Photo credit: Prachatai (Flickr CC)
Wisconsin Gov. Scott Walker and President Donald Trump claim their $3 billion subsidy to Taiwanese electronics giant Foxconn will create thousands of jobs in Wisconsin. When you dig into the numbers, however, the Foxconn deal looks like one of the biggest swindles in American history—a scandal waiting to happen. To understand how big the threat is, it is important to understand just how bad the Foxconn deal really is and look closely at what they’re proposing.
It is not really a tax break, but instead a direct public subsidy of $3 billion. Bribing big companies to stay or leave—and, therefore, allowing profitable corporations to exact public resources at our expense—is often what passes for economic strategy at the state and local level these days. However, as destructive and self-defeating as the subsidy game is already at the state level, the Foxconn deal shows Trump wants to supersize these giveaways to a national, billion-dollar scale never seen before. Because Walker and conservative legislators in Wisconsin have already virtually eliminated taxes for manufacturers starting in 2011, they will be cutting huge checks of up to $311 million annually to Foxconn for 15 years.
There is good reason to doubt that Foxconn will be held accountable for creating the jobs it’s promising. The deal was negotiated in secret by the CEO of Walker’s scandal-ridden economic development agency: the Wisconsin Economic Development Corporation (WEDC). Walker partially privatized WEDC early in his first administration, and the results have been disastrous. WEDC will be in charge of verifying the jobs Foxconn is promising to create, but a recent state audit found that the agency is still unable (or unwilling) to accurately track whether the jobs they are paying corporations to create actually exist.
Last week, Citizen Action of Wisconsin released a new analysis of WEDC’s own track record over the past three years. Even if we accept WEDC’s flawed data, their track record is astonishingly bad for the state. Some 60% of corporate recipients have not created the jobs they pledged in return for loans and tax credits, and nearly 15,000 fewer jobs have been created than promised. This deal is so stacked against the people of Wisconsin, and so overgenerous to Foxconn, that leaders in other states fear that it will become the new standard—such as with Amazon, which recently instigated a bidding war for its new corporate headquarters by 23 major cities.
It’s a dangerous precedent for a new and unprecedented era of ravenous corporate raiding of state and local treasuries being conducted all across the country. However, progressives should not immediately balk at a large investment in economic development. As a matter of fact, we should be heavily investing in economic development, but we should be doing it in a smart way. For example, according to a study by economist Robert Pollin at the University of Massachusetts, a $3 billion dollar investment in education would create, on average, 87,300 jobs; in health care it would create 58,800 jobs; in renewable energy, 51,300 jobs.
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If we are serious about rebuilding the middle class and opening it up to all the people who are shut out of opportunity, we do need to make massive new investments to dramatically expand the number of family-supporting jobs. Progressives need to turn around the whole economic debate in America by making the case that there are much better ways to create good jobs than continuing to allow ourselves to be fleeced by big, exploitative corporations like Foxconn.
Robert Kraig is the executive director and Kevin Kane the organizing director of Citizen Action of Wisconsin.
