Economic Nationalism

Foxconn Finally Admits It Won't Create 13,000 Jobs in Wisconsin

It now plans to employ just 1,454 people after bulldozing dozens of homes to make room for a factory Donald Trump once touted as the "eighth wonder of the world."

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When you subsidize something, the old adage goes, you'll get more of it.

But some ideas make so little economic sense that even the largest corporate subsidy ever awarded by a state government isn't enough.

It's been obvious for quite some time that Wisconsin's highly touted deal with Taiwanese tech giant Foxconn was going to fall well short of the lofty promises made by the project's supporters. Then-President Donald Trump, for example, predicted in 2018 that the planned factory on the outskirts of Milwaukee would be nothing less than "the eighth wonder of the world."

Exactly how short it will fall is now official. In filings with the state, Foxconn says it now plans to employ 1,454 people and invest about $672 million into its still-under-construction factory in Mount Pleasant, Wisconsin. That's a long way from the $10 billion that the company initially promised to spend building a plant that would have employed 13,000 workers. In response to the amended contract, the state will recover $2.77 billion of the subsidies originally promised to Foxconn—though the company will still receive $80 million from Wisconsin taxpayers, according to a statement from Gov. Tony Evers.

But recovering those subsidies won't bring back the residential neighborhood that was flattened to make space for the factory. Developers bulldozed 75 homes, some of which were seized through eminent domain, because why should mere houses full of people stand in the way of the eighth wonder of the world?

The town of Mount Pleasant invested more than $1 billion in the project—effectively mortgaging its entire future on the promise of thousands of new jobs and the tax-paying residents who would come to fill them. Those jobs won't be coming, but the town did have its credit rating downgraded.

The Foxconn folly was the brainchild of former Gov. Scott Walker, a one-time darling of the Republican Party who has now vanished from the political scene. From the outset, the deal didn't make sense. Foxconn promised to make Wisconsin a hub for the manufacturing of HD television screens and other high-tech products, but the company never explained how it planned to make the math work. Besides the relatively higher cost of American labor, there were serious supply chain and logistical issues to be overcome for a factory that was, as TechCrunch put it in 2019, "essentially [in] the middle of nowhere, without the sort of dense ecosystem of suppliers and sub-suppliers required for making a major factory hum."

Even if the dubious economics somehow worked out, the state wasn't going to come out ahead.

The state's Legislative Fiscal Bureau, a number-crunching agency similar to the federal Congressional Budget Office, calculated that it would take the state until 2043 to recoup the $3 billion handout, which was the largest such subsidy in Wisconsin history. Even if all 13,000 promised jobs went to Wisconsinites, the tab would be more than $230,000 per job created, the bureau found.

separate analysis conducted by the Mercatus Center, a free market think tank based at George Mason University, found that the higher taxes needed to cover the cost of Foxconn's tax breaks would "decrease Wisconsin's long-run GDP by about $20 billion over the 15-year life of the handout."

It would have been a bad deal no matter what, but it didn't take long for Foxconn's promises to spiral downward. The Verge has a useful rundown of the various revisions applied to the original plan in recent years:

The company spent years pivoting wildly from idea to idea. The enormous "Gen 10.5" LCD factory specified in the contract became a far smaller Gen 6, then was canceled, then came back. The company announced it was building something called "the AI+8K+5G ecosystem," to be developed in a network of "innovation centers," buildings that the company purchased only to leave empty. It looked into building fish farms, exporting ice cream, storing boats. It announced plans to build coffee kiosks and ventilators that never moved forward. Most recently, it said it would build electric cars — though maybe, the company acknowledged, that will happen in Mexico.

Now, the official story is that Foxconn will use the factory for "economic investment activities related to locating and operating a technology and manufacturing ecosystem," according to the company's new contract with the state. In short, it doesn't seem like anyone knows exactly what, if anything, will be manufactured in Mount Pleasant.

The entire saga provides an obvious lesson about the wasteful mistakes that state governments make when they throw tax dollars at businesses that promise to create jobs. The best way to create jobs in any state, of course, is to provide a stable economy with comparatively low taxes and a light regulatory touch for all—not to provide special treatment for some and stick others with the bill.

But there's also a lesson here for politicians who would pursue economic nationalism through greater industrial policy at the federal level. Trump saw the Foxconn deal not only as a way to create jobs, but as proof that reorienting supply chains was a matter of political will rather than economics. The factory, he said in 2018, was evidence that his policies were "reclaiming our country's proud manufacturing legacy."

If the largest subsidies ever offered to a foreign company were insufficient to make the Foxconn deal work, maybe that says something about the ability of our political leaders to steer the economy. But you can be sure they will keep trying.

NEXT: The Chauvin Verdict Is a Reminder That We Still Need To Abolish Qualified Immunity

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  1. “The Con Man and FoxConn”

    a factory Donald Trump once touted as the “eighth wonder of the world.”

    1. Aw he’s back wif more TDS on the brain.

      1. The only ones with TDS are the ones deranged enough to think he did anything sensible. Hmm…might include you.

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    3. It was Scott Walker and only Scott Walker. Any president of any party would tout their parties state Governor getting a new project standard fare.
      I live in Wisconsin. Walker is one of the most corrupt politicians ever. Yet we also have Oshkosh Truck and Marinette Marine. Senators, Governors, House Reps and mayors of BOTH party always show up when a new Federal Government contract is signed, touting how they brought jobs to the state. Hey, the companies got the contracts on low bid! That is just regular old politics.

      1. It’s pretty hilarious watching Democratic politicians brag about defense spending in their states/districts.

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    4. So…… how many children have you raped?

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  2. So 80MM / 1,454 jobs ~55K up-front cost per permanent, state tax paying job. Long term, is that such a terrible deal for WI? I mean, I get that we don’t want to ‘bribe’ businesses to entice them to relocate. But politicians do it anyway.

    I would have like to have read supporting detail behind the 1MM ‘mortgage’ that Mount Pleasant made. I question the truth of that assertion; too outlandish. The town has 27K people….tell me how (with actual detail, please) they ‘invested’ 1B dollars, again?

    This is the problem with Boehm. You simply cannot trust the veracity of what he writes.

    1. Given his track record, how do we know that anything he wrote here is accurate?

      1. Yeah, I’m sure the commenters here are much more reliable just by calling anything they don’t like into question…

        1. Do you know better or do you accept Boehm’s assertions at face value? Because reasons?

    2. You are assuming the 1454 jobs will actually materialize. We can evaluate whether it was a good deal or not once there is an actual operational factory that is employing people.

      1. You make a fair point. The jobs have to materialize.

    3. The billion number comes from the cost of property acquisition, roads, water and sewer. Not all of it is actual money but debt and debt service.

  3. “These people owed the State of Wisconsin and when Foxconn showed up, they cheated them out of it by paying $2.7B on their $80M tab.” Boehm

    Retardation. Just absolute retardation. And the sad part is, there’s a libertarian case to be made about eminent domain, but Boehm is so fucked up about basic math and the notion that Foxconn and the people of WI owing money to the state that you have to wonder if he wouldn’t be completely turned around on the subject if the state were subsidizing taco trucks or safe injection sites that operated, year-over-year, at a loss.

    1. There is no more Reason; there is only Emote.

  4. Didn’t want to build it once SleepyJoe got in office.

  5. Man that would make the asians a bunch of liars.

    1. All aboard the anti-aapi race train!

  6. Blaming Trump once again. Forget it Reason, it’s all about the Culture War! Doesn’t matter how many towns we bankrupt on the road to Culture War Victory! All Hail Trump, so redeems us of our shame!

    1. Any word about how Tony Evers deep sixed the state’s end of the Foxconn agreement and refused to honor Wisconsin’s promises, just because he hates Scott Walker with a red hot fury?

      Ctrl+F

      Nope, what a surprise.

      This is garbage journalism, Boehm, and pisses on Reasons legacy.

      I’m pretty sure that you knew about this too, Brandybuck, but I see you’re adopting the chemjeff school as your new commenting strategy.

      1. Gov. Evers merely refused to hand over money for nothing but promises. Walker would give money for nothing. Evers wanted some deliverables.

        Wisconsinites knew at the start that Foxconn was not a good actor and that they had pulled this bait and switch in other communities. Walker just overlooked this for promises.

  7. But recovering those subsidies won’t bring back the residential neighborhood that was flattened to make space for the factory. Developers bulldozed 75 homes, some of which were seized through eminent domain, because why should mere houses full of people stand in the way of the eighth wonder of the world?

    This, in my opinion is the real crime of this story, and unfortunately, a Supreme Court, while being cheered on by the Democrats and a highly sympathetic media (which could never figure out why — maybe because 99.67546785% of media is Democrat) created a precedent that said this behavior was 100% kosher.

    None of this is to forgive Trump’s support for this project. But we keep making our beds in this country, then whining when we find ourselves short-sheeted.

  8. Once again all the commenters here deflecting deflecting deflecting…

    Just admit this was a stupid idea to begin with. You’d think of all places that a libertarian rag could have people say “hey, maybe government subsidizing business is a bad idea” and it be popular.

    Good grief. Just more evidence this place is infested with shy Republicans, not actual libertarians.

    1. It really is pathetic isn’t it? I’ll never figure out why so many faux-libertarians are so devoted to Trump and so willing to debase themselves to play defense for him.

      1. Plus they don’t sympathize with how he just lives in my head without paying any rent at all. I mean, yeah, there is tons of extra space that I’m not using anyway. But it’s just mean

      2. Before Fuehrer 1 shot himself, many Germans believed he’d already been dead since the Valkyrie bombing. Then after Soviets overran Berlin, about as many again thought he’d escaped to Argentina. Hero-worship is pitiful, self-delusional stuff.

    2. Reason said nothing about Cuomo and the Buffalo Billions scandal. That was a Democrat swindle.

      It goes on with both sides.

      1. Cue the whinging about “both sidesism”.

        1. It’s true that both halves of the looter Kleptocracy are criminal. But thanks to the Nixon Anti-Libertarian Law, your money is transferred to their election campaigns and has been since 1971.

    3. Subsidizing is a bad idea. Equivocating between tax breaks and subsidies, and especially equivocating between actual subsidies and proposed tax breaks is a worse idea because it takes all the shitty premises and prerequisites involved in subsidies and just assumes they’re true.

      1. Right.
        ” the higher taxes needed to cover the cost of Foxconn’s tax breaks would “decrease Wisconsin’s long-run GDP by about $20 billion over the 15-year life of the handout.”
        I’m confused. Was Foxconn’s smaller investment and smaller tax breaks a good thing or a bad thing?

    4. Again, right on the money.

  9. “Donald Trump, for example, predicted in 2018 that the planned factory on the outskirts of Milwaukee would be nothing less than “the eighth wonder of the world.””

    The greatest American President of the modern era has a pretty great sense of humor, too.

  10. Huh. Only half of the National Socialist Commentators showed up to lynch Eric for blaspheming Boss Trump. Or maybe the others are cross-dressing with different sock masks or pillowcase hoods–no big loss.

    1. “Only half of the National Socialist Commentators showed up”

      Where’s your other half?

  11. The biggest subsidies Uncle Sam has paid is to the Union Democrat Auto Industry. Besides Foxcon is APPLE and Apple is 99.999% Democrat. Own up D&C.

  12. Wir sind Ihre Möbelpacker in Wien
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  13. Foxconn is like something directly out of Economics in One Lesson lmao.

    Please everyone get a cheap copy and read it. Short and concise, wildly entertaining and well written, and the chapters are pretty much standalone which makes it easy to consume in short sessions. Hazlitt was a phenomenal writer.

  14. I am curious. How much of the “the $3 billion handout” is actual cash paid to Foxxconn and how much of it is simply tax credits ? Maybe I am a suspicious soul knowing what passes for journalism, but this is a pretty crucial element of the story isn’t it ?

    Cash payments seem corrupt and a really stupid thing to do from day one. Simply cutting their tax payment and calling it “subsidizing” is simply standard Progressive dishonesty from people who believe they are allowed steal at will and anything they give back is a subsidy. Polar opposite moral concerns that are nicely conflated by dishonest reporting.

    It could be that cash payments were made, in which case, it was an unforgivably stupid move. On the other hand, I don’t seem be be able to find a breakdown of tax credits vs cash given and I have strong suspicions why that is.

    Anyone know how this breaks down ?

  15. It’s called a boondoggle. I’m sure Walker is enjoying his payout somewhere warm and sunny while the taxpayers are stuck with the bill.

  16. Yes, this is after Governor Tony Evers (Ever Stupider) was elected.

  17. “Trump saw the Foxconn deal not only as a way to create jobs, but as proof that reorienting supply chains was a matter of political will rather than economics. The factory, he said in 2018, was evidence that his policies were ‘reclaiming our country’s proud manufacturing legacy.'”

    Trump’s manifest ignorance baffles so many because his skill in building his cult of personality proves that he is not a congenital moron. Trump is an insect. In his famous quote Heinlein said that “…specialization is for insects.” Trump has specialized so exclusively in self-promotion that he has no other skills, nor even thoughts. Trump is an insect – a very poisonous insect.

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