Crony Capitalism

Trump and Scott Walker's Wisconsin Foxconn Deal Is Cronyism at Its Worst

The dealmaker in chief abuses his power to cripple companies that anger him and reward those that please him-and his fellow Republicans enable it.


President Donald Trump is visiting southeast Wisconsin today to celebrate the groundbreaking for the construction of what he once called, "an unbelievable [manufacturing] plant, like we've never seen before."

Foxconn, a Taiwanese manufacturer perhaps best known for producing iPhones in the so-called "Foxconn City" of China's Shenzhen province, has promised to build a massive plant in rural Wisconsin and create as many as 13,000 jobs.

The deal might look good politically for both Trump and Wisconsin Gov. Scott Walker (R), who is campaigning for re-election to a third term this fall. But the Reason video below explores some of the deal's troubling details, including $4.5 billion in state and local subsidies and tax breaks, as well as the potential seizure of family homes via eminent domain.

The Foxconn agreement, shepherded by Walker and touted by Trump, embodies latter's view of the executive branch as financial deal broker. For Trump, the prospect of family homes being seized to make way for a private corporation is simply the (rather low) cost of doing business.

He expressed as much as a private citizen in the wake of the Kelo v. New London decision—a case where retiring Justice Anthony Kennedy was the deciding vote—which affirmed the legal right of a Connecticut town to force home sales in order to make way for the pharmaceutical giant Pfizer because Pfizer's use of the land would supposedly spur more economic development in the area, though Pfizer never built the facility and the lots where many homes stood remain vacant 13 years later. In a 2005 interview with Fox News, Trump told interviewer Neil Cavuto that, "I happen to agree with it 100 percent." He continued:

If you have a person living in an area that's not even necessarily a good area, and government, whether it's local or whatever, government wants to build a tremendous economic development, where a lot of people are going to be put to work and make area that's not good into a good area, and move the person that's living there into a better place—now, I know it might not be their choice—but move the person to a better place and yet create thousands upon thousands of jobs and beautification and lots of other things, I think it happens to be good.

Trump tried to use eminent domain on several occasions as a real estate developer, once attempting to evict a 90-year-old widow to make way for a limousine parking lot for his Atlantic City hotel.

Thanks to the local government of Mt. Pleasant, Wisconsin, Foxconn will receive more than 1,000 acres of land for free, the logic being that the subsequent increase in land value will pay for itself eventually in the form of higher property taxes.

Wisconsin's use of "tax incentives" in many cases amounts to outright subsidies. For instance, the state will reimburse Foxconn 17 cents for every dollar it pays to employees, meaning the very taxpayers losing their homes will likely subsidize the paychecks of future Foxconn workers.

For all this, Foxconn has promised 13,000 jobs and billions in additional tax revenue, figures that were finalized in a handwritten deal between Walker and Foxconn's chairman. The Wisconsin legislature estimates that the state will break even by the year 2043.

Trump headlined a press conference in July 2017 announcing the deal, along with Walker, House Speaker Paul Ryan (R–Wisc.), and Vice President Mike Pence, whose much-touted Carrier deal in Indiana quickly cratered. Walker, who repeatedly referred to the company as "Foxcom" during the presser and at one point misidentified Sony as a partner (the plant will manufacture Sharp LCD screens), said that Trump identified the location for the plant as he flew over rural Wisconsin in his helicopter. Walker has faced criticism from voters and local media for the billions in tax incentives he's handing to Foxconn but has told critics to "suck lemons."

The president's visit to the Foxconn site coincides with an ongoing feud with motorcycle producer Harley-Davidson, a Wisconsin-based company. Walker is a proud biker, and his campaign ads often feature him traversing the state on a Harley-Davidson motorcycle. That makes it a bit awkward, since Trump has declared that the company will "be taxed like never before" if it moves production overseas in reaction to the E.U.'s tariffs on motorcycles. Those tariffs were, of course, imposed in retaliation for the Trump administration's duties on foreign steel and aluminum.

Trump's willingness to push and pull levers like eminent domain, taxation, trade policy, and the bully pulpit to bend private companies to his will shouldn't be a surprise to anyone who's paid attention to his rhetoric and behavior both as a private businessman and a politician.

But that high-profile Republicans and self-professed champions of the free market such as Walker and Ryan tacitly and explicitly endorse cronyist policies on such a grand scale is yet another sign that the GOP is abandoning even the pretense of being the party of free trade and more fully embracing an increasingly incoherent ideology of corporatist populism.