Tag: Wisconsin

Foxconn Finally Admits It Won’t Create 13,000 Jobs in Wisconsin

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“When you subsidize something, the old adage goes, you’ll get more of it.

But some ideas make so little economic sense that even the largest corporate subsidy ever awarded by a state government isn’t enough.

It’s been obvious for quite some time that Wisconsin’s highly touted deal with Taiwanese tech giant Foxconn was going to fall well short of the lofty promises made by the project’s supporters. Then-President Donald Trump, for example, predicted in 2018 that the planned factory on the outskirts of Milwaukee would be nothing less than “the eighth wonder of the world.”

Exactly how short it will fall is now official. In filings with the state, Foxconn says it now plans to employ 1,454 people and invest about $672 million into its still-under-construction factory in Mount Pleasent, Wisconsin. That’s a long way from the $10 billion that the company initially promised to spend building a plant that would have employed 13,000 workers. In response to the amended contract, the state will recover $2.77 billion of the subsidies originally promised to Foxconn—though the company will still receive $80 million from Wisconsin taxpayers, according to a statement from Gov. Tony Evers.

But recovering those subsidies won’t bring back the residential neighborhood that was flattened to make space for the factory. Developers bulldozed 75 homes, some of which were seized through eminent domain, because why should mere houses full of people stand in the way of the eighth wonder of the world?

The town of Mount Pleasent invested more than $1 billion in the project—effectively mortgaging its entire future on the promise of thousands of new jobs and the tax-paying residents who would come to fill them. Those jobs won’t be coming, but the town did have its credit rating downgraded.”

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“From the outset, the deal didn’t make sense. Foxconn promised to make Wisconsin a hub for the manufacturing of HD television screens and other high-tech products, but the company never explained how it planned to make the math work. Besides the relatively higher cost of American labor, there were serious supply chain and logistical issues to be overcome for a factory that was, as TechCrunch put it in 2019, “essentially [in] the middle of nowhere, without the sort of dense ecosystem of suppliers and sub-suppliers required for making a major factory hum.””

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“The state’s Legislative Fiscal Bureau, a number-crunching agency similar to the federal Congressional Budget Office, calculated that it would take the state until 2043 to recoup the $3 billion handout, which was the largest such subsidy in Wisconsin history. Even if all 13,000 promised jobs went to Wisconsinites, the tab would be more than $230,000 per job created, the bureau found.”

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“The entire saga provides an obvious lesson about the wasteful mistakes that state governments make when they throw tax dollars at businesses that promise to create jobs. The best way to create jobs in any state, of course, is to provide a stable economy with comparatively low taxes and a light regulatory touch for all—not to provide special treatment for some and stick others with the bill.

But there’s also a lesson here for politicians who would pursue economic nationalism through greater industrial policy at the federal level. Trump saw the Foxconn deal not only as a way to create jobs, but as proof that reorienting supply chains was a matter of political will rather than economics. The factory, he said in 2018, was evidence that his policies were “reclaiming our country’s proud manufacturing legacy.”

If the largest subsidies ever offered to a foreign company were insufficient to make the Foxconn deal work, maybe that says something about the ability of our political leaders to steer the economy.”

The Foxconn Con

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“Two years after Taiwanese tech giant Foxconn broke ground in Wisconsin, the massive LCD factory and accompanying tech campus the company promised to build in exchange for $3 billion in state subsidies does not exist and “probably never will,” The Verge reported in October. The company’s Wisconsin outpost was supposed to create 13,000 jobs; as of this year it employed no more than 281 people.”

Wisconsin Was Never A Safe Blue State

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“Wisconsin is proof that politicos have short memories. In 2004, Democratic presidential candidate John Kerry carried Wisconsin by just 0.4 percentage points — making it the closest state in the country. Four years earlier, it had been even closer — Democrat Al Gore won the Badger State by just 5,708 votes, or 0.2 points.

But Democrat Barack Obama really connected with Wisconsin voters, winning the state by 14 points in 2008 and 7 points in 2012. Going into 2016, that contributed to a sense that Wisconsin was a safe bet for Hillary Clinton — part of the mythical “blue wall.” It had, after all, voted Democratic in seven consecutive presidential elections by that point.”

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“Conventional wisdom says that Clinton lost Wisconsin because she infamously did not visit the state at all during the final seven months of the 2016 campaign. But that’s probably not true; Clinton devoted a lot of effort to winning Pennsylvania and still lost there, for instance. Instead, Wisconsin probably got redder in 2016 for the same reason that Pennsylvania and other Midwestern states did: demographics. The one-time home of progressive stalwarts like Robert “Fighting Bob” La Follette and Victor Berger could not escape the modern reality that white people without a bachelor’s degree — who make up 59 percent of Wisconsin’s population age 25 and older — have become more and more Republican, especially in the Trump era.”

Study Says Foxconn Deal Cost Wisconsin $20 Billion in Lost Economic Growth

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“In a recent paper on the issue, my Mercatus Center colleagues Matthew Mitchell and Michael Farren did the math and found that “the $3.6 billion in taxes needed to fund the subsidies will likely decrease Wisconsin’s long-run GDP by about $20 billion over the 15-year life of the handout. And this estimate doesn’t include the local utility infrastructure, and federal subsidies that total another $1.4 billion.” These numbers are harder to sell to taxpayers than the la-la land ones we hear about before every big subsidy deal.”

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“A new paper in the Journal of Economic Perspectives by Cailin Slattery of Columbia University and Owen Zidar of Princeton University looks at state and local business tax incentives and finds yet again that narrow, firm-specific tax breaks aimed at attracting businesses and boosting employment aren’t the way to go. The study shows that larger, more profitable companies are more likely to get bigger handouts. The largest deals benefit the recipients, according to their research, but not the overall state economy.”

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“This study is only one of many on the topic. They all find that these narrowly targeted subsidies don’t work as advertised and are typically counterproductive. Unfortunately, a slogan like “subsidized projects aren’t worth the money you pay for them” doesn’t make for a great sound bite at ribbon-cutting ceremonies.”