Donald Trump ran on a promise to bring back manufacturing jobs that have been shipped overseas, partly by using import tariffs to punish U.S. companies that move their operations abroad. He took the first step toward keeping that promise when Indiana manufacturer Carrier Corp., offered a package of state tax incentives (and possibly fearful of its corporate parent losing Pentagon contracts), agreed to retain 800 workers it had planned to lay off.
Some 600 jobs it had planned to move to Mexico will still be going there. But the incoming president claimed credit for those that will be staying here.
There’s nothing wrong with a president exhorting American corporations to fly the American flag, support the arts or find ways to preserve well-paying domestic jobs. Where such efforts become troublesome is when they’re accompanied by threats. The president-elect used his Twitter account Sunday to lambaste Milwaukee-based Rexnord for “rather viciously firing all of its 300 workers,” referring to a decision to shut a bearings factory in Indianapolis and move production to Mexico. He warned that companies outsourcing abroad were “making a very expensive mistake,” referring to the 35 percent tariff he wants to slap on their goods shipped here.
But the managers and shareholders running such companies generally have a better idea than anyone else of what they have to do to survive in a competitive market. A U.S. company that goes out of business may not ship any jobs abroad, but the domestic jobs it provides will be gone regardless.
Though Trump’s jawboning makes for good headlines, it’s not really a plausible method for meeting his goals. It’s the equivalent of trying to fill a swimming pool with an eye dropper. The 800 Carrier jobs he “saved” are dwarfed by the 5 million manufacturing jobs the country has lost since the start of this century. The type of deal he made with Carrier could backfire, by giving CEOs the idea that they can extract special favors by floating plans to leave. Trump may find himself putting out fires he inadvertently started.
To make a real difference in the job market and the fortunes of blue-collar workers, a president can’t rely on case-by-case persuasion. Something much bigger is needed. The key to keeping — and creating — jobs here is to make America a more inviting place to do business.
Trump could start with pushing to cut the corporate tax rate to a more competitive level. Even President Barack Obama proposed lowering the rate from 35 percent, one of the highest in the world, to 28 percent. Obama was never willing to spend any political capital getting his party behind the idea, though, and he saw corporate tax reform chiefly as a way to milk American companies for more revenue. With a Republican Congress, Trump should be able to achieve what his predecessor didn’t.
Another way to improve the job climate is by curtailing costly regulation. Trump has made a promise to “formulate a rule which says that for every one new regulation, two old regulations must be eliminated.” Done with care and resolve, that is a path to freeing up business to do what it does best.
“U.S. regulation is arbitrary, slow, discretionary and politicized,” Hoover Institution economist John Cochrane wrote last month in The Wall Street Journal. He offers some ideas for improvement: “Congress must review and approve major regulations. People and businesses have a right to see evidence and appeal. Regulators face a shot clock — no more years and years of delays on decisions.” In sum: Companies don’t expect zero regulation, but they are entitled to smart, timely, cost-effective regulation.
If Trump were to bring about reforms such as these, he would make producing in the United States more attractive not only to companies that are planning to move abroad but to companies that are already producing abroad, companies that see room for expansion and companies that haven’t even been created yet. Broadly improving the U.S. climate for job retention and creation is the real prize, and Trump should keep his eyes on it.
