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Affluent Investor | March 27, 2017

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To ‘Save’ 800 Jobs, Donald Trump Destroys Exponentially More

Donald John Trump, Republican candidate for United States President (Photo by Gage Skidmore) (CC BY-SA) (Resized/Cropped)

Donald Trump (Photo by Gage Skidmore) (CC BY-SA) (Resized/Cropped)

President-elect Donald Trump’s allegedly heroic efforts to “persuade” Carrier Corp. to maintain manufacturing operations in Indiana have succeeded, for now. Notable here is that if President Obama or President-elect Hillary Clinton had done as Trump did, Republicans and conservatives would have been up in arms – with good reason – about their excessive use of federal power to blunt the message of the markets. But since it was a nominal Republican threatening Carrier with retaliation if it sought to maximize profits, certain members of the right lauded Trump’s meddling as a sign from the 45th president that “help is on the way.” One prominent conservative writer who should avoid economic commentary altogether cheered on Trump’s economy-sapping nostalgia as a sign of “Republicanism in new accord with the needs of the moment.” Can we please be serious?

If we forget for now the depressed economic outlook and high unemployment that is nearly always evident where politicians are most aggressively “saving” jobs, Trump’s actions were not about a knight-in-shining-armor arriving to tell poorly treated businesses that “help is on the way.” If the latter had even remotely informed what Trump did, then he would have simply given another well-publicized speech full of promises to greatly reduce the corporate tax burden, the regulatory burden, and any other barriers to profits that businesses face.

Instead, and this is what’s so shameful about some of the support on the right for Trump’s alleged ‘coup’, Trump’s actions vis-à-vis Carrier sent a strong signal that the U.S. will no longer be as hospitable a locale to the very investors who create all jobs. As Trump so obnoxiously and chillingly put it, “Companies are not going to leave the U.S. anymore without consequences. Leaving the country is going to be very, very difficult.” Where is the outrage? Trump didn’t signal help on the way as much as he signaled retaliation against the companies that don’t do as he wishes.

This is especially interesting when we remember that for decades members of the right have knowingly explained high European unemployment as an effect of how costly it is for companies on the continent to shed non-performing workers. As the right have so correctly put it, “you can’t hire workers if you can’t fire them.” Ok, but the same applies to the United States and the formation of companies right here. If businesses can’t relocate out of the U.S., it’s less likely that they’ll locate here in the first place. If you can’t fire an errant country, you’re less likely to hire it to begin with. Members of the right who should know better talk up the 800 jobs Trump allegedly “saved,” but in their frightening willingness to excuse the most egregious acts of government so long as the person executing them has an R next to his name, they ignore the exponentially bigger number of jobs that will never be created in a United States that Trump is trying to turn into the proverbial Roach Motel. If investors can’t leave the U.S., they won’t enter the U.S.

As individuals we outsource the food we eat, the clothes we wear, and the cars we drive to producers across the street, and also around the world. Life would be defined by unrelenting drudgery absent our individual ability to “outsource.” It’s no different for businesses. Trump’s promise of 35% tariffs on American businesses seeking to maximize profits through the globalization of their operations is no different from him taxing individual Americans for outsourcing their clothing choices to China or Italy, or the styling of their hair to a French immigrant.

And what about businesses that, as opposed to moving operations overseas, simply use technology to produce more stateside with fewer workers? Will Amazon face higher federal taxes in response to its automation of so many warehouse operations? Will Uber passengers suffer a tax for purchasing a ride from a service that doesn’t employ dispatchers? If American Airlines imports computers mostly manufactured in China to shrink its need for human labor, will its passengers pay a 35% tax to fly American’s friendly skies?

Beyond the horror and absurdity of Trump’s threats, the economic nostalgist in Trump doesn’t see that we’re a rich and well-employed nation precisely because the nature of American work is constantly changing. In using threat to keep 800 manufacturing jobs in Indiana, Trump is doing the 21st century equivalent of an early 20th century politician seeking abolition of the tractor for the latter having rendered so many farm jobs redundant. Getting right to the point, our wealth and low unemployment are plainly a function of the fact that we don’t cling to the work of the past.

Lest we forget, jobs aren’t finite nor is the nature of work static. Jobs always and everywhere result from investment, and investors are always and everywhere looking for the most productive locales to put their capital to work. Of course, this speaks to how disastrous Trump’s job-saving efforts will ultimately be if they’re not neutered by Republicans in possession of a clue. If Trump succeeds in blasting the U.S. economy back to the past, investors will move their capital into a future that doesn’t include the U.S.

Detroit and Flint are but two American monuments to job-saving programs employed by politicians. Desperate to hold onto the work of yesterday, they’ve repelled the very investors eager to fund the work of tomorrow. Conversely, in Silicon Valley companies are constantly dying as are the jobs within them. But as opposed to its citizens spending their days in breadlines, they instead enjoy feverish bidding for their services in all manner of non-technology work in a locale defined by job-destroying technology. Ever ready to kill off its darlings, economic activity in Silicon Valley is always forward looking. Precisely because jobs and companies die there every day, so are new companies and new jobs created there every day. Investors migrate to locales living in the future, and run like crazy from leaders like Trump living in the past.

Donald Trump’s actions were a shakedown, plain and simple. Worse, the investors who once again create all jobs were surely watching with negative consequences for those who pine for a future defined by abundant job creation. The problem is that Republicans and conservatives only seem to vaguely understand basic economics and how jobs are created when a Democrat is in the White House. To put it as bluntly as possible, only the most economically confused could conclude that our 45th president’s jawboning of Carrier had anything to do with “saving” American jobs.

 

Originally published on RealClearMarkets.

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