Wisconsin has already overpaid for Foxconn
Whatever the electronics giant actually has planned, the state's giveaway will prove indefensible. (Illustration by Rachal Duggan.)
Wisconsin finally and irrevocably skidded off its long runway of Foxconn denial last week, when the company announced that it wouldn't actually be making LCD screens at its in-the-works facility in Racine County. With that, virtually nothing remained of the initial pitch made to the people of Wisconsin by Foxconn and its abject servants in the state legislature. The promised manufacturing jobs, and family-supporting wages for blue-collar workers, became jobs for "knowledge workers."
Louis Woo, the company's silver-tongued ambassador to Wisconsin, explained that one of the savviest technology companies in the world had suddenly realized that making screens in the United States just didn't make business sense. The suicide-net company just now has figured out that good manufacturing jobs equals high labor costs, exactly the kinds of costs such companies avoid to maximize profits.
By the end of Thursday, Foxconn was pushing back on reports that it planned to suspend its Wisconsin operations entirely, and as of Friday, it re-committed to building a screen factory, but only after a messy week of demonstrating just how elusive its promises are. Woo told Reuters in a January 30 story: "In Wisconsin we’re not building a factory. You can’t use a factory to view our Wisconsin investment." The chaos that followed suggests that Foxconn's story is getting too slippery for even Woo to handle.
Yes, the project has created some jobs. Mostly, however, the Taiwan-based electronics manufacturing behemoth has supplied Republicans, and especially two-term governor Scott Walker, with a campaign prop that failed in its first major deployment.
Ever since Foxconn announced its record-breaking deal with Wisconsin in the summer of 2017, the company and its political allies have been hedging. The company has failed to deliver on blockbuster economic-development deals in the past, which right from the start undermined the credibility of its pledge to create 13,000 jobs in Wisconsin. Throughout it all, Woo has served as the company's public face in Wisconsin. Through a series of sit-downs with journalists around the state, Woo made constant adjustments. Wisconsin companies hoping for a piece of the action should "just be patient," he said. (November 2017.) The factory will produce advanced screens that form the crux of an "8K-plus-5G ecosystem." (November 2017.) Foxconn will do research and development in the state as well as manufacture screens. (April 2018.) The screens made at the site will be smaller than initially planned (May 2018.) Because the screens will be smaller, Foxconn won't need a planned glass plant on site. (June 2018.) They'll need more engineers and fewer assembly workers. (August 2018.) While public confidence in a jobs boom grew ever more shaky, Foxconn stepped up its efforts to automate its existing manufacturing operations.
As Woo variously deflated and inflated expectations, Foxconn didn't seem to offer any corresponding adjustments to the investment it expected from the state, whether in direct public payments to the company, major infrastructure projects, or surrenders of political capital.
Every creature with so much as a scoop of rancid oatmeal in its skull has known all along that Foxconn was running a grift in Wisconsin. All you have to do, before even getting into the specifics of the project, is consider the broader context in which an electronics manufacturer operates. Critics of the deal said early on that, given a rapidly changing technology market and the rise of automation, Foxconn couldn’t possibly promise what it would be making at the factory a couple years down the line. Foxconn knew this too. If the company didn’t deliberately sell a false promise, then it offered a plan with a big unspoken asterisk, one Woo has filled in gradually over the past 18 months. Walker famously responded to any initial doubts about the deal by telling critics to "Go suck lemons."
Sure, things change in the electronics business and companies' plans have to change as well. But Foxconn is very good at gradually letting us in on things it, and much of the observant public, has known all along.
Here's a smaller example of how this works: In June 2018, the company announced that it would install a water-recycling system at its Wisconsin factory. This, the company announced, would cut down on its use of Lake Michigan water by about 3.5 million gallons per day and reduce the amount of potentially polluted water it would discharge back toward the lake. Conveniently, this announcement came a few months after Wisconsin's Department of Natural Resources gave Foxconn permission to draw 7 million gallons per day from Lake Michigan, one of the most controversial aspects of the project and a decision with vast implications for the Great Lakes as a whole.
Wisconsin's DNR also deemed it appropriate to tap into Lake Michigan for an almost entirely industrial use. This raises major questions about the meaning and the strength of the Great Lakes Compact, the eight-state agreement that governs access to one of the world's great freshwater resources. Because the project will pump some Great Lakes water outside of the lakes' watershed, it triggered a state-level review. The Compact says that such water should be used for "public water supply purposes," and that does include some industrial and commercial use—public water utilities routinely serve businesses as well as homes—but to what extent isn't spelled out. The water Foxconn uses will pass through a public water utility (Racine's), but it's almost all for industrial purposes. At its thirstiest, the Foxconn plant alone wouldn't pose that much of a threat to the vast supply of water in the Great Lakes, but it does set a precedent that could give other industrial users easy access to water that is supposed to be treated as a public trust. However one interprets the Great Lakes Compact, it's clear that Foxconn's water demands created a controversy that needed managing.
It wasn't really news that Foxconn would use water-recycling technology for any electronics fabrication it ended up doing. Making electronics of any kind requires enormous amounts of water, so it only makes sense that Foxconn would make the water go as far as possible to control its costs. The company has already used similar systems at its factories elsewhere in the world. News reports even noted this, but it still effectively gave Foxconn a silly PR victory as an environmental steward that was stepping up its water efficiency in response to profound public concern. An application submitted to the DNR for Foxconn's water access noted that "recycling this water would significantly reduce the demand for this facility, lowering the volume of water needed from 20.6 mgd on an average day to the current estimate of 5.8 mgd."
In other words, Foxconn stepped down its water ask by an order of magnitude in the application, then stepped it down yet again by 3.5 million gallons more in a later announcement. Suddenly this very thirsty project looks reasonable, not using nearly as much water as it could. If Foxconn ever intended to manufacture LCD screens in Wisconsin in the first place, it almost certainly had a good sense of how much water it might need. The sheer enormity of the Great Lakes are a major draw for industry in a world where water supplies are becoming more precarious every day. Yet, over the course of a few months, its projected water needs managed to plummet by about 18 million gallons per day.
Foxconn scored another sly PR coup by announcing a $100 million partnership with the University of Wisconsin-Madison, a prestigious public university that in large part helps Wisconsin punch above its weight both academically and economically. This "gift" represented about 2.5 percent of what Foxconn could potentially get from the state, and would generate research that uses public academic resources to benefit Foxconn directly. One UW-Madison grad student, in a letter to the Wisconsin State Journal, described the agreement as a "Trojan horse" from which Foxconn would reap intellectual property benefits and exert inappropriate influence over academics and research. UW-Madison prides itself on being a center of deliberate, skeptical research, but Chancellor Rebecca Blank showed no such reservation in announcing the partnership.
Foxconn is using the same PR technique it used in regards to water usage to step down Wisconsin's expectations for the factory as a whole, gently letting us down from an extraordinarily ill-advised euphoria. While struggling, post-industrial communities like Racine await a promised swell of opportunity, the costs are mounting.
Defenders of the $3 billion incentives package enacted for Foxconn will eagerly and repeatedly remind you that Foxconn gets that money only incrementally and only as it makes hires and capital investments. That’s true. It doesn’t, however, require Foxconn to create certain kinds of jobs or even turn the lights on. In theory, the company could reap more than a billion dollars from the state just for making capital investments in its Wisconsin facilities, regardless of how many people it employs or for what. For example, an almost entirely automated factory with relatively few human employees would still net Foxconn those capital investment credits. Even if Foxconn creates every single job and commits every single dollar of capital investment that the incentives package provide for, that still does not guarantee that the company will generate enough economic value for state taxpayers to recoup their costs.
Wisconsin has already paid dearly for Foxconn, both in public investment and in political ground. Local governments in southeastern Wisconsin have committed their own significant incentives, in part to expand roads and water infrastructure in the area. These dollars have strings attached as well; if the project doesn't create a certain amount of economic value, Foxconn will have to compensate in the form of tax payments. But that's not true of all the estimated $4.5 billion in public funds that could potentially flow to the project.
In a December lame-duck session aimed at stripping power from incoming governor Tony Evers, legislators reduced Evers' influence over WEDC, which is in charge of managing the Foxconn deal on behalf of the state. Walker and the legislature created WEDC in 2011 as a public-private economic development arm, and since then it has botched projects that are orders of magnitude smaller than Foxconn. The changes Walker signed into law in the waning days of his term represent an effort to safeguard the Foxconn deal and WEDC itself, because Evers' victory wasn't exactly a ringing endorsement for either.
The greater cost, though, can't be expressed with dollar signs and can't be recouped through shady legislative deals. Wisconsin officials and business leaders—including some Democrats who supported the Foxconn deal—have shown just how far they'll go for a flimsy promise. They capitulated on so much, from water rights to the appropriate line between a public university and corporate donors. Business groups like the Wisconsin Technology Council have served as credulous boosters for the deal, even in the wake of Foxconn's latest switch-up. Legislators gave Foxconn major breaks on regulations meant to protect wetlands and give members of the public a window into the project's environmental impacts. Wisconsin Republicans went so far as to mess with the basic plumbing of the legal process, enacting a provision that fast-tracked Foxconn-related legal challenges to the conservative-dominated Wisconsin Supreme Court. All of this behavior signals to other corporate incentive-seekers that Wisconsin is an easy mark.
The project even brought out the worst in Mt. Pleasant's village government, as detailed in a head-spinning episode of the Reply All podcast. Local officials even tried to force some rural residents from their homes by declaring "blighted" properties that weren't. One family that stands to lose its "dream home" has expressed relief about the possibility of Foxconn scaling back its plans—so ironically, at least one household in Wisconsin will be slightly less screwed if the factory fall through.
The most bitter irony here is that Scott Walker doesn't have to suffer the worst of the fallout. Foxconn arguably cost him a third term but he may never be forced to take responsibility for his role in a monstrous fraud. Instead, he has contentedly settled into his new life as a right-wing Twitter egg. Wisconsin Republicans, who still control both chambers of the state legislature, even made an absurd attempt to blame Evers for the latest bout of Foxconn uncertainty. Evers now has to show that he's working in good faith with Foxconn to handle a deal he opposes. Wisconsinites are left to wonder what we've actually paid for, and to ponder all the things that even 13,000 jobs can't buy back.