government.”
Chuck Jones, president of United Steelworkers Local 1999, which represents workers at the Indianapolis plant, said he was guardedly optimistic.
“The only thing I can say is if this materializes, there is 1,000 jobs saved,” he said. “But there’s other jobs that are still being lost due to unfair trade and corporate greed.”
Pence wasn’t interested in brokering a deal as governor, he said.
“He pretty much wrote it off,” Jones told POLITICO. “He met with UTC reps at one point in time, but he wrote it off entirely.”
Cogan Schneier and Megan Cassella contributed to this report.
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