A Taiwanese electronics maker has promised to bring 3,000 jobs to Wisconsin. Time to strike up the band and bellow the celebratory speeches.
Foxconn took an offer it couldn’t refuse: up to $3 billion in public subsidies — or $1 million for each and every worker promised a job at the factory over the next 15 years. In effect, taxpayers are putting up $3 for every $10 spent on the project.
Great deal for Foxconn. For taxpayers? Not so much.
What else could $3 billion have bought? How about providing early-childhood education for two years for 150,000 at-risk children? That would have been a higher-return, lower-risk, better buy.
Education, not underwriting private gain with public money, is the path to long-term prosperity. Treating everyone the same, not offering corporate handouts to a favored few, is the key to a thriving business climate.
But ribbon-cuttings draw cheering throngs. Underprivileged children getting a head start on reading and math? Never the stuff of political rallies.
President Donald Trump and Wisconsin Gov. Scott Walker say Foxconn couldn’t have done it without them.
If so, Foxconn will fail. Business location decisions should be the results of careful economic calculations, not chasing subsidies. Witness Indiana recently doling out $7 million in tax breaks to United Technologies to keep more than 1,000 jobs at its Indianapolis Carrier factory. Most of those jobs — 630 — will be gone by the end of this year.
If Foxconn thinks Wisconsin fulfills its checklist as the best U.S. location it can find, hurray for Wisconsin. But that also means the company didn’t need buttering up by taxpayers to move to “America’s Dairyland”
Foxconn has signaled for some time that being closer to its customers made sense. The company almost certainly was going to open a factory in the U.S.
So why did Wisconsin agree to effectively pay nearly a third of the cost of Foxconn’s U.S. investment? It’s an all-too-familiar tale of “I win/you lose” among 50 states, each trying to give enough away to outdo their rivals.
It’s a futile competition, even though Wisconsin ends up with more workers (whether the total ultimately is 3,000 remains to be seen).
“I’ll be excited about the Foxconn announcement when workers are getting paychecks in Wisconsin,” said Scott Paul, president of the Alliance for American Manufacturing, a nonprofit partnership of U.S. manufacturers and the United Steelworkers union.
But, Paul added in a New York Times interview, “Foxconn has a history of talking big and not necessarily delivering on their commitments.”
Whatever the company’s future, taxpayers — and companies in competition with the Foxconns of the world — are the losers.
Wisconsin gains in attracting a Taiwanese plant would have been conferred on another state if Foxconn picked an alternate U.S. location. From the national perspective, it’s a zero-sum game.
Every year, state and local governments sacrifice tens of billions in tax-revenue-chasing jobs that may or may not materialize, that may or may not endure.
Tax dollars forfeited to corporate welfare is money not spent on roads, bridges, water and sewer systems, health and safety programs, and education.
Education offers some of the highest returns of any public investment. Minnesota history, in contrast to Wisconsin’s, illustrates the point.
In the first half of the 20th century, Minnesota and Wisconsin lagged in per capita personal income — both below the national average, year after year.
But in the 1950s, Minnesota political leaders took a risk. They boosted public spending on K-12 and higher education. By the 1970s, those investments helped to deliver what became known as the “Minnesota Miracle.”
In 1980, Minnesota’s per capita income of $10,207 pulled ahead of the national average of $10,153. That year, Wisconsin stood at $9,986.
Last year, per capita income in Minnesota hit $52,117 — higher than the national average of $49,571 and Wisconsin’s tally of $47,275.
A well-educated workforce has fueled economic prosperity in places like Minnesota for 50 years. Education will be even more important in the next 50.
Congratulations, Wisconsin. May your $3 billion bet on 3,000 jobs pay off.
Just know that a wager on the education of hundreds of thousands of children would offer better odds of economic windfall.
Arthur J. Rolnick is a senior fellow at the Humphrey School of Public Affairs at the University of Minnesota. He previously served at the Federal Reserve Bank of Minneapolis as a senior vice president and director of research. Mike Meyers is a former Star Tribune reporter.