David Michael Miller
Last week a Foxconn executive told Reuters that the company would not manufacture liquid crystal screens in Racine County as it had promised. Two days later the company’s CEO reversed direction after a conversation with President Donald Trump.
This is par for the course for the Taiwanese tech giant. Foxconn has a history of making lavish promises only to scale them way back or to drop the project altogether. In Pennsylvania, the company promised 500 jobs to much fanfare only to back out. In Brazil, it topped itself by promising 100,000 jobs. Brazil is still waiting.
While Foxconn is now promising again to do some manufacturing at its Racine facility, it appears to be far less than the original plan. One supply chain expert figures that the new plan to produce only small screens and not TV screens will result in about a quarter of the originally promised $10 billion investment and 13,000 jobs.
When a company with Foxconn’s mercurial record says it will stay the course (or at least 25 percent of the course) only two days after saying the opposite, how can we count on them to follow through? In fact, let’s hope they don’t follow through. Let’s hope they meant what they said the first time.
During the 48 hours when Foxconn was thought to have eliminated all manufacturing jobs at the Racine site in favor of only research and engineering positions, Assembly Speaker Robin Vos was quick to blame Gov. Tony Evers for their decision.
But, if in the end Foxconn does pull the plug altogether, far from accepting “blame,” Evers should take the credit. In fact, it’s not at all unreasonable to think that the company’s initial decision to pull back had more to do with Scott Walker’s defeat in the last election than with anything else.
The official explanation the company was offering was that U.S. labor costs are just too high compared to other parts of the world. Really? They just came to that conclusion now? They were ready to throw away around $200 million in investments they’ve already made because their crack labor analysts had just discovered what’s been true for about half a century or more?
A more plausible explanation is that they were banking on continuing to have Walker in office to run interference for them and to make sure they got their unneeded government payout even if they didn’t meet all their targets. When Evers, who was appropriately critical of the deal during the campaign, eked out a victory over Walker, and when Josh Kaul beat Brad Schimel for attorney general, the company decided that a $200 million loss in sunk costs would be just a rounding error and they started the process of retreat.
Then Trump intervened and the project, along with its crippling public subsidy, is back on for now. Walker’s deal is the biggest, most egregious piece of corporate welfare in U.S. history. Total subsidies from the state and from local governments kept rising but the latest estimated total was $4.5 billion. That’s $346,000 a job when the national average for these kinds of job subsidies is $2,500.
A smaller investment means a smaller overall subsidy but some of the largess was for fixed costs and not tied to specific numbers of jobs, so with a smaller plant the cost per job might actually end up even higher.
At the full build out-scenario the state would be hit for about $250 million a year for about a decade. Even if it turns out to be a portion of that, the result would be that it would be harder for the state to do exactly what it needs to do to improve its economy and create much more than 13,000 jobs, which is to invest in public education and infrastructure.
Foxconn lost their front man when they lost Walker. Now, it appears that President Trump has stepped in to play that role. I’ll bet that Foxconn will drag its feet for two more years to see what happens to Trump and then, if he loses, as all the sane world hopes, they’ll rediscover high U.S. labor costs yet again and head for the door this time for good.
As it turns out, increasing support for education and roads and broadband are Evers’ priorities. If the Foxconn deal does finally and mercifully go away, he’ll have more room to do exactly the kinds of things that will bring jobs not just to one region but to the whole state.
We can only hope.
