What’s wrong with the Wisconsin Foxconn deal

To understand what’s wrong with the Wisconsin Foxconn deal you first have to understand its appeal, its lure to the entire Midwest, its promise of revitalizing a region of the country much maligned as “The Rust Belt,” where major manufacturers fled and the hunger for robust modernized technology has grown among a neglected and willing workforce.

That’s why, though all sides agree the deal reeks of economic overreach (hatched by what state Rep. Gordon Hintz calls the “two biggest entities known for over-promising and under-performing, Gov. Scott Walker and Foxconn chairman Terry Gou”) it is likely to fly though the state legislature with minor changes.

This is the potent mirage concocted with the blessings of President Trump and House Speaker Paul Ryan, whose district it would be set in.

It requires $3 billion from taxpayers for a commitment of $10 billion to build a plantation plant larger than Manhattan’s Central Park ranging from maybe 3,000 workers to maybe 13,000 (with no breakdown on how many interchangeable peons) to perhaps handfuls of specialized workers and high tech employees. It would be built on still undetermined acres to be carved out of farmlands in Racine and Kenosha counties—essentially a continuous giant conveyer belt pushing out LCD screens for TVs, cars and whatnot, requiring the lifting of environmental safeguards on wetlands and waterways.

But Taiwanese Foxconn is now hailed as a transformative opportunity for Wisconsin and the Midwest, with mental pictures of an enormous chain of contributing suppliers (none of whom, in this day and age, need to be based in Wisconsin) and serving as a magnet for vital new shops and technologists to flourish in the Midwest

No wonder even established Democrats who long for new jobs in southeastern Wisconsin have made favorable remarks—Milwaukee Mayor Tom Barrett, U.S. Sen. Tammy Baldwin and noted progressive firebrand U.S. Rep. Mark Pocan, even while expressing caution. No wonder naysayers are accused of lacking vision. Yet they are deeply bothered by the facts and they have a genuine insight into what constitutes real change, plus an enduring suspicion of the main players.

The promise of sustainable new jobs is dubious based on more than the track record of both Walker and Foxconn, as Peoples World has previously revealed.

Even hopes of massive construction jobs were dashed in Madison testimony by the company and state officials who refused to promise that Wisconsin workers — as opposed to imports — would either build or occupy the plant. (Democrats are working to change that.) Plus the $10 billion promised investment over 10 years looks a lot different if buying the land and building its mammoth infrastructure cost many billions of that promise.

Even the Walker administration has taken to justifying the taxpayer burden by insisting Foxconn would create “at least 22,000 indirect and induced jobs throughout the state” plus new businesses and housing, all estimated at bringing in $7 billion a year!

It is an exaggerated multiplier effect, the same math Republicans usually scoff at when applied by cultural institutions. Even Forbes magazine ran down how many times – from Saturn in Nashville to Tesla in Nevada to ExxonMobil in Virginia and on and on – the taxpayers have been left holding the bag after these “once in a lifetime” opportunities.

Moreover, Foxconn cheerleaders sorely misread what lures new technology and ancillary industries, according to many experts consulted who say the same thing: “This is not how industry clusters develop.”

Economics professor Michael Rosen has a long memory of this happening in Wisconsin before, citing the “same crowd” that once promised Wisconsin would become “the Silicon Valley of Printing” and then “the Silicon Valley of Water,” which I might interject is closer to the truth since the appeal of Lake Michigan loomed large in Foxconn’s thinking (more on that later).

Many states would easily expect 59,000 new jobs rather than the promised 3,000 for this size of tax incentives. Timothy Bartik of the nonprofit W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., noted, “The amount [taxpayers are] paying per job is very, very high—I’m skeptical that the benefits justify the cost.”

Gregg LeRoy, the respected leader of the national Good Jobs First, also calls the deal is “a sure loser.”

“There is no way the typical Foxconn worker will pay $230,000 more in state and local taxes than she and her family will consume in public services over her work time there,” LeRoy said. “Yet that is the cost if the firm hires 3,000 workers, which itself is highly unlikely. The deal can only be accurately described as a transfer of wealth from Wisconsin taxpayers to Foxconn shareholders.”

Perhaps in hope their engineering graduates could better stay in a state where now only Madison and Milwaukee have emphasized high tech startups, leaders of universities and colleges in Wisconsin have been sucked in to generally support the Foxconn deal in testimony. Which suggests even they need a deeper study of history. Marquette University President Mike Lovell compared Foxconn to the surge in high-tech hires that occurred in Pittsburgh after Google opened a facility there in 2006, but Pittsburgh experts in a newspaper series disputed this beyond the 500 Google hired.

Pittsburgh’s Carnegie-Mellon, which has actually spent decades developing a world-shaking computer reputation and drew Google’s attention, is not the only institute of higher learning to question Lovell’s example. UW-Madison, some noted, would draw even more high tech interest were it like MIT or Stanford, where the U.S. Department of Defense devoted decades to human capital in computer brain power, which “resulted in a flowering of commercial success.”

Moreover, these experts point out, Foxconn is not relocating its Taiwan and China based research and development. Such R&D is a growing area of importance for LCD manufacturing as overused resources (zinc and special glass) dry up and new graphite flexible material is developed in laboratories. For that reason even U.S. branded LCD companies have a Chinese partnership.

These are factors Foxconn can control outside Wisconsin, while there are many factors in the state they can’t, noted Washington Post writer Todd Frankel, who covered Foxconn’s broken promises to Harrisburg.

“You know, the business climate, the investment climate and all the different things [they can’t control], so it’s going to be very difficult to say exactly how many jobs there are going to be in the end,” he said. “But they can extract a lot of concessions out of the governments and local leaders at this point because everyone wants those jobs.”

Many experts wished they knew more about what LCD manufacturing process was being explored for this futuristic plant where many believe Foxconn can experiment on its dream of using robots and eliminating people in manufacturing. But Foxconn has kept its procedures close to the vest.

The wholesale lifting of environmental protections is particularly disturbing since the company is insisting on the power to discharge dredged fill and other materials into wetlands, build on a riverbed or lakebed, connect artificial bodies of water with natural waterways and change the course of streams, all without getting state permits.

Some scholars think such demands are illegal under the state constitution. They sure go far beyond the usual GOP nostrum that environmental rules are burdensome. “We are exempting one company from a whole slate of environmental protections without even knowing where the plant is going to be,” noted Jennifer Giegerich for the Wisconsin League of Conservation Voters.

There was some reassurance at the Madison hearings when the head of the Kenosha water treatment facility told legislators that “only clean water” would be returned to the Great Lakes – but only some reassurance. Scientific studies at phys.org note: “The volume of toxic chemical compounds discharged into the environment from LCD manufacturing has risen significantly, but little is known about the impact of this pollution on living organisms.”

A scholarly treatise from India in 2013 goes further and outlines the dangers of the chemicals and materials used.

“Many people might regard electronics as a clean industry, what with all those iconic ‘white rooms’ and workers in high-tech protective gear,” noted author Ron Legro in an op-ed for Urban Milwaukee. “Fact is, electronics is a dirty business; no black smoke coming out of a stack, surely, but invisible nasties all the same.”

Could Foxconn have been attracted to Wisconsin not only because of its pushover government but also because Lake Michigan, in an era of micro-circuit technology using untested acidic chemicals, provides a way to wash away worrisome molecules?

Other critics of the deal move from ecology right back to economics, pointing out how Walker is insisting on various tax exemptions while lifting requirements from local governments on TIFs, those tax incremental financing zones, moving from 20 to 30 the years Foxconn has to pay back such things as roads and utilities. (Can anyone conceive of the LCD screen being the cutting edge technology in 30 years?)

An AP analysis of state fiscal reports notes that the “provisions blocking sales taxes on construction materials and equipment would cost the state about $139 million” while local governments would lose about $10.7 million and payroll and capital expenditure tax credits would cost the state about $2.85 billion.

As alluring as the dream of Midwest revival in technology is, more people are speaking out against this peculiar concept of a “life-changing technological revolution.”

In an explosive essay, state Rep. Jonathan Brostoff cited the central needs Wisconsin faces that this deal in its fantasies ignores:

“For the 3 billion dollars demanded by Foxconn, we can fix every pothole in the state with Wisconsin workers, reduce our public school classroom sizes by hiring hundreds of new teachers, reinvest in our University System (a $15 billion annual economic activity generator), and still have money left over!”


Dominique Paul Noth
Dominique Paul Noth

Dominique Paul Noth for the past decade was editor of the Milwaukee Labor Press and website, milwaukeelabor.org. He now writes as an independent journalist on culture and politics.