Mike Pence: “Free Market Has Been Sorting It Out, and America’s Been Losing.” Really?

 

Mike Pence CarrierDonald Trump yesterday warned that companies like Carrier “are not going to leave the United States anymore without consequences. Not going to happen. It’s not going to happen, I’ll tell you right now.”

When I heard the President-elect make that threat, I responded thusly on CNBC, calling the comments “chilling.” Money manager Doug Kass was even stronger: “I believe that speech was one of the most dangerous and reckless speeches I have ever heard from a President or President-elect.”

And nothing I’ve heard since then sounds much better. From the New York Times:

“I don’t want them moving out of the country without consequences,” Mr. Trump said, even if that means angering the free-market-oriented Republicans he beat in the primaries but will have to work with on Capitol Hill. “The free market has been sorting it out and America’s been losing,” Mr. Pence added, as Mr. Trump interjected, “Every time, every time.”

Let me focus on the Pence comment: “The free market has been sorting it out and America’s been losing.”

I hope this was somehow taken out of context. As a sort of general economic statement, it’s terrible wrong. America isn’t losing today, nor has it been losing. America is a fabulously wealthy nation that pushes the technological frontier of the global economy. Americans overall are better off than they were a generation ago. And while America has lost manufacturing jobs, 80 percent or more of that seems due to automation rather than bad trade deals. Factory output has gone up, actually. Free trade, including NAFTA, has benefited the US economy.

Of course there were regions hurt by the now-dissipating “China trade shock.” But there are always winners and losers from automation and globalization, even with net gains overall. Conservatives are supposed to understand the concept of “tradeoffs.” Government has a role to play, everything maybe from retraining to income subsidies to relocation. And, of course, creating a better overall growth environment.

Workers have a responsibility to make sure they are preparing themselves to prosper in a modern, technological advanced, dynamic economy with no promise of lifetime employment at one firm. After all, Trump, in his Carrier speech, said he wouldn’t penalize firms for moving factories within the US.  The goal should be an economy of maximum competitive intensity with workers helped by a modernized safety net.

But perhaps the new populist GOP has other plans. In an interview with the Wall Street Journal, Pence apparently made comments that “suggest that a Trump White House would eschew many of the free-market principles that have guided prior Republican administrations, including injecting itself into the personnel and long-term operating decisions of individual companies.”

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  1. Paul Dougherty Member
    Paul Dougherty
    @PaulDougherty

    Talk about harshing the mellow. Doesn’t Mr. Pethokoukis understand that we are in the charm of a new paradigm? There are unprotected that need protecting. The new protectionism will not take a back seat to such “moral preening”. I suggest that the way markets and regulations and tax policy were understood a month and a half back will now need to be shelved. For sanity’s sake, don’t try to follow but rather watch with the mind as a blank slate. They got this.

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  2. Xennady Member
    Xennady
    @

    Doug Kass should start every morning and finish every night thanking God Donald Trump won this election and not the criminal incompetent Hillary Clinton, the communist loving socialist stooge Bernie Sanders, or another hapless goper like Jeb! Bush.

    At the very least Trump- and Pence too, it appears- have noticed that the country has problems that need to be addressed, unlike the usual suspects who imagine that everything is going along swimmingly.

    It ain’t.

    When major employers like Carrier want to leave the United States this is a sign that something is wrong, not a glorious event to be celebrated, or lamented when they are convinced to stay.

    If only the Bushes had understood this, we may have been spared Barry Obama, or even Bill Clinton- and we’d be living in a much more prosperous and better governed country.

    Alas, they did not.

     

     

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  3. Scott Abel Inactive
    Scott Abel
    @ScottAbel

    Didn’t Carrier receive some kind of Indiana tax incentives to stay that benefited the company? Despite the tough talk that plays to Trump’s voters’ concerns in the Midwest, we have a data point, and it was hardly one of “consequences” for Carrier.

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  4. Sweezle Member
    Sweezle
    @Sweezle

    I thought Alan Tonelson was much closer to the mark than you were James. The CNBC program was interesting but I felt uncomfortable by much of what you said.

     

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  5. Doug Kimball Thatcher
    Doug Kimball
    @DougKimball

    I empathize, to a point.  Certainly unions bear some of the blame for driving industry away.  They forced the cost of labor to the point where it was cheaper to move manufacturing to places with inadequate infrastructure and squirrelly legal systems, places cheap enough to cover the added costs of freight and difficult logistics as well as a premium for cost of oversight.  Our corporate tax system is partially to blame as well with high corporate tax rates and high payroll taxes.  Add to that the many regulatory burdens, both federal and state.  Then there is Obamacare.  Let’s face it; the US has largely priced and regulated itself out of the competition for production.

    These disparities were known when we originally agreed to NAFTA and the disparity has grown bigger since.  In the meantime companies have addressed many of the logistical problems associated with operating in third world countries.  Turning this trend around is not just a function of doing better or fixing existing deals.  The largest disparities can be easily remedied with a 15% corporate income tax rate.  Why even bother with the 10% repatriation tax?  Tax worldwide profits, allow a credit for all foreign taxes paid (limited to the US top rate) and let the money flow.   On the regulatory side, we can ask relocated companies who wish to export their production back into the US to agree to effectively abide by US OSHA, labor law and environmental standards and require periodic independent attest of that compliance. Also, relocated manufacturers in countries without mandated benefits like SSI, Medicare, unemployment, holiday pay, overtime, etc. could be required to contribute a similar amount into a company sponsored benefit, profit sharing or pension plan.  We just have to make the playing field a little less tilted towards China, Mexico and the third world than it currently is.

    This “consequences” talk is all talk.  US companies play the hand they are dealt.  We just have to make sure we aren’t tossing all the aces to the competition.

     

     

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  6. EJHill Podcaster
    EJHill
    @EJHill

    My favorite argument against the deal is that government shouldn’t be picking winners and losers in the economy. We all know that Barack Obama did that with the way he structured the GM deal: UAW workers won, non-union workers at Delco got screwed. But that’s pitting Americans against each other, political favorites vs those that don’t necessarily toe the Democrat Party line.

    But in these cases we’re not talking about internecine warfare. Who won the Carrier deal? American workers. Who lost? Mexican workers. Duh. And this isn’t racial. I’d feel the same way if the jobs were slated for Canada.

    If NAFTA or PTT was about American companies competing for market share I’d be all for it. But it’s more about US companies shipping the jobs out and reimporting the goods previously made within our borders.

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  7. OccupantCDN Coolidge
    OccupantCDN
    @OccupantCDN

    “The free market has been sorting it out and America’s been losing.”

     

    I don’t know what context this was said, but on its face it’s correct. Now before you get all offended let me explain.

    When a company takes its production over-seas, its not because labor is cheaper somewhere else. Labor is cheaper because its less productive – with everything you get what you pay for. What a company is really doing when it goes off-shore is dumping the government. The cost of taxation, of complying with all the mandates, regulations and guidelines would choke several horses, and when production goes off shore all those costs disappear.

    Its not the fault of the worker, its the fault of the government. Thats why the political class is so quick to blame the cost of labor, hoping that if they provide an easy explanation people wont do some research and discover the real reason on their own.

     

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  8. Quake Voter Inactive
    Quake Voter
    @QuakeVoter

    James Pethokoukis: Government has a role to play, everything maybe from retraining to income subsidies to relocation.

    Fascinating how Beltway thinkeries presume the right to define allowable opinion.

    What a joke.  Seek to revisit a few key provisions of an 800 page trade agreement:  Chilling!

    Revise the tax code to create incentives to maintain, expand and relocate firms within the United States:  Chilling!

    But the “everything maybe” of the reformicon and center Keynesian consensus — massive government expenditures on retraining, income support and relocation subsidies — are clear government roles because …. because we say so.

    Trump’s speech at Carrier was maybe the most winning and personable performance he’s given.  He repeatedly connected the Carrier deal to deep corporate tax cuts, regulatory rollbacks, Obamacare repeal and the other defining pro-growth aspects of his agenda.

    The Carrier deal amounts to less per year over the next decade than the contract of .200 hitting backup catcher.

    This bedwetting is silly.

    Not as preposterously silly as reading a James Pethokoukis article at 5:40am I must admit.

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  9. Hang On Member
    Hang On
    @HangOn

    So Pethokoukis is one of the pfft people. Typical of Washington think tankers and others of irrelevance.

    https://spectator.org/attack-of-the-pfft-people/

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  10. Concretevol Thatcher
    Concretevol
    @Concretevol

    OccupantCDN: What a company is really doing when it goes off-shore is dumping the government.

    @occupantcdn  I really really really like this sentence and will be using it as my own frequently  :)

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  11. Concretevol Thatcher
    Concretevol
    @Concretevol

    I don’t really know the specifics of the Carrier deal but I’m sure it will be a political winner and Democrat’s criticism is pretty weak.  That said, I’m a little worried that Pence is still going with the populist 1980’s union hall slogans since I was hoping that was just campaign rhetoric.

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  12. Vice-Potentate Inactive
    Vice-Potentate
    @VicePotentate

    TPP attempted to rope in nonsubsidy costs of labor, look at the Japanese auto market section. There has been a quite a backlash against the panels designed to adjudicate these disputes, but at least they roll in realistic labor costs.

    As a broader point, when the government starts telling people where they can manufacture it is a de facto cost control. You will pay x dollars for labor if you wish to have access to the marketplace. Now you can say, “if you agree to pay x dollars per worker we will loosen up an onerous burden.” But that burden still exists for all competitors. This style of doling out of favors by reduction of burden always leads to corruption and market distortion and it will again.

    Laws not men and no one above the law.

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