Trump has already created thousands of jobs, but needs big reforms to keep them
Donald Trump pledged that his administration would be about three things, "jobs, jobs, jobs." When Ford Motor Company announced on Tuesday that it would invest $7 billion in a new U.S. plant in Flat Rock, Michigan and hire 700 new workers, Trump appeared to be keeping one of his most important campaign promises.
According to experts, if Trump wants to continue on his path towards millions of well-paying American jobs, there is only so much he can do from the Oval Office and on Twitter. Trump will need buy in from lawmakers to get regulatory and tax reforms if he wants to create jobs and keep them.
Trump is already taking credit for creating or saving as many as 51,500 jobs. Between the high profile fight with Carrier Group to keep about 1,000 jobs in Indiana, to tech sector pledges from IBM, Japan's SoftBank, and Sprint for billions in new investments in the United States and tens of thousands of new jobs, he is clearly inspiring confidence.
Ford CEO Mark Fields directly attributed the decision to domestically produce Ford's new line of high-tech electric vehicles to President-elect Trump. In an interview with CNN, Fields said the company's decision was based on a number of factors, "including what we view as a more positive U.S. manufacturing business environment under President-elect Trump and its literally a vote of confidence around some of the pro-growth policies he has been outlining."
Ford was the target of relentless attacks by Trump on the campaign trail, and was called out by name in front of 80 million television viewers during the first presidential debate. "Ford is leaving. You see that, their small car division, leaving. Thousands of jobs leaving Michigan, leaving Ohio. They’re all leaving. And we can’t allow it to happen anymore," Trump promised.
On Thursday, the Japanese car company Toyota became the latest target of Trump's apparently job-creating tweets. Trump went after the automaker's plans to manufacture its cars in Mexico and sell to the U.S. market, saying, "NO WAY! Build plant in U.S. or pay big border tax."
Toyota already has a plant in Baja, but announced in 2015 plans to open a new plant Corolla production plant in Guanajuato, shifting production of the small car from Canada. So far, Trump's tweet has not impressed Toyota President Akio Toyoda, who said that the company will wait to see what policies Trump adopts before changing its production plans.
Publicly naming and shaming companies has had an effect. But according to experts, in order for that effect to last, Trump will have to do the hard work of tax reform and regulatory reform.
Michael Bernick is the former director of the California Department of Labor and a current fellow at the Milken Institute. Despite his disagreements with the president-elect on some issues, Bernick believes that Trump deserves credit for the deals with Carrier, Ford, Sprint and others to reverse the off-shoring of manufacturing jobs.
"It's positive what he has done so far, but it needs to be connected to tax changes, most of all to the broader tax reform that the new administration talked about," he said, pointing to Trump's pledges to lower corporate tax rates and create other incentives for companies to locate jobs in the U.S.
Some critics of Trump have argued that the deals he cut with manufacturing companies are insignificant, given the fact that there are more than 145 million Americans now in the workforce, and about 7.5 million who are still officially unemployed.
"Most of the narrative so far...has been to dismiss these as small, insignificant gains," Bernick noted. "They are obviously very significant to the workers involved and the communities, and I think they can have a broader impact."
The critics' arguments leave out an important point, Bernick suggested. "Will these recent actions lead to a culture change in terms of 'off-shoring,' and will they lead to broader impacts when compared to changes in the tax code. We don't know yet. But it's not inconceivable."
It is entirely possible that by making an example out of a few leading companies, by publicly shaming them, Trump could encourage others to follow suit. But by focusing on individual companies and individual deals, he could also lose sight of the larger goal. According to senior research fellow at the Mercatus Center, Christopher Koopman, Trump's use of Twitter to target companies who are off-shoring production could actually work against efforts aimed at larger economic reforms.
"You are not going to save the U.S. economy with 140 characters," Koopman said.
"If the idea here is to create real tax and regulatory reform that helps businesses thrive and prosper, doing these one-off deals distracts from the bigger issues. It also gives the appearance that reform is being done without actually ever engaging in doing that hard work of reform," he argued. Getting ad-hoc individual deals "that look like wins, really may not lead to long-term winning."
There are a lot of changes Trump can make within the federal agencies, like the Department of Labor or the Environmental Protection Agency or the Department of Energy, but they are not necessarily lasting changes.
For example, President Obama implemented a series of executive actions on immigration, the environment, and other areas with a direct impact on the economy and job growth. Trump has promised to reverse those actions on day one in office. Outlining his first 100-day plan, Trump vowed to repeal immigration rules that he says keep Americans from getting "good-paying jobs." He promised to "cancel rules and regulations that send jobs overseas," and lift restrictions on energy production and other environmental regulations that impact jobs in the energy sector.
Trump also promised to "pass massive tax reform to create millions of new jobs."
Koopman argued that for businesses to have a sense of confidence and certainty, getting tax reform through Congress is key. "Where you're going to create long-term value for companies is in an environment where...entrepreneurs and innovators are doing what they do best because we have a tax and regulatory climate that supports that type of activity, as opposed to companies waiting to see if they're the next one on the list to be shamed into staying."
On the other hand, if companies are bringing production back to the United States for the reasons outlined by Ford CEO Mark Fields, because they're anticipating a better business climate, that's a different story. "If that is why companies are choosing to stay, then the pressure will be on not just the president but the Congress to do the right thing and create a better environment for all businesses to succeed," Koopman emphasized.
In a Friday press release, House Speaker Paul Ryan (R-Wisc.) announced a plan to reform America's tax code. Among the features of the GOP plan is to lower the corporate tax rate from 35 percent in order to incentivize businesses to bring overseas cash and jobs back home. The Republicans seek to make up for corporate tax cut by moving to a consumption-based tax. That tax plan has the support of some economists who see it as a way to end the income tax, and eliminate taxes on personal savings, which could encourage people to put money away. But critics of the consumption tax argue that shifting the corporate tax burden to individual consumers will disadvantage lower and middle-income Americans who would have to pay the equivalent of a federal sales tax on a whole spectrum of goods and services.
It is not entirely clear how the plan will make its way into legislation, but Republicans in the House and the Senate are dedicated to getting tax reform through this year.
Back in December, Majority Leader Mitch McConell (R-Ky.) indicated that the Senate could push through tax reform by Spring 2017. McConnell suggested it that the budget resolution would "largely be dedicated to tax reform." It's a sneaky tactic, and it just might work. By putting the reform into the budget resolution, it would only need 51 votes, so even if the entire Democratic caucus tried to block the measure, the Republican majority could likely still get it passed.
But the opposition to Trump and the GOP-controlled Congress should not be underestimated, nor should the complexities of tax reform. On Friday, House Minority Whip Steny Hoyer (D-Md.) balked at the idea that Trump had created jobs at Carrier, Ford, or Sprint, saying that "Trump's claiming credit for any of these jobs is inaccurate." Hoyer said that if the incoming administration wants to create jobs and get tax reform passed, Trump is going to have to work with both parties on the Hill.
Striking a conciliatory tone, Hoyer said, "I certainly look forward to working [with Republicans], to see whether or not we can create a consensus so that there can be agreement between the parties on how to do that. And how to pay for it."
With thousands of new jobs he can take credit for and still two weeks away from taking the Oval Office, Trump is delivering a strong message to manufacturers, workers, and CEOs: "This is just the beginning - much more to follow."