How much will Foxconn really cost?
Imagine for a moment that it’s all true — that Foxconn invests in a massive new factory complex in southeastern Wisconsin and hires 13,000 people.
Imagine that Wisconsin becomes a hub for a new American industry — the production of flat-panel screens — and that gives rise to other new ventures.
Imagine that the study Foxconn paid for is spot on — that a $3 billion investment by taxpayers leverages $10 billion to build the complex and billions of dollars more in payroll.
There are good reasons for skepticism. Foxconn has a history of talking big and failing to deliver, and taxpayers are being asked to pay a king’s ransom to lure the Taiwanese industrial giant to Wisconsin. The Legislative Fiscal Bureau found that even in the best case state taxpayers wouldn’t recoup the $3 billion in proposed tax incentives for 25 years. If Foxconn misses its job targets — or if a portion of those jobs are filled by people commuting from Illinois — the payoff for Wisconsin taxpayers will take much longer.
The Fiscal Bureau report only focuses on state government’s bottom line; it doesn’t account for the broader impact of a $10 billion investment and 35,000 new jobs (including Foxconn’s suppliers). The effects of infusing the economy with that much cash could be enormous — even catalytic, supporters of the deal argue. The consulting firm EY, which wrote Foxconn’s report, says the project would generate $11.1 billion a year of additional economic activity in Wisconsin.
One side benefit could even be a warming of the state’s chronically frosty climate for start-ups.
People close to the state’s start-up scene believe that Foxconn gives Wisconsin a new narrative to sell to venture capital investors, which could help the region attract much-needed funding for new companies. And the company would be a magnet for new talent. A deeper bench of engineers and tech specialists could mean more new ventures get off the ground as smart, ambitious people start their own companies. As we’ve seen repeatedly in other tech centers around the country, brain power matters.
“It will likely be the foundation for a cluster of activity and leadership by our state beyond Foxconn as a supply chain grows around the company, and talent and expertise is attracted and trained,” John Neis, the managing director of Venture Investors and president of the Wisconsin Venture Capital Association, told an Assembly committee last week.
Neis points to GE Healthcare, which employs 6,800 people and has 870 suppliers in Wisconsin, supporting another 21,000 jobs. GE has worked closely with the University of WisconsinMadison, he noted, and executives have left the company to start their own ventures, including TomoTherapy, NeuWave Medical and Healthmyne. Foxconn could have the same halo effect.
But a question lingers: At what cost?
Taxpayers are being asked to pay a very steep price. They are being asked to make a $3 billion bet based, as far as I can tell, solely on the word of a governor running for re-election and a report that was paid for by the company that stands to receive the largesse.
What if Foxconn’s job promises turn out to be empty? Or “Foxbots” automate away thousands of the promised jobs? What if a large percentage of the employees drive in every day from Illinois? What if EY’s economic impact estimates are bloated?
In any of those cases, and others, the impact Gov. Scott Walker has touted will be significantly less “transformational” and significantly more expensive to Wisconsin taxpayers.
Consider what economists would call the “opportunity cost” of this deal. What else could the state do with $3 billion to foster economic growth? Would 1,000 new small businesses created over the next decade amount to the same thing? And might that not be better — and cheaper — for the state? It might. But it wouldn’t be as good of a headline.