Saturday, December 3, 2016

Bizarro World!

How strange the world has become when Paul Ryan seems like a moderate and I find myself agreeing with Sarah Palin.

Sarah Palin made news yesterday by saying something rational.   Well, she said it in her down-home folksy way, but what she said still made sense.  Yes, I know, I just said Sarah Palin made sense.   This is how strange the world has become, when murdering dictators are invited to the White House and Russia is now the good guy.

Anyway, the former governor of Alaska had this to say about Donald Trump and his deal to "save jobs" at the Carrier plant in Indiana:
“When government steps in arbitrarily with individual subsidies, favoring one business over others, it sets inconsistent, unfair, illogical precedent,” she asserted.

And in an apparent jab at Trump, whom she famously endorsed in a rambling speech earlier this year, she asked: “Republicans oppose this, remember? Instead, we support competition on a level playing field, remember? Because we know special interest crony capitalism is one big fail.”
The problem is, Sarah Palin is right.  And this illustrates why mainstream Republicans shied away from Trump.   Trump is not a Republican in the "small government" sense of the word.   Instead, he is a glad-hander and showman who is willing to do anything to look good and be a hero to the working class, even as he pisses off the business class, who are the traditional backbone of the GOP.

Why is Trump's deal with Carrier a bad thing?   I mean, after all, we're saving jobs here, right?

Well, right and wrong.   In an economy with 4.6% unemployment (basically full employment) all of the people laid off from Carrier would have found other work in other fields.   Yes, this may have meant a disruption in their lives, moving to another town, taking up another career (HVAC repair is one option).   But the economy has always been that way - jobs are not guarantees for life.

And in order to "save" 1,000 jobs, the State of Indiana had to make certain guarantees and tax-breaks so that Carrier won't be losing money and that the net cost of staying in Indiana is the same as moving the jobs to Mexico.  And that means Indiana has to fork over a lot of money, and not just one time, either, but now and in the future.

So each of those 1,000 jobs was bought and paid for with government money.   And this raises the question:  Is the State of Indiana or the Federal Government going to have to cut deals with other industries to "save jobs"?

Are we now in the position where "big government" decides to "choose winners" - something the GOP mocked Obama for when he bailed out the automakers and loaned money to Solyndra?   In other words, is big government going to get bigger?

And does this all come at the expense of the taxpayer and moreover, the small businessman or smaller company who doesn't have the clout to get a tax break or a kick-back from Federal, State, or local governments?

Of course, this kind of thing has been going on a long time.  One criticism of Wal-Mart is that many small towns have offered huge tax incentives to the company to put a distribution center or retail store in their town.   If you don't offer the breaks, they go to the next town over.

Sports teams do the same thing - shaming city councils into building them multi-million-dollar stadiums free of charge - on the taxpayer's dime.  Although lately, citizens and city councils are wising up to this game and refusing to subsidize Billionaire owners and Millionaire players with taxpayer funds.

Large auto companies move plants or open factories in the States which promise the most tax relief or other special considerations that are not available to the small Mom-and-Pop business.

The problem with this model is that not only that it screws small businesses in favor of large ones, but that it can create a huge potential for cronyism and kick-backs.   If you offer a tax break to Company A, and then down the road, you or a family member is elected to the board of Company A, that's kind of a conflict of interest.  Or maybe just the old suitcase full of cash would work.

Either way, we end up with a government that is in bed with business - but only certain businesses - instead of being impartial and staying out of the way.   It is, in a sense, like the situation Ayn Rand railed against when in her story Atlas Shrugged, the large steel companies lobbied the government for selective relief, so that they would not have to compete to make profits.

A commentator on Bill Maher's show the other day made an interesting comment that went right over the head of Maher and his panel.   She noted that Trump is an odd duck.   On the one hand, he's a Nationalist - wanting to make America Great again.   On the other hand, he claims to want to help out "the working man" which makes him something of a Socialist.   He's a National-Socialist!

Like I said, the panel didn't get this joke.   The National Socialist Party, of course was very powerful in Germany in the 1930's.   You may know them better by their abbreviated name - Nazi.

And there is a parallel between Hitler and Trump in this Carrier deal.   In addition to the staging of populist rallies (favored by both), both leaders claimed to be "for the working man" but in reality were more akin to kleptocrats, dividing the spoils of the nation among themselves and certain favored industries.   Not a bad deal if your name is Krupp or IG Farben.   To bad if you are just some small businessman.   No loot for you!

So Trump saves a few jobs in Indiana.   Or maybe not.  1,000 jobs saved, out of 2,500 who were slated to be laid off.   And if the tax breaks and other swag doesn't materialize, well they still may close the plant.  Or, even if the swag materializes, they may close the plant later on, if the tax breaks are not permanent.  The upshot is, nearly 2 out of 3 people at Carrier Indiana are still going to lose their jobs and the State of Indiana will pay $7,000 per head to keep the remaining jobs in place.

The other half of the equation is even more disturbing.   It has been inferred that if Carrier, which is a division of United Technologies, didn't "play ball" with Trump, then lucrative defense contracts or other government contracts (aerospace) might not be renewed.  This is, in effect, blackmail.   I am not sure this is even legal.

It is kind of odd, in a way, as Eisenhower warned against the "Military-Industrial Complex" and now here is Trump using this complex as leverage against a manufacturer.   I would not be surprised at all if UTC spins off Carrier as a separate entity to avoid such blackmail attempts in the future.   But of course, it may just be all bluster on Trump's part anyway.   The military doesn't have a lot of outlets to buy hardware from.  Arms are the one industry that has to remain largely American for security reasons.   Even the "losing" bidder on a defense project often ends up being thrown a bone or two in terms of component manufacturing.  It is not like a President can shut out a competing bidder or turn a contract to another bidder even if they are higher priced and have a worse product.  People in the Pentagon have gone to jail for that sort of thing in the past.

Palin is right.  Yes, it pains me to say that.   But the government should not be cutting deals with selected businesses based on political expediency, publicity, or campaign gimmicks.   If we go down this road, bribery and corruption are not far behind.  Moreover, we make our economy less efficient by choosing winners, much as a command-economy dictator does.   As Palin said, that ends up being "one big fail."

It will be interesting to see if Palin stands by her guns, or takes a position in the new administration, instead.

Because what she said was important.




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