Christian Schneider is a reporter for the College Fix and author of “1916: The Blog.” He is formerly a columnist for the Milwaukee Journal Sentinel and served as spokesman for the Wisconsin Department of Transportation in the Scott Walker administration last year.
In late July 2017, President Trump gathered the media at the White House to announce that Taiwanese corporate giant Foxconn Technology Group would be building a $10 billion manufacturing plant in southeastern Wisconsin.
“This is a great day for American workers and manufacturers and for everyone who believes in the concept and the label 'Made in the USA,’” boasted Trump, promising a “state of the art manufacturing facility for the production of LCD panel products.”
Trump made room in his victory declaration to include Foxconn chief executive and chairman Terry Gou, praising him for his “faith and confidence in the future of the American economy.”
“If I didn’t get elected, he definitely would not be spending $10 billion,” Trump said of Gou, at which point he turned and grabbed the unsuspecting businessman, engaging him in an awkward left-handed bro-grip.
Soon, it will be up to Gou to determine whether that cringe-inducing moment was more of a political death grip.
Since its 2017 unveiling, the Foxconn project has been beset by negative news. By the end of last year, the company had spent only 1 percent of the amount it had pledged to build the factory and had hired only about 10 percent of the employees it anticipated hiring by the end of the project’s first year. In June 2018, the company announced it was downgrading the plant from a “Generation 10.5” facility to a “Generation 6 plant,” which would produce smaller LCD panels. In January, the company announced it was scrapping the LCD portion of the factory altogether, but quickly backtracked after a call from Trump.
In February, the company boldly announced it would be moving forward with construction of a factory, which is only notable because … the public believed that was the plan all along. This is like getting a random call from your wireless provider telling you your phone is definitely not going to burst into flames tomorrow. At that point, it might be time to worry.
In recent weeks, Wisconsin Gov. Tony Evers (D) has said he does not believe Foxconn will live up to its promise to create 13,000 new jobs and has sought changes to the contract with the state. Foxconn responded by saying it has “never wavered from our commitment to our contract with the State of Wisconsin and the creation of 13,000 jobs as part of our broader effort to make the Badger state a global technology hub."
However, while once thought to be a big electoral winner, the project could end up sinking Trump in Wisconsin, a state that he won in 2016 by a deli-thin margin of less than 23,000 votes.
As part of the Foxconn deal, the company was awarded $4 billion in government incentives to locate its plant in the city of Mount Pleasant, well beyond any package ever offered by a state to a foreign company. Foxconn supporters, who hoped the plant would have the transformational effect on the community that medical software giant Epic Systems has had on nearby Madison, argue that virtually the entire benefit being offered to the company is in the form of tax abatements; if the company doesn’t produce the promised jobs and economic development, it won’t reap the tax benefits it seeks.
Yet while the lion’s share of the public subsidy is in the form of tax breaks on projected economic activity, real money is already being spent on the plant. The state has received $160 million in federal money to renovate Interstate 94 near the plant. Local governments have borrowed nearly $350 million for infrastructure improvements. About 75 houses have been bulldozed to make room for the expansive plant footprint.
Further questions remain about the competence of the administrators charged with managing the massive project. A recent state audit of the Wisconsin Economic Development Corporation, the department in charge of overseeing the Foxconn project, found that it had spent hundreds of thousands of dollars’ worth of taxpayer funds on companies that created jobs in other states. Further, the WEDC failed to collect $400,000 in tax credits and more than $4 million in loans it could have recouped when employers didn’t live up to the terms of their agreements with the state.
The idea of providing public subsidies for private businesses in Wisconsin certainly is not new. At one point, the state’s Commerce Department represented a $190 million slush fund from which governors could hand out perks and incentives to businesses looking to soak taxpayers for handouts. In 2007, the Milwaukee Journal Sentinel analyzed 25 companies that had received more than $80 million in subsidies from the state and found that about 40 percent of the jobs those companies had promised never materialized.
It’s possible that the Foxconn project will pull itself out of its negative public relations spiral, but it all depends on whether the Taiwanese are willing to live up to the terms of their agreement. Betting on the manufacturing plant’s success is a fool’s errand; only Gou knows whether he intends to see the massive project through.
The dangers of subsidizing a private corporation with the allure of public money were clear throughout the process. Subsidizing big businesses simply rewards unsustainable business practices, leaving taxpayers scouring their pockets for change to bail out companies. And predicting the market for technologies consumers would be purchasing years down the road is not something a deliberative government is typically equipped to handle.
It is yet to be seen whether Trump’s association with Foxconn will become a liability. What we do know is that when he watches results on election night 2020, he almost certainly won’t be doing so on an American-made Foxconn TV screen.