Column: How a factory deal Trump touted put the ‘con’ in ‘Foxconn’ — and how taxpayers will get taken
The entirety of President Trump’s job-creation strategy was visible July 26 during a White House ceremony to announce a deal bringing a $10-billion video-screen factory for the Taiwan electronics company Foxconn to southeastern Wisconsin.
The elements included a claim about the number of jobs that was unverifiable and not believable; a description of the cost and terms of the $3 billion in tax incentives dangled in front of Foxconn that concealed their astronomical cost for Wisconsin taxpayers; the presence of political sycophants (in this case, Vice President Mike Pence, Wisconsin Gov. Scott Walker and House Speaker Paul Ryan, [R-Wis.]) to attest to Trump’s role in negotiating the deal; and grandiose assertions by Trump himself that it’s all about him: “If I didn’t get elected, he wouldn’t be spending $10 billion,” Trump said of Foxconn Chairman Terry Gou, also in attendance.
Left unexpressed were doubts that the factory would ever actually be built, and that even if so, it would employ the extraordinary workforce of 13,000 that was claimed. Reporters on hand might have delved into that issue, but no questions were permitted.
This is a transfer of wealth from Wisconsin taxpayers to Foxconn shareholders. For the taxpayers, it’s a guaranteed loser.
— Tax incentive expert Greg LeRoy
So let’s provide some of the context that was overlooked on that occasion. Experts who have examined the proposed deal, which must be approved by the Wisconsin Legislature, have concluded that it won’t begin to pay off for state taxpayers for more than two decades, if then — or ever.
A good portion of the jobs will go not to Wisconsin workers, but to residents of Illinois, meaning that Wisconsinites will pay, and their cross-border neighbors will profit. The deal would exempt the Foxconn plant from a host of environmental regulations, placing the local water supply and ecology at risk.
In other words, the announcement was all flash and precious little substance. But what substance is known is disturbing.
“This is a transfer of wealth from Wisconsin taxpayers to Foxconn shareholders,” says Greg LeRoy, the head of Good Jobs First, which tracks government economic incentives handed over to corporations. LeRoy observes that even if the plant reaches its projected complement of 13,000 workers, that means the deal would cost about $230,000 per job.
“The average worker at Foxconn is never going to pay $230,000 more in state and local taxes than the public services she and her family will consume during her work tenure there,” he says. “For the taxpayers, it’s a guaranteed loser.” If the size of the workforce falls short, he noted, the cost per job could be much higher.
Under Gov. Walker, who briefly ran for the Republican presidential nomination last year, Wisconsin has been something of a sinkhole in economic development schemes. After Walker privatized the state’s main job-development agency, it became ensnared in scandal after scandal while failing to make much of a mark on job growth. The defining job program of Walker’s administration was a $6-million grant in 2014 to Ashley Furniture, which was allowed to lay off half of its 3,800 Wisconsin workers as part of the deal. A few weeks after the grant from the Wisconsin Economic Development Corp. was approved, Ashley’s owners donated $20,000 to the reelection campaign of the development group’s chairman, Gov. Walker.
The Foxconn proposal boasts similar elements of a glittery political veneer concealing signs of rot from the inside out. One blow was landed in Madison on Aug. 8 by the Legislative Fiscal Bureau, which analyzes bills with budget implications. Among other points, the bureau pointed out that Foxconn would receive at least $1.35 billion and possibly as much as $2.9 billion in tax incentive payments even if it didn’t owe any Wisconsin tax, that increased state tax revenue from job growth wouldn’t offset the incentive spending until at least 2042 — and then only if the full complement of 13,000 jobs was reached and all went to Wisconsin residents.
But the bureau acknowledged that anywhere from 10% to half of the jobs could go to nonresidents. That’s because the proposed factory site in the Racine-Kenosha area — Paul Ryan’s home district — is within easy commuting distance of Illinois. If there are fewer jobs, and fewer go to state residents, the bureau said, the break-even point could be years or decades later.
Whether the plant ever will host 13,000 workers is doubtful; the legislative analysis acknowledged that some estimates place the probable payroll as low as 3,000. Trump touted the plant as a “state-of-the-art manufacturing facility,” but state-of-the-art electronics factories are replacing human assembly workers with robots, a trend the efficiency-minded Foxconn is unlikely to abandon.
The most important aspect of Trump’s participation in the Foxconn announcement may be what it says about his job development approach. It doesn’t seem to be aimed at anything special except generating photo opportunities. Foxconn itself is getting a reputation for making lavish promises and letting them lapse, as appears to have been the case with a project the company touted for Harrisburg, Pa., in 2013. That deal was for a $30-million plant employing 500 workers. But the plant hasn’t materialized.
Ever optimistic, Pennsylvania officials participated in a seven-state beauty contest Foxconn staged this year, playing Pennsylvania and Wisconsin off against Illinois, Indiana, Michigan, Ohio and Texas in its quest for the most lavish state and local incentives. This race to the bottom has the effect of all but eliminating any genuine economic gains the ostensible winner can claim from landing the plant.
Yet Trump explicitly endorsed such interstate shakedowns in December, when he bragged about keeping a Carrier air conditioning plant in Indiana. Employers “can leave from state to state and they can negotiate good deals with the different states and all of that,” Trump said then. “But leaving the country is going to be very, very difficult.”
Even Trump’s victory in the Carrier episode was predictably ephemeral. Even though the company supposedly pledged to retain more than 1,000 jobs rather than move them to Mexico, in June it emerged that Carrier will lay off more than 600 of its workers by the end of this year.
In Wisconsin, Foxconn is insisting that the state Legislature enact the package of proposed incentives by the end of September, or no deal. That means that for all the preening at the White House last month, the deal may end up like others sponsored by Trump and offered by Foxconn: real hype and false hopes.