Donald Trump made a deal with Carrrier for which the taxpayers of Indiana are paying. Such deals will not make America great again. From Lance Roberts at realinvestmentadvice.com:
“Trump saves jobs in Indiana before even being President. This is how you make ‘America Great Again.”
Between promises to cut corporate taxes from 35% to 15%, reduce regulatory burdens and penalize companies who leave the U.S., markets, economists and analysts are all trying to figure out what it means. As I noted on Tuesday, the always bullish analysts are already pushing up corporate earnings to record levels while the mainstream media is fostering the idea of an economic resurgence to levels last seen during the Reagan Administration. In turn, this will result in higher inflation, higher interest rates and an end to the stagflationary environment that has gripped the economy over the last 8-years.
Well, that is what is hoped for.
I thought it might be useful to take a look at the specifics of the deal struck with Carrier and the reality of the current economic backdrop as it relates to fostering future job growth, higher wages and the avoidance of a recessionary outcome.
The Art Of The Deal
Supporters of Donald Trump have praised the president-elect for working out a deal to keep jobs at a manufacturing plant in Indiana from being moved to Mexico.
The deal with Carrier, which makes heating, air conditioning, and refrigerator parts, meant that roughly 1,000 workers will keep their jobs in Indiana. However, in exchange for keeping those jobs in Indiana, Carrier will receive $7 million in tax credits and other incentives which will ultimately be picked up by the taxpayers of Indiana. Carrier also said it will invest $16 million in its Indianapolis plant.
To continue reading: Carrier & The Broken Window Narrative
Bob: Trump’s political “win” with Carrier is simply “dressed up” fascism practiced by “our guy” (as might be contrasted with the practice by their gal Hillary). It is ugliness smeared with make-up. What this story and many other ignores is as follows:
Bush’s 8 years saw federal debt rise from around $5T to $10T. Obama’s 8 years saw it go from $10T to almost $20T – with over $1.7T in the last two years alone. Keep in mind that these last two years are years of supposed economic “recovery.”
Trump has promised to: Cut taxes; maintain entitlement spending; increase defense spending; “invest” in infrastructure spending to the tune of $1T! Now I ask you: What do you think is the likelihood of 8 years of Trump producing growth in the debt of AT LEAST $20T to $40T? Barring nuclear exchange or hell freezing over, it is assuredly certain – with one important caveat. The bond (debt) markets must remain accepting of such debt at unprecedented near-zero rates.
I am equally certain that is not likely. Should (when) the “eventually” becomes imminent, Trump, should he be President, will likely be the last Republican President elected in our history.
Of course I have been remarkably wrong about the timing of such things for literally decades. He may, through the attracting to these shores of unprecedented capital flows from all over the world, again postpone such a reckoning.
Dave
Dave,
In “Make America Competitive Again” I called the Carrier move “mercantilism.” I don’t think you are going to be wrong about the timing of a financial crash, although I thought it would occur during the Obama presidency so I too have been wrong on the timing. Reality always trumps (pun intended) debt and exponential growth functions. The day social mood, to use Robert Prechter’s term, goes from, on balance, optimistically endorsing debt expansion to pessimistically seeking debt reduction will be the beginning of the end. The marginal effectiveness of an additional unit of debt has already gone negative. In other words, the debt service burden outweighs its incremental effect on GDP (not just in the US but throughout the developed world). The looming debt crash will be massively contractive and deflationary, and will probably cut Trump’s tenure to four years. Crashing social mood and markets generally take down political incumbents. The analog may be 1972/1973, when Nixon won in a landslide and the Dow hit 1000 for the third time. By 1974, Nixon was out of office and the Dow was on its way to being cut almost in half.