Quid pro quo for Carrier
The Latin phrase literally means “something for something.” The phrase is used broadly these days, but has dramatically different connotations almost every time. In politics, it is usually used with a negative tone, but in business contracts, it is a simple defining characteristic of a negotiated transaction. Sexual harassment in the workplace is a common area where the term is used—which more aptly describes an exchange made under obvious duress.
I have found over the years when some deal that has been struck gets labeled a “quid pro quo,” it usually means some party to the deal got the short end of the stick, or some party wasn’t included in the deal who desperately wanted to be. I can’t recall ever hearing about or being invited to a quid pro quo party. But a “QPQ” bash definitely has an inviting ring to it.
In my spare time, I am a governmental affairs consultant. You have heard about guys like me. Lean in and I will whisper the translation—I am a lobbyist. We have the reputation of making those infamous backroom deals which always means someone excluded from the backroom got shorted. That is more of a myth than anything else, but very illustrative of our theme today.
Government deal making is often more complicated than it seems, and the deals often mean more than the initial press release and media reports describe. The art of the deal when an advanced culture is your client means that success is hard to achieve. There will always be someone unhappy with a deal struck by a President or a Governor or both.
A big deal was struck this week between the State of Indiana and Carrier Corporation. And as should be expected, the deal is not uniformly loved. There are some obvious reasons.
First, the deal was touted and largely reported as saving jobs. But from the first announcement in February to today, more jobs are being lost than saved. The union representing the employees at the facility was not a party to the deal either. That’s a warning sign. Concessions by the employees remaining have yet to be announced. Hold off on the QPQ party planning if for no other reason.
Second, the commitments made by Carrier were publicly made in exchange for a paltry $7 million in incentives by the state. Why then is President-elect Trump taking credit for the deal? Couldn’t we have cut that deal as a state all by ourselves earlier? What good is a $2 billion surplus if we can’t use a tiny slice of it to save a 1000 jobs, without prompting, by someone who isn’t even in office yet?
There are multiple answers to those questions. Yes, we could have done that part of the deal ourselves. Next, this absolutely is a fundamental reason for having a rainy day fun—so it can serve as an umbrella when it actually is raining.
But most troubling about the first read of this latest deal is that the deal itself still has not been fully disclosed. How do we know this? Because the elusive reduction in regulations and federal taxes has not being publicly released, and is only being hinted at with an anecdotal tone.
Carrier didn’t “hold out” for the $7 million.
That is almost certainly a smoke screen for what the deal is really about: the protection of the more than $6 billion in revenue Carrier’s parent company generates in defense contracts from the U.S. Government each year. Former Lt. Governor John Mutz spoke of it matter of factly the day before Trump visited.
So here’s the deal: Indiana did not dig very deep to keep the jobs it kept. For the workers and their families who get to keep their jobs, it is a great deal. However, the rest of this deal stinks to high heaven.
The benefits to keeping this business operating are undeniable. But in a quid pro quo, we should know what the actual price is. We, the taxpayers are the ones across the table from Carrier here.
The defense contracts being used for an undisclosed amount of leverage belong to us also. This is the real value of the deal to Carrier and its parent company, United Technologies. Americans have no idea what that aspect of the deal even is. Until it is disclosed, the “deal” is still stuck in the backroom.
For those with strong emotions about the announcements this week, stay tuned. I will patiently await the rest of the story. I’m sure it will be fascinating.
More importantly though, whenever possible in a quid pro quo, it’s important to actually see the deal before we collectively sign or celebrate it.