Trump and Jobs in the North Country
“Make America Great Again” is the campaign slogan that galvanized millions of Americans to vote for and elect Donald Trump president. It appears to have struck a chord in them, a validation of their collective belief that they and their concerns have been ignored by U.S. policy makers for the past fifty years. Above all, it appears to be understood as Trump’s commitment to them to put white American workers back to work. In short, it means jobs.
Does that mean jobs for the North Country, particularly the manufacturing jobs that have been lost as U.S. corporations increasingly transfer their operations to low wage countries? Does it mean infrastructure innovation and repair here, the second of the twin pillars upon which Trump’s jobs program seems to rest? I’ll take a look at prospects for jobs in the North Country under a Trump administration in this article, the first in a series that will examine the possible impact of other key policies when Trump takes office.
Only three weeks after the election, Trump appears to have made good on one of his key campaign promises, to keep jobs for American workers here rather than losing them overseas. On November 29, he announced he had persuaded United Technologies, the parent company of the Carrier Corporation, to keep 1000 jobs in Carrier’s Indiana plant from being shipped to Mexico. Over the next few days, the smoke cleared and the details of the deal with United and Carrier became evident.
Chuck Jones, president of Local 1999 of the United Steel Workers, the union representing the Carrier workers, was the first to challenge Trumps’ claim, asserting to the Washington Post (12/6/16) that “Trump Lied His Ass Off,” about the number of jobs actually saved. United Technologies (UT) CEO confirmed that only 800 of the 2100 jobs at issue would stay in Indiana, with many of the 800 slated for elimination by automation over the next several years.
In a scenario familiar to North Country residents, particularly to residents of Massena – think Alcoa, 2007-15 — UT then revealed that vice-President elect, Mike Pence, still governor of Indiana, had arranged for the company to receive $7 million in tax rebates over the next ten years as compensation for revenues lost by maintaining the 800 U.S. jobs. UT also announced it would be raising Carrier products prices by 5% as further recompense. You should know that UT is a very prosperous corporation, announcing $7.6 billion in profits for 2015, resulting largely from $6 billion in Federal defense contracts. Bernie Sanders summed up the sentiments of many observers in an article in the Washington Post (12/1/16), “Carrier Just Showed Corporations How To Beat Donald Trump”: just claim you’re about to shut down your plant and ship jobs off to Mexico, Vietnam, wherever, and the government, state or Federal, will rush to the rescue with tax write-offs, courtesy U.S. taxpayers.
Actually, Carrier, UT and Trump simply re-invented the wheel and used a stratagem that government has been relying on for years to placate antsy (and greedy) corporations, including those located in the North Country. The Alcoa/Massena drama began in 2007 when Alcoa, which had smelting and production operations in Massena since 1902, began downsizing its smelting capacity by 45%, closing its Massena East subsidiary, Reynolds Aluminum, and reducing its total workforce to 900 jobs. Next, in early 2014, Alcoa decided it would no longer invest $60 million in modernizing its Massena East plant and would instead shut down all Massena East operations and cut its workforce to 750.
The thunderbolt struck in November, 2015, when Alcoa announced it would cease operations in Massena West and lay off 487 of its remaining 725 workers. Governor Cuomo, declaring he was blindsided, and Senator Chuck Schumer, quickly cobbled together a deal to save the Massena jobs: in exchange for $38.5 million in cash for capital and operating expenses and $30 million in lower hydropower rates, Alcoa agreed to retain 400 of the threatened jobs. But only for three and a half years, or until the end of 2019. In sum, a shell game – now you see the jobs, now you don’t.
None of the jobs that have been or will be lost in upstate New York, Indiana or the Midwestern rust belt will ever return. Bernie Sanders’ solution to continued overseas job loss? Enactment of the Outsourcing Prevention Act which he is preparing for the new Congress, designed to penalize any corporation that seeks to transfer its U.S. operations and jobs to low wage countries: pay a tax penalty in the amount equal to the money it anticipates saving; re-pay all tax rebates received from the Federal government; forfeit eligibility for Federal contracts. My solution – as well as that advocated by renowned economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman [“Distributional National Accounts: Methods and Estimates for the United States”(2016)] — is tax reform that will oblige U.S. corporations to return to the U.S. an estimated $20-30 trillion in profits currently stowed in overseas tax shelters; pay the estimated $150 billion in Federal taxes owed; and invest the returned assets in creating several million new jobs. Chances of any of these proposals becoming law? Do I really have to answer that? Might Trump and the Republican Congress enact any of these measures? Unlikely, without a massive public demand.
Which brings us to Trump’s infrastructure plan. This is not FDR’s Depression-era WPA (Works Progress Administration), which spent billions of U.S. tax dollars to put millions of Americans to work rebuilding America. Trump’s plan, yet to be finalized, calls for as much as $150 billion in tax incentives to generate one-half to one trillion dollars over the course of ten years in new infrastructure investment by the private sector. Note well that these will be capital investments on construction projects that the private corporations and investors might ordinarily be expected to make – pipelines, electric grids, fiber optic networks, new bridges and airports – and will not involve the repair of deteriorating roads or non-toll bridges or municipal water systems, like Flint’s. Once construction has been completed, it’s likely they will be able to charge the public and local governments usage fees to recoup the cost of their entire investment. The Federal government’s task will be to insure them from loss, hence the generous tax rebates; on top of which Trump has proposed cutting the corporate tax rate from it’s current 38.9 % (which, with loopholes and assorted exemptions, is actually closer to 20%) to 15%. It appears he’s intent on re-cycling the Republicans’ tired supply side economics premise that putting more money in the hands of corporations and the one percenters will serve as an economic stimulus and create the milions of jobs Trump has promised the country.
Critics like NY Times op-ed columnist and economist Paul Krugman (Business Insider, 11/21/16) have labeled this approach “crony capitalism,” and have estimated that a one trillion investment, coupled with the guaranteed tax breaks, could return $85 billion and more in profits to infrastructure investors. The study I referenced above by Piketty and his colleagues (NY Times, 12/7/16) details the continued maldistribution of wealth in the U.S. and the unbroken rise of income inequality. From 1980 to 2014, the share of all income that went to the country’s top one percent doubled. In dollars and cents, $7 of every $10 earned went to the one percenters during that 24 year period. To use another example, in 1980, the one percenters had an average annual income of $428,000 or 27 times the $16,000 average income of those in the bottom 50%. By 2014, the top one percent’s annual average income had grown to $1.3 million or 81 times the $16,00 that the average person in the bottom 50% continued to earn.
The bottom line is that it’s highly unlikely that the prospective tax breaks will generate one trillion dollars in infrastructure investment. Since there will be no massive Federal outlays, it’s equally unlikely that many new jobs will be created. Construction and related companies will have no need to substantially increase the number of workers required for projects that are already in the works or customarily would have been taken on. Local infrastructure repair projects will continue to be neglected; and new infrastructure projects, despite their support with taxpayer dollars, will pass from the public to the private domain. Again, millions of new jobs will not be created.
So what’s next? What can we collectively do? I always draw my inspiration from the final words of Joe Hill, the IWW labor organizer killed by a Utah firing squad in 1915, “Don’t mourn, organize.” In practical terms, whether you support or oppose President –elect Trump and his policies, stay involved and take nothing for granted. Talk to your friends and neighbors about his jobs-creation program. Better yet, set up community-wide discussions; feel free to use some of my comments as talking points. Stay informed. The official unemployment rate in the North Country, i.e., the number of individuals receiving NY State unemployment benefits in June, 2016, according to the U.S. Bureau of Labor Statistics, is approximately 4.5%, somewhat lower than the U.S. rate of 4.9%. However, a report issued by the President’s Council of Economic Advisers this past June estimated that an additional 11.6% of American workers have simply stopped looking for work. Which makes for an effective unemployment rate nationwide of 16.5% and a probable unemployment rate in North Country counties of approximately 16%. That’s a lot of people.
Finally, regardless of your political allegiance, remain skeptical of any politicians’ promises, particularly those made by Trump and his surrogates who are now in power, and be prepared to put their and all local politicians’ feet to the fire. We need jobs, not only for white workers but for all workers whom an otherwise prosperous economy has tossed to the side and regards, if not as deplorable, then as easily disposable.
As I wrote in an earlier article, I’m open to an invitation from any community group to discuss these issues at greater length. I can be contacted here, via my website, www.paddlingupstream.org.