“Incentive” is a versatile word. Both positive and negative, incentives help get things done. In recent days, we have witnessed how the two sides of the term coexist in the “carrot and stick” theory (also known as reward and punishment). I refer to the Carrier A/C Company, which recently changed their announced closing of a plant in Indianapolis. They will, instead, remain in Indiana. Why? They received incentives from the Governor of Indiana (also known as the “Vice-President-Elect”), and the current President-elect of the United States, Donald J. Trump.
Together, they offered Carrier both carrots and sticks. The sticks included a threat to impose punitive taxes on importing equipment they would produce in Mexico, plus, possibly, loss of 10% of Carrier’s business through Government contracts. Alone, the sticks are punishing, often effective, but they just don’t feel good. So, Trump and Pence added carrots in the form of tax breaks, some unique to the Carrier situation, but others in the form of changes in the Tax Code that will make all profitable American companies more competitive. Reducing the punishing 35% top income tax rate on corporate profits to 15% would be a rate reduction of nearly 58%. That’s an eye-opener, a game changer, and a huge incentive. A carrot, if you will. Congress may not allow Trump to go all the way to 15%, but I expect a significant reduction.
Trump’s negotiating worked like a miracle, yet criticism abounds. Both political sides have criticized the “deal” hammered out between Carrier, Pence, and Trump. The criticisms have the smell of sour grapes, but the incoming Administration apparently smells only the roses. How refreshing it sounds, at least to this friend of commerce and the American worker! Bring it on, naysayers, but watch the good people of Carrier have a very joyous Christmas season.
Is this a glimpse of “The Art of the Deal?” Trump wrote the book, quite literally, on that subject. What is a good deal? A good business deal, according to my theory, is when everyone walks out happy. A good political deal, however, is when nobody walks out smiling. So it seems with Carrier. The company seems happy, the employees are jubilant, and President-elect Trump is triumphant. Hey, that makes it a good business deal.
From the political standpoint, all the whining and moping going around prove one thing – this was a good political deal; nobody seems happy. Maybe we all have something to learn from the “carrot and stick” approach. Compromise seems to have been lost along the way. Too often nowadays, the sides of any argument, especially with political issues, have become “my way or the highway.”
Can the coming Administration usher in a new era of understanding and compromise? Stay tuned. I believe that the fun is just beginning.
I am smiling.