Subsidy? Subsid'oh! The limits of economic incentives

Last June, President Donald Trump, then-House Speaker Paul Ryan and then-Wisconsin Gov. Scott Walker grabbed golden shovels at the Wisconsin groundbreaking for Taiwanese electronics maker Foxconn. In retrospect, it appears that the politicians were digging a hole for themselves — and for Foxconn.

It was a familiar scene in an era when state and local governments heap as much as $80 billion a year in subsidies on companies in the name of jobs, jobs, jobs. Markets don't decide where big companies expand and hire. Politicians do. Or at least they try, as they race toward the cameras with taxpayer money in hand.

Central planning, once a slur linked to the failures of the crumbling Soviet Union and the stumbling Warsaw Pact, these days goes by the beguiling label "economic development." Fairer tax bills for all, a better education for all and displaced worker aid for all? Boring. Let's pick winners. Let's have flashy artist renderings of sprawling industrial structures that taxpayers soon will see, touch and, in some cases, smell.

"America is open for business more than it has ever been open for business," Trump crowed at the Foxconn ceremony. "I want to wish you good luck, and congratulations on this — the eighth wonder of the world."

Foxconn promised a $10 billion factory, employing 13,000 mostly blue-collar workers making TV flat panels in southwestern Wisconsin — all with the aid of about $4 billion in tax breaks over 15 years. It would be a stunning, remarkable reversal of decades of U.S. TV manufacturing moving offshore.

Yeah, good luck with that is right. But maybe the congratulations were a bit premature.

In January, Foxconn reminded everyone why no one has made televisions with American-made parts since Zenith folded up shop in 1995, becoming a South Korean-owned electronics research and development company. The eighth wonder of the world became a now-you-see-it-now-you-don't pipe dream. Or seemed so.

Reality. The odds against success in Wisconsin were too great. The cost of foreign-made electronics too low. Foxconn would make its TV panels in China and Mexico.

Even with Wisconsin taxpayers putting up $4 of every $10 invested in the plant, manufacturing seemed too risky. Thus, Foxconn pulled a switcheroo — testament to the enduring appeal of a subsidy deal still in play.

Instead of a factory, the company would hire a relative handful of white-collar workers for a Wisconsin research facility in Racine, never before a dream locale for electrical engineers, physicists and designers. Details to follow. Don't get your hopes up. We'll get back to you.

Suddenly, the tilling of dirt by the president, speaker and governor seemed less celebratory than funereal. Not for long, however.

Trump — never deterred by the maxim "when you find yourself in a hole, stop digging — made a phone call to Foxconn's CEO. Did Trump threaten? Plead? Promise? Like so many exchanges between corporate chiefs and their political enablers, it's a secret. But within hours, the Foxconn plant that had disappeared magically reappeared. The original deal was on! Foxconn vowed to build the factory — in the face of all the competitive challenges that the company earlier said made the prospects of success ever so slim and the chances failure ever so great.

Stay tuned.

But Trump's Foxconn intervention fits a pattern that, so far, shows few boast-worthy results.

A month after his election, Trump visited a Carrier factory in Indianapolis to declare victory in jawboning the company to keep more than 1,000 workers busy making furnaces. A few months later, Carrier laid off workers, moving hundreds of jobs to Mexico.

The president later fired angry tweets at the CEO of General Motors after that company announced cutting jobs in Michigan, Maryland and Ohio, while ramping up employment south of the Rio Grande. In retaliation, Trump vowed to cut federal subsidies that reduce the retail price of electric cars. GM stock took a hit (so much for Trump's love of rising stock prices), but the automaker proceeded with its reorganization plans.

Trump's actions are part of a long-term trend. Other politicians have made meddling in private economic choices hallmarks of their legacies. The nation is littered with hotels, shopping malls, entertainment centers and factories that got subsidies and later shuttered or learned to live with hard times.

Consider the story of Amazon's search for a second headquarters, HQ2, that was supposed to bring with it 50,000 high-paying white-collar jobs. More than 230 cities swooned at the prospect, offering up into the billions in taxpayer money under the cover of the nondisclosure agreements demanded by the world's richest man and one of the world's richest companies.

In a last-minute bait-and-switch, Amazon changed the deal — anointing both Crystal City, Va., and the borough of Queens in New York each with the promise of 25,000 jobs. But, as details leaked out, New Yorkers bristled at the cost of the deal's tax breaks, the prospect of soaring housing prices, and the idea of billions being spent on new subway stations, improved roads and sewers and a helipad that promised to keep Amazon executives above it all.

Too much hassle, Amazon executives decided. Amazon took its football (you might like the Wilson NFL Super Grip, $12, with free shipping for Prime customers) and went home. Exactly where the home of the second HQ2 will be located remains a mystery.

The finger-pointing soon started in New York and beyond. Did the politicians offer too much? Did the politicians do too little? Who failed to make Amazon feel comfortable taking taxpayers' money?

Those were all the wrong questions. The real question should be why taxpayers keep suffering from misbegotten economic policies that imagine one part of the country can prosper at the expense of another. The country, as a whole, ends up worse off — "winning" corporate prizes that may, and often may not, pay off even at the local level.

Picking winners and losers is dumb policy riddled with unintended consequences.

Mike Meyers, a former Star Tribune business reporter, is a Minneapolis writer.