(Photo: Chris Kelopnis via AP Images)
Governor Scott Walker (Republican of Wisconsin) makes remarks during the announcement of the creation of a Foxconn Factory to be built in Wisconsin to build LCD flat screen monitors at The White House in Washington, DC, July 26, 2017.
In late July, President Donald Trump joined with Vice President Mike Pence, House Speaker Paul Ryan, Wisconsin Governor Scott Walker, and Foxconn CEO Terry Gou at the White House in a bid to validate Trump’s economic stewardship. Gou’s company, a Taiwanese electronics manufacturer, best known as an iPhone supplier for Apple, was entering into an agreement with Walker’s state to invest $10 billion in a gigantic 20 million-square-foot LCD television factory in southeastern Wisconsin.
With promises of as many as 13,000 new middle-class jobs, the event was supposed to be seen as proof that Trump and the Republicans were making good on their promise to resurrect American manufacturing. “This is a great day for America, a great day for Wisconsin, and it’s a great day for Foxconn,” Walker said, calling the deal the “single largest economic development in the history of the state of Wisconsin and one of the largest in the history of this country.”
And as everyone, including Trump, was sure to point out, this development was due solely to the bold leadership of the new president. "If I didn’t get elected, [Guo] definitely would not be spending $10 billion," Trump said at the White House event.
But the Foxconn deal is not a triumph for Trumponomics. Rather, it’s just the latest instance of Trump and the Republican Party’s rigged approach to economic development: using taxpayer-funded subsidies to prop up boondoggles that enrich corporations, squeeze state and municipal budgets, and generally fail to generate long-term, good-paying jobs.
In the preliminary deal to which Walker and Foxconn agreed, the state of Wisconsin will pony up $3 billion in taxpayer-funded economic incentives to the company, making it the fourth-largest corporate-welfare deal in U.S. history. That means if the deal actually does fulfill its promise of 13,000 new jobs, it would come at the cost of more than $230,000 per job in public money. According to an estimate by the Legislative Fiscal Bureau, Wisconsin’s nonpartisan budget office, the state wouldn’t break even on its $3 billion incentive package until 2043—and that’s only if the deal actually does create 13,000 jobs, which is uncertain to say the least.
This week, Walker will try to jam the Foxconn agreement through Wisconsin’s Republican-controlled legislature, which must approve it. But the deal has come under a great deal of scrutiny, thanks to both Foxconn and Walker’s troubling histories with labor and economic development deals.
"The possibility of a tax-break package worth between $1 [billion] and $3 billion for just one project—and for an employer so controversial as Foxconn—raises many profound policy questions for the United States,” Greg LeRoy, executive director of Good Jobs First, an organization that researches economic development deals, said in a statement when the initial agreement was announced. Trump and state Republicans are following the “buffalo hunting” approach to economic development, Leroy explains, in which they seek big-game “mega-deals” that generate favorable headlines while cutting funding for government programs that support more small and medium-sized manufacturers.
Foxconn, best known for assembling iPhones for Apple in China, has a long and troubling track record of labor violations and worker exploitation. As Wired reported in 2011, the company was compelled to put nets up beneath the windows of its Chinese factories to prevent its workers from committing suicide. Seventeen workers had killed themselves during the previous half a decade. The company has also broken previous promises to set up shop in the United States. In 2013, Foxconn announced to great fanfare that it would build a $30 million high-tech factory in central Pennsylvania and bring on 500 employees. Today, the factory remains unbuilt, the manufacturing jobs non-existent.
Walker, meanwhile, sees the Foxconn deal as the foundation on which to base his upcoming 2018 re-election campaign. The governor has made his bones as the most aggressive union-buster in the country. After winning election in 2010, he immediately went after public workers’ collective-bargaining rights. And then he survived a recall election in 2012, won re-election in 2014, and promptly got right-to-work signed into law.
The governor’s economic development policies haven’t exactly put workers first, either. In 2011, he privatized the state’s economic development agency, creating the Wisconsin Economic Development Corporation, which is charged with administering more than $500 million in grants, bonds, tax credits, and loans to companies. Since then, the WEDC has become notorious for dealing out lucrative tax breaks to companies that make big job-creation promises, only to come up way short. As Los Angeles Times columnist Michael Hiltzik has reported, the WEDC doled out a $6 million grant to Ashley Furniture without any type of job-creation requirements; indeed, Ashley was allowed to lay off half of its 3,800-employee workforce in the state. Two other companies received millions of dollars in tax credits, whereupon it moved hundreds of jobs abroad.
“No one should ever believe that massive subsidy deals to corporations that pit states and cities against each other is part of any good economic development strategy,” says Peter Rickman, who heads the Alliance for Good Jobs, a coalition of progressive organizations advocating for high-paying union jobs in Wisconsin. “The Foxconn approach is the worst of corporate subsidies on steroids.”
The WEDC has served to subsidize the growth of Walker’s low-wage economy in the state, Rickman says, pointing to, for instance, the $10 million in tax credits offered to Amazon for opening a warehouse facility in Kenosha back in 2013. The company, which is currently in the midst of a nationwide hiring spree, has been criticized for its low wages (a quick Google search for a full-time warehouse associate position in Kenosha advertises pay of “Up to $13.25/hr + $500 Referral Bonuses!”) and grueling working conditions.
This time, Rickman adds, legislators should condition their approval on strengthening the language in the memorandum of understanding (MOU) between Walker and Foxconn to guarantee good-paying, long-term jobs. For instance, the agreement claims that the average pay for employees will be about $53,000 a year, plus benefits. On the face of it, that’s a good-paying middle-class job in the region. But it’s also an average that will likely be skewed by a large number of high-paying executive and engineering positions. Without clearer guarantees in the MOU, jobs on the factory floor could end up paying far less.
“Foxconn keeps saying these will be good jobs. Our approach is [to] put it in writing,” Rickman says. The Alliance for Good Jobs did exactly that in another recent development project: the construction of a new basketball arena for the Milwaukee Bucks. Organizers got the NBA team to enter a project labor agreement that secures a $12 minimum wage (and $15 by 2023) and the right to unionize for the arena’s permanent service employees, and the creation of a local union hiring hall to staff it.
Rickman says he expects some Democratic legislators to introduce amendments when the Foxconn deal comes to the Assembly floor later this week that would stipulate that all jobs created would pay at least $15 an hour and would grant workers a clear path to unionization. That would set a floor not just for jobs in the factory, but also for other jobs throughout the Foxconn facility, including those of the drivers who transport workers from the parking lot to the plant, the cafeteria workers, and the janitors. It would also apply to all suppliers and subcontractors for the Foxconn plant, which would include a glass-manufacturing plant that is likely to be built nearby.
“What’s good for the Bucks is good for Foxconn,” Rickman says. “Fifteen dollars and a union is what Foxconn needs to rebuild this eroded middle class.”
The likelihood of such amendments passing in the Assembly or Senate, where Republicans have majorities, are slim. But Rickman says that regardless, the Alliance for Good Jobs will continue to press Foxconn to enter a private agreement, much like the Bucks did. Meanwhile, Wisconsin Republican Senate Majority Leader Scott Fitzgerald says that he wants more concrete job creation benchmarks to be included in the agreement but otherwise expects it to pass by the end of the month.
Foxconn is just the latest in a long line of multinational corporations that play desperate states against each other in hopes of landing more jobs. Now, in addition to reaping a mega-subsidy from the winning state, they can also bask in the warmth of a publicity-hungry president.
And the game rolls on. Toyota and Mazda recently announced their intention to jointly build a $1.6 billion factory that could create 4,000 jobs. Eleven states are currently courting the auto manufacturers.