MENU

Reason.com

Free Minds & Free Markets

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.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Ken Shultz||

    "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."

    I don't have any problem with the observations in this article--certainly not on libertarian fundamentals or the fundamentals of free market capitalism. I would suggest that it's a mistake to make this about Trump personally, especially if you're trying to reach people in rust belt swing states like Wisconsin and people who voted for Trump--because they like him.

    My problem is not that Trump supports using the coercive power of government by way of eminent domain, taxation, and trade policy to bend private companies to his will.

    My problem is using the coercive power of government by way of eminent domain, taxation, and trade policy to bend companies to anybody's will.

    If it were Hillary Clinton, Barack Obama, some other governor in some other state, or senator Rand Paul doing this, you'd presumably oppose doing this for all the same reasons. Making it about Trump personally adds nothing to your argument, and makes it unpalatable to your intended audience--if your intended audience is swing voters in rust belt, swing states who might support Donald Trump.

  • jcw||

    I would suggest that it's a mistake to make this about Trump personally

    So should we act with civility or not?

  • Ken Shultz||

    It's not about civility to me--certainly not in the name of civility itself.

    It's about impact.

    We should be trying to reach swing voters in swing states with our message.

    If making it personal about someone swing voters in swing states like, then we're tying an albatross around our message's neck.

    If being uncivil is more effective, then, yeah, do that.

  • Praveen R.||

    I didnt realize reason is supposed to be in the politics business getting its reporters elected. When it comes to attacking Trump, we gotta be civil but he and his supporters can attack everyone else?

  • Chipper Morning Baculum||

    Civility is the main weapon of smarm.

  • Chipper Morning Baculum||

    Civility is also a potent weapon of the ruling class. Notice that the party in power always accused those not in power of not being civil, of not having decorum, of not respecting our institutions.

  • Tony||

    It's fascinating how your main purpose here is to defend Trump's good name without any prompting. Do you really think things are going to end well for him?

  • sarcasmic||

    I read him wondering why the opposition to this is personal instead of on principle.

  • Ken Shultz||

    That's because you're objective and reasonable.

  • Calidissident||

    Trump is mentioned because he is the president and has had a role in making this specific thing happen - there's absolutely nothing to indicate the writer is arguing that this should be opposed because he is the one doing it. And it doesn't by any means single him out - it attacks Scott Walker and Paul Ryan for their roles in it, and calls out their hypocrisy as supposed free-marketers.

  • MoreFreedom||

    It's not Trump providing the subsidies and using eminent domain to put the Foxconn plant in Wisconsin. It's Walker.

    Why blame Trump for that? It's the Wisconsin taxpayers and citizens who'll pay for this.

    I agree the government shouldn't be using eminent domain to do this. But the SCOTUS we've had (because of how people in the US have collectively voted) is the one that expanded eminent domain abuse. And that isn't Trump's fault either, rather IMHO it's partly led to Trump being elected. And with his nomination of Gorsuch and potentially Mike Lee to replace Kennedy, Trump is the most libertarian president in at least 80 years.

  • JoeBlow123||

    They give me significant over market value in my home and I am gone in a flash. Free money.

  • Juice||

    I would need a 25% premium plus all expenses related to selling the house, buying a new one, and moving.

  • SRoach||

    I live on property that's been in the family awhile and which I consider an heirloom. I'd need a lot more, like maybe knowing the people pushing for this were reduced to begging for spare change under the nearest bridge, before I felt anywhere near happy with losing my home.

    That which does not kill me makes me bitter.

  • Delius||

    Sure, and that would be great, for you personally. But what about people who don't want to go? And what happens if they don't offer you significantly over market value, but force you to move anyway?

  • Just Say'n||

    I blame Justice Kennedy

  • Just Say'n||

    Oh wait...that actually makes sense in this scenario

  • Ben_||

    Supposed "libertarians" are now complaining about "tax breaks".

    This is one reason people don't take "libertarians" seriously. It's all complaining, all the time. Nothing is ever good enough.

    And you have zero ideas on any other realistic way for a place like Wisconsin to have an industry like this. But you're 1000% sure you're against them doing it this way.

    Being a "libertarian" means never winning an election and never having to represent or serve constituents. No need to think about compromises or actually getting anything done. It begins and ends with congratulating yourself for being consistent, even though that doesn't actually help anyone in any way.

  • Jordan||

    Being a libertarian means having actual principles. I know this is a foreign concept to progressives and conservatives. Can I assume you're totally cool with the Obama Administration's, California's, and New York's various green energy tax credits?

  • Jerryskids||

    Is Ben's last name Dover?

  • Ben_||

    There are lots of ways to get energy without big government giveaways.

    How do you get a giant high tech manufacturing business to locate in a small city in Wisconsin without any incentives?

  • Red Rocks White Privilege||

    How do you get a giant high tech manufacturing business to locate in a small city in Wisconsin without any incentives?

    Hookers?

  • Happy Chandler||

    You don't. It's terrible economics. You could just as well ask how you get a 3 star Michelin restaurant to locate in a small city in Wisconsin. Why should there be a manufacturing plant in this city? What about all the other cities in Wisconsin that don't have high tech manufacturing?

    How do you get high tech manufacturing? Build an educated workforce. Invest in education. Build an infrastructure and attract people.

    If you want government to provide people jobs, then government should hire people to do jobs. This plan is merely taxing the people in the state of Wisconsin and giving the money to rich Chinese people.

  • Ben_||

    Why would an "educated workforce" stay in a small city with no high tech jobs? How does it make sense to spend huge amounts on education just to see the people you educated move away, taking their education with them, to someplace where they can benefit from their skills?

    Why is education spending good, but spending directly to lure employers bad? When you lure employers, you get local employment. Spending on education with no employers just subsidizes whatever faraway place the students eventually go to work.

  • Delius||

    An educated workforce can create high tech jobs. And I suspect that it is a lot harder to get people to move to Wisconsin than to persuade the people who grew up there to stay.

  • Ben_||

    If you maintain a high level of spending and focus on education for 20 to 40 years, then yes. Why is that better than spending to lure an employer now?

    It's just another subsidy — only the people being taxed today to pay for that kind of education don't get to share in the benefits of it for 10-20 years at least.

    Perhaps someone can explain why one type of subsidy is good while the other type is evil. It only takes 2 years for the "evil" one to start paying off for the people of Wisconsin who want good jobs.

  • Happy Chandler||

    Because it is taxing the citizens to transfer money to foreign shareholders. Walker is taxing Wisconsinites to give to the Chinese.

    What makes this particular town special that the entire state is taxed to pay a company to locate there? If it were the best place to put the factory, it wouldn't need incentives. If it isn't, why should it go there?

  • BSL1||

    Why do you think people wouldn't be willing to move to Wisconsin? Also, why do you think the educated workforce would need to relocate from outside the state? There are plenty of highly skilled workers already within the state borders. Maybe you've never been there, and get your info only from TV or movies.

  • Happy Chandler||

    You don't. It's terrible economics. You could just as well ask how you get a 3 star Michelin restaurant to locate in a small city in Wisconsin. Why should there be a manufacturing plant in this city? What about all the other cities in Wisconsin that don't have high tech manufacturing?

    How do you get high tech manufacturing? Build an educated workforce. Invest in education. Build an infrastructure and attract people.

    If you want government to provide people jobs, then government should hire people to do jobs. This plan is merely taxing the people in the state of Wisconsin and giving the money to rich Chinese people.

  • Cynical Asshole||

    How do you get high tech manufacturing? Build an educated workforce. Invest in education. Build an infrastructure and attract people.

    It would also be a good idea to keep taxes low and the regulatory burden low. I know, crazy talk!

  • Jerryskids||

    "Tax breaks" including giving private businesses free land and free money, yes, some of us do object to that. In fact, Reason has written dozens of articles bitching about cities building stadiums for professional sports teams and I don't recall too many people speaking out in favor of stadium deals. This is different how?

  • sarcasmic||

    I believe the logic is that because taxes are theft, libertarians should celebrate tax breaks. Never mind that they're handed out in an effort to distort markets in favor of the politically connected, and combined with subsidies and eminent domain. That part doesn't matter. Taxes theft, taxes bad, tax breaks good. Urgle urlgle libertarians simple minds.

  • Ben_||

    Stadiums don't employ 13000 people, for one. Stadiums provide a few hundred entertainment jobs in a big city with thousands of other employers, not thousands of high tech manufacturing jobs in a small city with relatively few other prospects. Stadiums are spending where spending is needed least.

    How can a place like this in Wisconsin ever get a high tech manufacturing business for nothing? Please let us know.

  • Jerryskids||

    Stadiums are spending where spending is needed least.

    Says who? The same politicians deciding to give your money to Foxconn are the same ones deciding to give your money to the NFL. So shut the hell up, you're in no position to judge them now that you've granted them the argument that they're authorized to decide who deserves free shit and who doesn't.

    See, this is why some of us have principles - the specifics of the deal don't matter if the government has no right to make the deal in the first place. Not the least reason is the fact that politicians make deals based on political considerations rather than economic considerations because it's not their fucking money they're giving away. Shit, I'd be glad to give Foxconn 2000 acres and a 35 cent wage subsidy if I was stealing the land and the money from somebody else, too.

  • Ben_||

    So "shut the hell up" is your best argument then?

    You have no answer for how any local officials can help anyone.

  • BSL1||

    You keep saying "a place like this in Wisconsin", like it's on the moon. It's a great location, just south of Milwaukee and just north of Chicago. It's near the shores of Lake Michigan and in a great location for access to transport options. Lots of high-skilled and low-skilled workers within a short distance. Seems like a pretty good spot for such an operation.

  • I am the 0.000000013%||

    Thank you! I've been thinking about how to correct the assumptions in these comments, but you beat me to it.

  • Cynical Asshole||

    And you have zero ideas on any other realistic way for a place like Wisconsin to have an industry like this. But you're 1000% sure you're against them doing it this way.

    I don't think too many libertarians would have an issue with Wisconsin or any other state selling a parcel of state owned land to Foxconn or any other company. It's the use of eminent domain to take people's land and then turn around and give it to another private owner that we tend to have an issue with. Property rights: how do they fucking work?

    We're also not against tax breaks, we're against tax breaks for specific industries or specific companies. That's picking winners and losers, not free markets. If Walker had pushed for across the board tax reductions I don't think you'd here many complaints except from the usual lefty trolls.

  • Ben_||

    There also wouldn't be a big new high tech employer.

  • Cynical Asshole||

    Says who? Perhaps this exact employer wouldn't be willing to locate there without special tax credits carved out specifically for them and land taken from its rightful owners. But low taxes across the board and a low regulatory burden can work wonders in attracting all kinds of employers to a state. Seems to work out pretty well for Texas.

  • Ben_||

    How can one group of politicians in office during one year promise "low taxes across the board and a low regulatory burden" for the next 30 or 40 years needed to amortize the cost of a huge high tech factory?

  • Cynical Asshole||

    I'm shocked - shocked - to find that that cronyism is going on here!

  • Longtobefree||

    Here are your winnings - - - -

  • Longtobefree||

    Bribery is the act of giving or receiving something of value in exchange for some kind of influence or action in return, that the recipient would otherwise not alter.
    How is this not bribery?
    The elected officials, both state and local, involved in this are still "U.S. persons" as described in The Foreign Corrupt Practices Act of 1977; 15 U.S.C. § 78dd-1.

  • Headache||

    or authorization of the giving of anything of value to--
    (1) any foreign official for purposes of

    No foreign official is involved, at least as this article does not get into that.

  • Headache||

    "U.S. persons" as described in

    I did not find stated description in the statute.

    https:// www.justice.gov/sites/default/.....nal-fraud/ legacy/2012/11/14/fcpa-english .pdf

  • Empress Trudy||

    It's hard to find anything that Reason endorses other than anarchy and ennui

  • Echospinner||

    I think yesterday we all agreed that Jack Daniels was just overpriced mediocre whiskey.

    How about daylight savings time? Can we all get on board with abolishing that?

  • Happy Chandler||

    Well, what a fucking surprise.

    The deal maker is getting hosed. Again. How many tones must we give tax money to companies who hose us?

  • BambiB||

    This is easy. Get an independent appraisal. Then offer the owners $1 million more per home than the appraisal.

  • vek||

    1, Eminent domain is a separate thing, and doing it for private businesses is BS.

    2. The problem with all the special tax breaks etc is that they're bullshit and shouldn't exist anywhere in the country, or preferably world...

    3. The problem is 2 is not the case. Sadly it is largely a matter of if everybody played by the rules, everybody would be better off. But people don't. So if you can bribe your way into a deal that DOES benefit your area, it logically makes sense to do it. But then everybody has to do it. That's the rub. If nobody offered special deals nobody would have to offer special deals... But since everybody offers them, then everybody has to offer them. If you stand by strict principles and bring your knife to the knife fight, but don't bust out your gun when the other guy does, you're gonna get killed.

    The thing I dislike about these things most is that they only go to certain companies. I would be vastly more okay if a state saaay passed a law that gave ANY COMPANY that met objective criteria qualified for the perks. Then it's essentially a policy change, and not a special handout. While we're working at convincing EVERYBODY to stop bribing businesses, this is the best interim approach. Which will be the forever approach since government will never stop the handouts entirely world wide...

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online