Milwaukee Journal Sentinel, July 28
Big risks, maybe a big payoff, in Foxconn deal
State officials want to place an enormous bet on a single company that they believe could transform the economy in southeastern Wisconsin.
Gov. Scott Walker wants to give the Taiwanese manufacturer Foxconn up to $3 billion in tax incentives to open a massive factory to make flat-panel displays, an incentives package that is larger by a factor of 50 than any other in state history. For its part, Foxconn would agree to spend billions of dollars on the complex and hire at least 3,000 people initially and 13,000 over time.
Three billion dollars is an eye-popping number, to be sure, and it’s not just that the state will forgo taxes. Taxpayers also will have to cut checks for up to $200 million annually for 15 years to the electronics giant. State officials say the awards are dependent on Foxconn actually creating the promised jobs.
Foxconn’s investments could be catalytic, launching a brand new industry in southeastern Wisconsin - indeed, an industry that doesn’t exist anywhere in the United States at the moment. Despite the huge tax breaks involved and whatever additional local tax abatements might be needed for infrastructure improvements, the investment might pay off if Foxconn does what it says it will do.
Average pay for Foxconn workers is expected to be $53,900, and the capital investment could be as high as $10 billion. Thousands of construction workers would be needed as the complex takes shape, and, after it’s completed, Foxconn would buy more than $4 billion a year from suppliers, much of it sourced from Wisconsin, the company promises. The state’s economy could get another boost if suppliers choose to locate nearby.
But there are plenty of risks to the public:
- Will Foxconn do what it says it will do? The company has a track record of broken promises. In 2013, Foxconn promised to open a new high-tech factory in Harrisburg, Pennsylvania, employing 500 people. It never happened. “I’ll be excited about the Foxconn announcement when workers are getting paychecks in Wisconsin,” Scott Paul, president of the Alliance for American Manufacturing, told The New York Times. “Foxconn has a history of talking big and not necessarily delivering on their commitments.”
- Will the state meticulously track Foxconn’s activity? Will it demand ironclad claw-back provisions to protect taxpayers? Will it retain outside help to ensure that those provisions are ironclad? The state has no experience with an incentive package of this size and may need outside help to write careful terms for the final agreement. Legislation would be required to enact the incentives.
- Will Wisconsin workers who need the most help - including the unemployed in Milwaukee’s central city - benefit?
- Are Foxconn’s job promises real? Foxconn has heavily automated its factories elsewhere, replacing 60,000 workers with robots in the last year alone. It even produces its own industrial robots - known as “Foxbots.” With factory automation improving the bottom line for companies, the long-term viability of these jobs is a legitimate concern for taxpayers footing the bill.
- What starting wage and benefits will Foxconn offer its employees? In short, how good are these jobs?
- What additional public financing will be needed for infrastructure - to extend sewer and water lines or to build roads? That’s an open question; the price tag could be enormous for individual communities.
With an election fast approaching, landing Foxconn is a major political win for Walker and for President Donald Trump, who pushed Foxconn founder Terry Gou to build a facility in the United States. Given Trump’s protectionist trade policies and the cost of shipping products to U.S. markets from Asia, Gou had some incentive to do so. It didn’t hurt Wisconsin’s chances that Trump was the first Republican presidential candidate to win the state since Ronald Reagan and would like to win here again in 2020.
Walker and Trump deserve credit for aggressively pursuing a deal, as do former White House Chief of Staff Reince Priebus and House Speaker Paul Ryan. When Trump crowed at the announcement in the White House East Room on Wednesday, “If I didn’t get elected, he wouldn’t be spending $10 billion,” the president had a point. It also helps to have multiple friends in high places, as Wisconsin does at the moment.
Stripping away the hype, this is a raw-bones business deal: Taxpayers forgive Foxconn’s taxes for 15 years and deliver the tax credits, and Foxconn delivers thousands of good-paying factory jobs and makes a $10 billion investment in Wisconsin.
Nonetheless, it’s an enormous subsidy by Wisconsin taxpayers. In a perfect world, it’s a deal that would not be made. Unfortunately, in the real world, states and localities do compete and bid against each other for business, and tax breaks are the coin of the realm.
But there are risks. A few years ago, the state of Washington gave Boeing Co. the largest handout in history - $8.7 billion - and watched the company subsequently cut thousands of jobs in the state. Legislative efforts over the past two years have failed to “claw back” any of the tax breaks given to Boeing, and the aerospace giant is fighting a new attempt this session. Boeing has joined a lobbying group that “opposes efforts to make the aerospace tax breaks, passed in 2013, dependent on Boeing maintaining minimum employment levels in the state,” Reuters reports. Other states have been more prudent.
The Foxconn deal could be the “game changer” that Ryan says it is. We hope that’s the case. But Walker and the Legislature need to take great care in designing a package of incentives that both bring this work to Wisconsin, and, just as important, protect taxpayers if it suddenly goes away.
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The Journal Times of Racine, July 30
Set aside partisanship to bring Foxconn here
Southeastern Wisconsin received momentous news this past week: Taiwanese manufacturing giant Foxconn is coming to the area and investing up to $10 billion.
The plant to be built could eventually employ up to 13,000 people, with 10,000 construction jobs and 22,000 indirect and induced jobs throughout the state expected to be created, according to the Wisconsin Economic Development Corp.
This is game-changing.
For far too long, Racine had the highest unemployment of any city in the state. Now it sits at No. 2, just barely behind Beloit. What that means is that we have people here who need jobs.
Local educational institutions and officials are making it abundantly clear that training is already starting to ensure that those people will be ready to be hired for the jobs that come along with Foxconn.
These jobs are reported to pay about $50,000 per year, plus benefits. That is enough to support families and help families get out of poverty.
Along with jobs, Foxconn will bring more development, more houses and businesses, which will improve the tax base, helping governments afford more services and infrastructure improvements.
This would also help increase enrollment for local school districts, which have had numbers go down over the years.
To further sweeten the deal for southeastern Wisconsin, on Friday legislators announced that the Foxconn incentive package included plans for restarting construction on the Interstate 94 North-South project, which extends from the Illinois state line through Racine County to General Mitchell Airport in Milwaukee.
State legislators and Gov. Scott Walker had been struggling to reach agreement on getting this project done. It appears the Foxconn deal was the shot in the arm that project needed.
Some have criticized the proposed $3 billion in incentives that the governor has announced.
But Walker has assured those critics, saying the tax incentives will be tied to performance and if Foxconn doesn’t fulfill its promises to invest and create jobs, then the company will not be eligible for tax credits. We expect him to follow through on that promise.
As legislators go into a special session to discuss the Foxconn deal, partisanship should be set aside so that everyone can focus on what really matters: good-paying jobs and a bright future for Racine, southeastern Wisconsin and the state as a whole.
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Wisconsin State Journal, July 30
Trump targets loyal troops with tweets
As if he doesn’t have enough controversy to contend with, President Donald Trump created yet another distraction last week.
He’s banning transgender people from the military.
Or so he tweeted.
He didn’t bother to let the Joint Chiefs of Staff know about his intentions. And his Secretary of Defense James Mattis, who received a day’s notice while on vacation, is reportedly appalled.
Trump’s stated goal is to prevent disorder among the ranks. But his tweet did just the opposite - it caused disruption.
Several thousand transgender service members - some of whom are fighting for their nation in war zones, risking their lives - suddenly wondered if they were going to be discharged because of who they are.
Military leaders responsibly tried to calm the unnecessary chaos created by the commander in chief. They said their policy of allowing transgender troops to serve openly, which began last year, will continue until the president formally issues his directive to Mattis, who will have to draft and implement guidelines.
In other words, Trump has no plan for how to proceed and hasn’t given his military leaders time to develop protocols. Trump also undercut Mattis, who announced a six-month study on the issue in June. Mattis insisted he wasn’t presupposing the outcome of the study. But obviously Trump has.
In a series of tweets Wednesday, Trump said he “will not accept or allow transgender individuals to serve in any capacity in the U.S. military,” which “cannot be burdened with the tremendous medical costs and disruption that … would entail.”
But a government report counters those assumptions. Allowing openly transgender people to serve has a “minimal” financial impact, according to a RAND Corp. study. It estimated the additional expense for transgender-related health care and readiness at “between $2.4 million and $8.4 million annually” - out of a Pentagon budget of more than $500 billion. And just 29 to 129 active-duty personnel would seek gender transition-related services - out of 1.3 million members.
Trump’s claim that transgender soldiers cause disorder is the same excuse that was used to bar blacks, then women, then gays from serving their country. The American military needs the best people it can recruit and retain, not a discriminatory policy aimed at a tiny minority of patriotic and proven troops.
That includes Erika Stoltz of Sun Prairie, whom State Journal reporter Steven Verburg profiled in Friday’s newspaper. Stoltz has completed four combat deployments to Iraq and Afghanistan and continues to serve in the Army reserves.
Sen. Orrin Hatch, R-Utah, was one of many lawmakers critical of Trump’s tweets last week. Hatch said the military shouldn’t discriminate against anybody.
“Look, people who are transgender, they don’t choose to be transgender,” Hatch said. “They’re born that way. And why should we hold that against them? And they’re human beings, and many of them are extremely talented human beings.”
Hatch is right. Trump - again - is wrong.
The military should continue to treat all of its brave soldiers with respect, even if the president does not.
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