Wait...what just happened?

By Grant Davies

This morning as I was reading the feed on my Face Book home page I came across a post written by Mark Malter, a guy who understands the number one rule in Henry Hazlitt's book Economics in One Lesson.* His short explanation of the economic impact of the recently announced deal by Donald Trump to "save 1,000 jobs in Indiana" was right on the Malter.

(The unedited post is re-published below for those who have a desire to learn what econ 101 never taught them.)

Others' observations about the claimed 1,000 jobs being saved that followed made many good points. As Dr. Walter Williams frequently says "let's look at it." Of course I'm a famous blogster so we will look at mine first.

My first observation/suggestion was that perhaps the country ought to lower the taxes for everyone, including Carrier (owned by UTX), as a way to stop companies from fleeing the USA.

As an aside, the media calls it "shipping jobs overseas" to confuse and manipulate the gullible. Which is what I just did by describing it as "fleeing the USA." Unfortunately for me, my readers are neither gullible or manipulable.

Next I reached for my tin foil hat and posited that it might not be a coincidence that this deal was in Indiana, home state of Mike Pence, the future VP and current Governor of the Hoosier State.

Subsequently my comment was that the whole point of the exercise was to buy votes from witless voters in Indiana with their own money. (Not like that's a very innovative idea.)

Another point I made was that this deal is straight from the Illinois playbook. So much for Indiana politicians being entirely different from "The Chicago Way" politicians. Did anyone ever believe that anyway? (Just to be clear, I didn't even though I just fled from that place to Indiana myself.)

My final comment was that Trump is taking credit (?) for a deal for which his influence was indirect. Pence made the deal, he is still governor of Indiana. Technically speaking, Trump has no power yet to make deals, particularly deals between states and the companies that do business in them. 

In reality, the fear of what he might do to UTX in regards to future defense contracts may have made the whole thing happen. That point was made by another commentator on the thread and was a valid speculation.

Finally, another poster said the idea that any of these deals could halt the trend of globalization was a delusion. I agree wholeheartedly.

However, the absolute best comment was on a different post elsewhere on Face Book. It was Julie Borowski who inspired me to make this meme with her short quip. 




So the answer to the question "Wait, what just happened? is that nothing has changed for the people who wanted change from Trump. The government is still buying votes from the gullible with their own money. And those buyers haven't even been sworn in yet, so if you are into selling your vote to them, hold out for an all cash deal with you as the payee.



"Trump didn't save 1,000 jobs today. He cost many more jobs than that amount. Besides the $7 million taxpayer bribe to a private company, by using the power of the government to force Carrier to remain in Indiana, their costs will be higher than if they had moved to Mexico (if not, why were they moving?). That means the price of air conditioners will rise, and every homeowner and business owner in America will now have less money to spend on other goods and services, which means marginally lower production elsewhere in the economy, and far more than 1,000 jobs either lost or not created. It's just that those jobs are spread out as only a few here and a few there, too invisible to make headlines." - Mark Malter 

*  "The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." - Henry Hazlitt.



9 comments:

  1. I'll confess I don't know all the particulars of the Carrier deal, but it might inspire or increase consumer confidence, which could provide some stimulus to the economy. I would imagine that the agreement will be far more psychological or symbolic than fiscally responsible.

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  2. Real stimulus to the economy would be lower tax rates across the board for everyone, including corporations like Carrier. Lowering rates for overseas profits would also provide some stimulus in my opinion. Unintended consequences for this type of subsidy are apparent in Illinois. Companies who are not politically connected are leaving for other states.

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    Replies
    1. I have been and remain skeptical about Trump and what a Trump presidency will mean to the country. I am cautiously optimistic (after all, the alternative was Hillary!), and will give him the benefit of the doubt for at least a brief "honeymoon" period. But, ultimately, he needs to deliver.

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  3. I agree with giving him a chance. I even did that for Obama even though I must admit I already knew how it would turn out. My piece about the "saving the jobs" isn't about Trump per se. It's the policy behind it that I write about.

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    Replies
    1. You're right, of course. Lowering tax rates and reducing regulation will do more to create jobs than anything else. Other than maybe jettisoning/replacing Obamacare!
      As I say, I'm cautiously optimistic, but not very optimistic. I pray to be proven wrong.

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