The Foxconn Wisconsin Deal Has Devolved Into A Pile Of Shifting Promises, Buzzwords, And Hype

from the prey-I-don't-alter-our-deal-further dept

Wed, Oct 31st 2018 6:26am — Karl Bode

Last year, you'll recall that Wisconsin Governor Scott Walker signed what at the time was treated as a revolutionary deal: the state promised Taiwan-based Foxconn a $3 billion state subsidy if the company invested $10 billion in a Wisconsin plant that created 13,000 jobs. Walker hoped that the deal would finally help cement job growth that he had promised his supporters for years, and the press was quick to hype the plan without really giving it too much thought. Quietly, Wisconsin’s non-partisan Legislative Fiscal Bureau was busy pointing out that it would take until 2043 for taxpayers to recoup the subsidy, though that obviously took second fiddle to the hype of bringing American jobs back from overseas to focus on cool new tech.

But as the details of the plan solidified by late last year, the $3 billion subsidy quickly ballooned to $4.1 billion, and some folks quietly began to notice that the math really didn't make much sense:

"Wisconsin currently has an unemployment rate of 3.2%, so they are only so many workers available locally. Realistically, the payback period for a $100,000 per job deal is not 20 years, not 42 years, but somewhere between hundreds of years and never. At $230,000 or $1 million per job, there is no hope of recapturing the state funds spent from taxes on the company and its workers."

Many now doubt whether the subsidy will ever pay for itself. This week, The Verge offered up a new piece dissecting the deal and it's well worth a read. It notes that while the scope of the subsidies Foxconn would receive slowly ballooned, the promised factory Foxconn was supposed to build kept shrinking in size and scope. Instead of building 10-foot by 11-foot panels for 75-inch TV screens, Foxconn would be building a Generation 6 plant that only produces 5-foot by 6-foot glass panels.

Instead of a 10.5 plant needing $10 billion in investment (Foxconn's original promise), the Gen 6 plant actually being built requires about a $2.5 billion investment. And still, the scope of the promised plant continued to shrink:

"But Foxconn officials also said that the company was still committed to a $10 billion investment and 13,000 jobs, adding it might eventually add a Gen 10.5 plant, but it would get there in “phases.” The phases were not spelled out.

Just seven weeks later, in late August, the company announced the plans had changed yet again — far more radically. Woo told the Racine Journal Times that Foxconn would never add a Gen 10.5 plant to its Racine campus, despite past statements, because by the time it was built, the market would be glutted by other manufacturers in China."

Of course none of this should really be surprising, especially given that Foxonn has made similar, magically-shrinking promises of similar ilk in countries like Vietnam, India, and Brazil. And this is all before you seriously consider the environmental impact of the arrangement, which many aren't. At this point, the fading promises have become almost comedic in nature (if you ignore taxpayers footing the bill for the kerfuffle). Vast plans to build a major panel manufacturer plant with thousands of new jobs have been replaced by hype, buzzwords, and nonsense:

"Even the Gen 6 panels might not be manufactured in Racine for long. “We are not really interested in television,” Woo told the newspaper, though he said the company wants to build America’s first thin-film transistor (TFT) fabrication, which can be used in LCD products. Rather, Woo said, workers at the Wisconsin plant will be focused on figuring out new ways to use Foxconn’s display, cellular, and AI technology, building out an “ecosystem” Woo calls “AI 8K+5G."

We've already noted that 5G is important but violently over-hyped, and this idea of an "AI 8K+5G ecosystem" is largely meaningless (they really should have thrown a blockchain reference in for good measure). A May 2018 poll of locals found that 66% doubted the deal would ever actually meaningfully benefit the local economy, and the plan isn't having anywhere near the impact on polling that Walker had hoped ahead of the midterms. At this rate, Wisconsin will be lucky to see a few thousand jobs in exchange for an investment most objective observers doubt will ever actually pay for itself.

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Filed Under: crony capitalism, factories, jobs, scott brown, subsidies, wisconsin
Companies: foxconn

42 Comments

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Anonymous Coward, 31 Oct 2018 @ 6:40am

what?
Corporate welfare didn't work this time????
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Anonymous Coward, 31 Oct 2018 @ 6:53am

To put things in perspective, New Jersey put together a package of $7.1 billion for the freaking Amazon HQ2. Scott Walker, once again, got played.
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tom (profile), 31 Oct 2018 @ 7:15am

The voters in all the places that are offering the family jewels to Amazon in trade for a HQ should read this.
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alternatives(), 31 Oct 2018 @ 7:34am

Scott Walker enjoys boondoggles.
And so does Wisconsin. Note the Milwaukee County pension issue. https://reason.org/wp-content/uploads/files/fdc15a51e854e26460feefba6c302a9c.pdf http://archive.jsonline.com/news/milwaukee/44156882.html/
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Anonymous Coward, 31 Oct 2018 @ 7:41am

This just in...
The main purpose of a business is to gain a profit, while the main purpose of a charity is to help people. In other words, if it ain't profitable for the business' bottom line, it ain't gonna happen, folks. So quit cryin' and start your own. THIS IS 'MERICA!

More news at 11.
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Anonymous Coward, 31 Oct 2018 @ 7:59am

The number of new jobs created when a large manufacturing plant is built can be hard to calculate, as it's typically much more than just the number of employees who work at the company. For instance, local engineering and construction companies will likely see a huge increase in business, as well as equipment and parts manufacturers, the trucking companies that haul it, and on and on down the line. (the reverse process happens whenever a factory closes, and it's especially observable in a small town, in which the whole town basically dies, even though only a small minority of the population is employed at the plant.)

Another factor that's often underestimated is the hit on local taxpayers. Since these multi-national corporations won't even consider building unless they get to ride tax-free, who do you think will be footing the bill for all the municipal expansions that will be needed to service the plant, such as new roads, power plants, water and sewage treatment, pipelines, and the expected expansion of the local airport?

Yes, that's right. You, the local taxpayer, who is likely to be hit with increased sales and property taxes, as well as higher utility bills. Yet oddly, governments typically underestimate this cost when seeking approval from voters such as when pushing municipal bond issues.
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Pixelation, 31 Oct 2018 @ 8:07am

"the state promised Taiwan-based Foxconn a $3 billion state subsidy if the company invested $10 billion in a Wisconsin plant"

TLDR; Did Wisconsin already give Foxconn (notice they have con in their name) the $3 billion? Has Foxconn spent $10 billion towards the plant? Can Wisconsin sue Foxconn?
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James Burkhardt (profile), 31 Oct 2018 @ 8:18am

Re: This just in...
I am unclear as to what point you are trying to make. Is this a "Why are you reporting this? its obvious."? But of course, this is the discussion of a government's actions and choices, which makes your discussion of a business strange. As well, the tone suggests you are trying to argue against Karl, even though you agree. So maybe you are one of those satire trolls? In any case, have a flag.
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Michael, 31 Oct 2018 @ 8:28am

Re:
Sorry to ruin the surprise ending, but Wisconsin will subsidize them more than $3bn and Foxcon will invest less than $10bn.
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rangda (profile), 31 Oct 2018 @ 8:30am

Working as intended
Where is the problem. This is working exactly as intended. The corporation gets giant bags of money. The politicians get small bags of money and the ability to point to this so they can win at buzzword bingo come election time. A few of them will probably get cushy private sector jobs from this when they finally get voted out of office.

The taxpayers of Wisconsin get screwed but do you really think anybody involved cares about that? That is part of the plan. Let them eat cake.

We've created a political system which encourages the morally strong to avoid politics and the morally bankrupt to run for office. We are getting exactly the government we asked for. (Note that humans are very, very good at screwing other humans so you'd probably get a similar government no matter what you asked for.)
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Anonymous Coward, 31 Oct 2018 @ 8:41am

Re: Re: This just in...
Trigarrrd (triggered hard), James?
Don't get upset James, get inspired. Yeah, and YOU calling me a troll just proves my point. I guess you stating that I don't have a point, is your point? Thanks, you just saved my life, James!

Let me make it plain for others like Mr. Burkhardt:

1.Don't ever expect business' to do the "right thing" (i.e. look out for the welfare of their employees). The purpose of a business is to make a profit. If the business' employees can make a good living while the business makes a profit, that's great for the working man/woman, but it's not the purpose of a business. The purpose of a charity is to help people; the purpose of a business is to make bank. 2.Don't get upset when a corporation [gets a tax break in order to come to your state], promises mad jobs and then the deal falls through -or- [gets a tax break in order to come to your state], and then leaves a few years later after it's deemed unprofitable by the share holders.
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ShadowNinja (profile), 31 Oct 2018 @ 8:59am

Re: what?
No it worked plenty!

We took it away from the poor individuals and gave it to wealthy corporations whose cash helps elect politicians like Scott Walker!
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Anonymous Coward, 31 Oct 2018 @ 9:00am

Re: Working as intended
yep, and most of if supported from regulatory efforts.

I keep telling these knobs that voting in a politician to solve a problem for them is a sure fire way to get screwed!
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Anonymous Coward, 31 Oct 2018 @ 9:14am

Re: Re: what?
afaik, it is a credit rather than a write off.

Walker really screwed his constituents with this but it was not the first time as he seems to like doing that.
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Anonymous Coward, 31 Oct 2018 @ 9:15am

Re:
In which state, of those on the list, did the voters get a say in this corporate/bribe scandal?
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Anonymous Coward, 31 Oct 2018 @ 9:21am

Re: Scott Walker enjoys boondoggles.
Pensions, both private and government, are continually under attack by grifters.

The low to middle level employees are left with less than nothing, upon being hired they agreed to a deal that was not honored by management and they are left without a pension.

What's next? Wag some fingers in their face and talk to them about personal responsibility?
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Gary (profile), 31 Oct 2018 @ 9:22am

Re: Re: Re: This just in...
Let me make it plain

Clear as mud. You wanted to agree with the article, but had to insert snark is the only point I see you making.
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Anonymous Coward, 31 Oct 2018 @ 9:29am

Re: This just in...
"the main purpose of a charity is to help people"

In theory, yes.
In practice however, we find many charities that only help themselves.

"So quit cryin' and start your own"

Who's crying? The citizens of Wisconsin I imagine.
And they should just make their own business, you know - pull yourself up by your own bootstraps like I did - LOL.
Then you can make all sorts of promises to Scott Walker like Foxconn did and live the life of luxury.
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Gary (profile), 31 Oct 2018 @ 9:30am

Re: Re: Working as intended
So AC, could you clarify your position?
As a paid Russian astro-turfer, you *seem* to be saying that not voting is the only choice?
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Anonymous Coward, 31 Oct 2018 @ 9:30am

Re: Re: Re: Re: This just in...
and horrible formatting
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Dennis Moore, 31 Oct 2018 @ 9:34am

Re: Soon every lupin in the land Will be in his mighty hand
Dennis Moore, Dennis Moore
Without a merry band
He steals from the poor
And gives to the rich
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Anonymous Coward, 31 Oct 2018 @ 9:37am

Re: Re: Re: Re: This just in...
Wow! Another savior.
Again, if all you can do is personally attack me for having a point of view that's different from yours, then go on --be that, but having your own, different, point of view/argument would be more helpful; since I don't know everything. You, like James, only state that you disagree with my point, but fail to bring your own bag.

Reiteration:
The goal of a business-->profit
The goal of charity-->helping mankind
Don't expect a business to help mankind as a primary goal of said business.
(Analogy: Don't move to Florida if you like snow. Can it snow in Fl.? Yes. Does it snow in FL.? Sometimes, but don't expect it.)
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Anonymous Coward, 31 Oct 2018 @ 9:44am

Re: Working as intended
"We are getting exactly the government we asked for"

The only voters who asked for this are the wealthy who benefit from it. You clearly understand the business profit motive, but severely misunderstand the populace, maybe this is intentional like so many politicians.

"We've created a political system "

We did not create this political system as it has been in place for some time. The inability of most citizens to orchestrate change is not an implicit concurrence with policy, for obvious reasons and is, by design, implemented such that the citizens lack the recourses required. Our government then gaslights them into thinking it all is their fault for being so lazy. It is a shame that many believe the shit.
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Anonymous Coward, 31 Oct 2018 @ 9:45am

Re: Re: Working as intended
Your Cult Of Personality is not having a good day
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Anonymous Coward, 31 Oct 2018 @ 9:56am

Re: Re: Re: This just in...
Still chugging those paint chips are we?
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Anonymous Coward, 31 Oct 2018 @ 10:07am

Re: Re: Re: Re: This just in...
Still personal attacks, and no points to add to the discussion... Agree/disagree, whatever, but at least think.
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Anonymous Coward, 31 Oct 2018 @ 10:43am

but why does this keep happening
The question is, why do corporations request tax breaks just to open a facility/factory/campus/etc...?
Is it that all corporations are greedy? Maybe
Is it that the taxes required to open a physical business are too high: federal taxes, state taxes, county taxes, city taxes? Maybe
Probably some of both. How do we answer this question?

Also, has a corporation ever set up shop without requesting some kinda tax break as part of the deal? EVER?
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Chip, 31 Oct 2018 @ 11:16am

Re: Re: Re: Working as intended
I am not "Paid"! I am Smart. And I am "here" to tell you Knobs that you are Knobs, and that both "Parties" are the Same, and also that I am very Very SMART.

"Politician" want to Regulate Paint. They want my "paint Chis" to not have "lead" in Them. They are Knobs, and they "support" Regulation. They are Stupid Knobs who do not "want" me to eat Leaded Paint.

Every Nation eats the Paint chips it Deserves!
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Anonymous Coward, 31 Oct 2018 @ 11:29am

Re: Re: Re: what?
If one side changes what they're putting into a deal why doesn't the other side to the same? The changes should be proportional and equal. In other words, Foxconn should now only get a book of McDonald's gift certificates rather than a $3B credit.
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Anonymous Coward, 31 Oct 2018 @ 11:40am

Re: Re: Re: Re: what?
HA!
This X infinity.
You made me laugh, and you brought a new idea to the table. Keep it up!
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Anonymous Coward, 31 Oct 2018 @ 11:42am

Re: Re: Working as intended
Yeah, and if people did not need to get organized to solve problems, you would have solved them all by yourself.
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Anonymous Coward, 31 Oct 2018 @ 12:05pm

Re: Re: Re: Re: Re: This just in...
It’s only personal if it’s true...
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Anonymous Coward, 31 Oct 2018 @ 12:21pm

Re: Re: Re: Working as intended
whatever NPC.

I will be happy to tell you more if you had the capacity to respond in some other way besides what your party tells you to.
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Anonymous Coward, 31 Oct 2018 @ 12:24pm

Re: Re: Working as intended
No, he is right. You just like to mask your poor and ignorant stupidity behind the accusation of "wealthy get their way".

There will always been wealthy people in power, in fact the solutions you recommend will actually consolidate the power and wealth into even fewer people.

The government does not have to gaslight anyone... people on either side of the isle do that for them.
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Anonymous Coward, 31 Oct 2018 @ 12:33pm

Re: Re: Re: Working as intended
The problem in not the organization... that I fully recommend that people do.

the problem comes when that organization becomes institutionalized so that people looking to abuse it come about with empty promises and big speaking mouths to gain power and wealth from it upon the backs of the sheep carrying it all around.

Obama and Trump are one and the same. Both big talkers... but the only things that proceed forth from their lips is manure.

The reason many on the left hate Trump is because Trump talks the exact same shit their side does and that tends to piss people off when you have your own game stolen from you and shoved into your face.

I just sit back and laugh as everyone spits and froths out the mouth.
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Anonymous Coward, 31 Oct 2018 @ 1:11pm

Re: Re: Re: Working as intended
You need to take off the blinders as they do you a dis service.
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Anonymous Coward, 31 Oct 2018 @ 1:25pm

Re: Re: Re: Re: Re: Re: This just in...
ok...you're cool
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Chip, 31 Oct 2018 @ 1:36pm

Re: Re: Re: Re: Working as intended
I call people NPCs, because I am an "Individual" and I Think for MYSELF, and also because I saw someone on the Internet say it.

Every Nation eats the Paint chips it Deserves!
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Anonymous Coward, 31 Oct 2018 @ 2:01pm

Re: Re: Re: Re: Working as intended
"Obama and Trump are one and the same"
- In what regard? Talking? Because trump is a horrible speaker. The two are very different in most regards, only similar in some and not identical at all.

"The reason many on the left hate Trump is because"
- You apparently have no idea what most voters are thinking and do not care otherwise you would listen to them and we would not be having this comment thread.
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Anonymous Coward, 31 Oct 2018 @ 2:07pm

Re: Re: Re: Re: Working as intended

The problem in not the organization... that I fully recommend that people do.

In that case, how do you prevent ye same type of people as current politicians rising to the top? Not everybody has the time to keep a close eye on politicians and ensure that they follow the rules, like following the constitution.
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Anonymous Coward, 31 Oct 2018 @ 2:28pm

Re: Re: Re: Re: Working as intended
And we sit back and laugh at how clever you think your 6th grade level analysis is. Keep chugging that paint bro!
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Anonymous Coward, 1 Nov 2018 @ 8:40pm

Re: Re: Re: Re: Re: This just in...
Let me help you out here, the point of the article is not about a business that is out to make money. The point of the article is that the government official who brokered that deal either didn't understand the deal he brokered or did and deliberately lied and misled his state's constituents on how awesome it would be for them.

This isn't about Foxconn, it's about Scott Walker. He either didn't understand what he was doing or did and deliberately lied about it. That's the point. One you have conveniently ignored.
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