Saturday, December 03, 2016

Liberals Don't Understand the Simple Economics of the Carrier Deal

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Donald Trump said he would work to keep the jobs from Carrier Corp. from leaving Indiana and made it part of his stump speeches. Who can forget this:

Now Trump has done so and employees are jubilant. Those opposing Trump have belittled the plan since it required tax breaks. Here's what the anti-Trumpers will never understand: Yes the cost is $7-million in incentives but the return on investment (ROI) is short and the ultimate benefits far outweigh the initial costs.

Carrier has opted to keep 1,000 jobs in the Indianapolis plant, let's say each job pays $50,000 a year plus benefits so let's take that out to $70,000 per employee. The taxes paid on those salaries and benefits will equal approximately $10,000 each paid to the state, local and federal governments. Plus this is 1,000 more people paying into the nearly insolvent social security fund.

 Let's further look at the buildings these workers will build air conditioners in daily. The property taxes will be paid to the city.

 Let's expand further, the utilities for the building include electric, natural gas and water. The electric needs to be generated and that's a further five people being paid. The natural gas needs to be extracted and piped through several stations to get to the end user, that 10 jobs all down the line. And the water? The local municipal water utility has to pump the water, treat the water and move the water through pipes. Let's say that saves one job.

 But what about ancillary effects: I imagine they have vending machines in the break room of the plants. Let's go low and say that three people stock those vending machines from 3 different companies. And how about the first aid kits, uniforms and cleaners who the company hires. Lets say that is another 3 people. And how about contractors? No plant does all their own work so they may need outside people for welding, motor and tool repair and a company selling them maintenance supplies and equipment. I'll go low again and say that 10 people are utilized for that. And what about transportation to get the product from the factory in Indiana to California. Trucking companies will hire (or keep) drivers who will be dispatched by dispatchers. Let conservatively say that is 3 more people.

 I could go on and on but you see where I'm going. But let's then look at one more aspect of this; all the people named above will buy gas for their cars, drink beer at their local bar, take their families out to dinner, pay property taxes, shop at Home Depot and Walmart, give to charity and simply live their lives. The expanding effect is huge. The $7,000,000 spent now will be looked at as a great investment.

 Finally, every state in the union does the same exact thing to keep businesses local. Liberals act as if this is some sort of bribery and Trump's idea. It's not, he just negotiated better terms than a politician would've. This will prove a successful strategy if implemented the way Trump wants to. He's already working to keep additional jobs in Indiana and elsewhere and if successful he will make good on his promises. Never have we had a president have this kind of effect before even taking office. Companies who got away with shafting employees and had rules allowing them to do so under Obama can no longer expect the same latitude with Trump in office.

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