Last month, Wisconsin governor Scott Walker signed into law a bill approving up to $3 billion in subsidies and tax breaks for Taiwanese tech giant Foxconn, in return for the company’s promise to build a manufacturing facility in the state. ((Danielle Paquette, Scott Walker just approved $3 billion for a new Foxconn factory in Wisconsin (Sept. 18, 2017), https://www.washingtonpost.com/news/wonk/wp/2017/09/18/scott-walker-signs-3-billion-foxconn-deal-in-wisconsin/?utm_term=.8484993d33ad.)) Under the agreement, Foxconn would invest $10 billion to construct a facility over six years, bringing with it up to 13,000 jobs with a purported average salary of $53,875, while Wisconsin would provide subsidies in the form of payroll and capital tax credits. (( Memorandum from Bob Lang, Legislative Fiscal Bureau, August 2017 Special Session Assembly Bill 1: Foxconn/Fiserv Legislation 1 (2017) (http://docs.legis.wisconsin.gov/misc/lfb/bill_summaries/2017_19/0004_ss_ab_1_foxconn_fiserv_legislation_8_8_17.pdf).)) In addition, Walker has said the bill will likely add another 10,000 construction jobs, and 22,000 incidental jobs as the facility transforms southeast Wisconsin. ((Michelle Fox, Wisconsin Gov. Scott Walker Defends Foxconn Incentive package, Touts State’s Turnaround (Aug. 8, 2017), https://www.cnbc.com/2017/08/08/wisconsin-gov-scott-walker-defends-foxconn-incentive-package-touts-states-turnaround.html.))
However, the bill is not without controversy. The most alarming of these concerns comes from a memo released by the nonpartisan Legislative Fiscal Bureau, which reported that under the current deal, the state will not break even until 2042, or even longer if many of the jobs go to Illinois residents. ((Lang, supra note 2, at 6.)) Furthermore, Foxconn’s own track record in these deals is suspect, having promised to build a similar plant in Pennsylvania back in 2013 that never materialized ((Todd C. Frankel, How Foxconn’s broken pledges in Pennsylvania cast doubt on Trump’s jobs plan (Mar. 3, 2017), https://www.washingtonpost.com/business/economy/how-foxconns-broken-pledges-in-pennsylvania-cast-doubt-on-trumps-jobs-plan/2017/03/03/0189f3de-ee3a-11e6-9973-c5efb7ccfb0d_story.html?utm_term=.b7390e4cae7d.))
Another cause for concern is the loss of replacement jobs due to changes in the market. As technology and artificial intelligence develops further, jobs that are available at the start of this deal might not be there in five or 10 years. However, the state seems to have prepared for this possibility, as under the current deal the payroll credits would only be paid as long as the jobs are there. ((Id.)) Furthermore, the rapid pace at which technology changes these days is the most concerning part of this deal. While many companies are making flat screens now, how long will it be until some newer, better technology comes around? For example, just 10 years ago, Apple announced the iPhone and Netflix had only just begun its online streaming service. ((Jefferson Graham, Happy Birthday iPhone- will we get to 2027? (June 24, 2017), https://www.usatoday.com/story/tech/talkingtech/2017/06/24/iphone-2027-talkingtech-uber-apple-amazon-closet/103127196/.; Miguel Helft, Netflix to Deliver Movies to the PC (Jan. 16, 2007) http://www.nytimes.com/2007/01/16/technology/16netflix.html.)) It’s quite possible that 10 years from now, neither the iPhone nor Netflix will still be around as we know them. Whether they are provided on an improved platform, or on some new model that does not yet exist, the result is the same: a very real possibility that the screens made at the Foxconn plant will not be used in 10 years.
Regardless of the long term fiscal impact on the state, the political maneuvering it took to get this deal done is a troubling sign of what the future of economic development in the United States may look like. If it takes this much incentive to bring manufacturing jobs from overseas, it suggests that the current tax and regulatory scheme in place is hindering job growth, keeping the state from being competitive for jobs in the marketplace, and likely hindering small business growth as well. But instead of looking into potential changes to the law or incentives for all, Wisconsin has decided to go a different route, changing the rules for Foxconn alone.
Unfortunately, I think Foxconn is only the beginning of a larger trend when it comes to governments bending over backwards for massive corporations. What do these big companies have to offer that small businesses can’t to make these deals worth it for politicians? According to Governor Walker when he signed the bill, that answer is, “good paying family supporting jobs, that’s really what today is all about. . . there are sometimes things we do at the state and local level that are about today, or even tomorrow, this is about far into the future.” ((Stein, supra note 4.)) While that makes for a good sound clip, the decision to announce this deal at the White house with President Trump shows that this deal goes beyond jobs and Wisconsin’s families, and likely hits at the heart of why Foxconn is getting so many breaks: it’s about votes. ((See Nelson D. Schwartz and Vindu Goel, Foxconn Says it Plans to build Factory in Wisconsin, Adding 3,000 jobs (July 26, 2017) https://www.nytimes.com/2017/07/26/business/foxconn-factory-wisconsin-jobs.html.))
Bringing back good-paying working-class jobs to the country was one of the big promises of Donald Trump’s 2016 campaign, and a massive tech facility with 13,000 jobs sounds a bit like fulfillment of that promise. Certainly, there are other parts of the country in worse economic conditions that could use the facility. For example, why not try to fix the broken Pennsylvania deal? If you consider the fact that President Trump was the first Republican candidate to carry Wisconsin since 1984, and the proposed site is located in Speaker Paul Ryan’s district, the Foxconn deal begins to look more like a blatant attempt to lock up votes in 2018 and 2020, and less like an effort to create a stronger future for the state. Mind you, this factory will take around six years to build, so as long as the promise of jobs exists during their re-election campaigns, not a single screen could be made in this facility and Trump, Walker, and Ryan could still come out as winners. And therein lies the art of the deal.
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