The risk of believing in Foxconn
The basic question: Is this a company we can trust?
Here’s what we know about the deal to bring Foxconn Technology Group to Wisconsin:
It could cost taxpayers up to $2.85 billion in cash.
The state treasury won’t be money ahead for at least 25 years and possibly much longer.
The governor, Foxconn, and three studies claim this is the best deal since the Packers drafted Aaron Rodgers.
Are we really headed to the Super Bowl?
The newest of the studies, this one by University of Wisconsin-Madison economist Noah Williams, might lead you to think so.
His rosy prediction: Nearly $4 in economic benefits will flow to Wisconsin for every taxpayer dollar sunk into the company. That would mean as many as 39,000 jobs when the ripple effects of Foxconn’s billions of dollars in plant and equipment are considered.
But eyes wide open. “Ripple effects” can be illusory, and taxpayers need all the protection they can get from a company with a history of making big promises it doesn’t keep. Now that Assembly Speaker Robin Vos has pushed the deal through the lower house, it’s up to the state Senate to do a proper vetting.
Mark Hogan, chief executive officer of the Wisconsin Economic Development Corp., says he will push for tougher job requirements that might force the company to return some of the money if the head count at the new factory doesn’t hit employment targets. That’s good because as it stands there are
no minimum job creation requirement for some of the potential payments to the Taiwanese manufacturing giant.
But senators also need to consider whether the promised new industrial “ecosystem” outweighs the dead weight of $119 million to $318 million a year in payments to Foxconn over the next 15 years. That money will have to come out of someone’s hide, whether it be K-12 or higher education or the DNR. If Foxconn turns out to be a Powerball bonanza, it may not matter so much. But if a decade from now Foxconn looks more like the winnings from a $3 scratch ticket, it could matter a lot.
Even under the best conditions, Wisconsin taxpayers won’t break even for 25 years, according to the nonpartisan Legislative Fiscal Bureau. But it might be a lot longer if more workers than expected drive up from Illinois or if Foxconn automates more work than expected and creates fewer jobs. In a glob-
ally competitive industry, Foxconn will automate extensively, which is why predictions of 13,000 jobs in a few years at the Wisconsin plant sound wildly optimistic. Points for Hogan for trying to mitigate that risk.
The fact is we really don’t know where the break-even point is. The Fiscal Bureau notes that the way Gov. Scott Walker’s administration accounted for the capital tended to reduce the cost to taxpayers. Using a more typical accounting method “could push the break-even point for the project further into the future,” the Fiscal Bureau warns.
But there is a more basic question
that has to be answered: Can Foxconn be trusted?
I’d love to believe the story that Foxconn Chairman Terry Gou is spinning. I’d love to imagine a sprawling, new industry emerging in southeastern Wisconsin, an operation that includes thousands of good-paying factory jobs making next-generation flat-panel LCD screens (Hogan says the median wage would be nearly $54,000). I’d love to see scores of smart technical people working at a cutting-edge research and development facility.
But then the dream bubble over my head bursts, and I remember Harrisburg, Pa. And India and Brazil. And Vietnam and Indonesia. In all of those places, Foxconn talked big and failed to deliver. Walker has blamed the collapse of a factory deal in central Pennsylvania on a transition in state government. (A Democrat took office). But how to explain the others?
And how to explain Foxconn’s development of a similar factory in Guangzhou, China, where construction already has begun. How does that facility, which will have vastly lower production
costs than the Wisconsin plant, fit into Gou’s plans? How much of a role did Gou’s desire to mollify the trade warrior in the Oval Office play in his decision to promise to open a factory in the U.S.? What happens if Donald Trump is no longer president? Would Gou walk?
Foxconn might be all that Walker claims that it is. Landing this company might be like drafting Aaron Rodgers in the first round.
Or, it might be like drafting Tony Mandarich — ahead of Barry Sanders, Derrick Thomas and Deion Sanders in 1989. In a cover story that year, Sports Illustrated called Mandarich “The Best Offensive Line Prospect Ever.” Lots of hype. Lots of hope. The thing is, by the time we know whether we’ve bet our taxpayer dollars on a Hall of Famer or a false promise, Walker and the others may be long gone.
And the rest of us may still be paying the bill.