Foxconn promised a giant fab in exchange for massive tax breaks, and then just took the tax breaks and did nothing. Any reason to expect this is different?
They didn't get the tax breaks because they didn't meet the targets.
From your article:
After Foxconn failed to meet its job creation targets, Wisconsin’s governor, Tony Evers, last month pulled a deal that would have handed the company nearly $4.5bn in incentives for completing its plans.
The tax breaks to Foxconn were just one aspect of the deal, and unless you're specifically interested in Foxconn, it makes sense to look at everything that happened.
Hundreds of millions were spent on variously infra improvements, eminent-domaining people out of the way, lawyers, etc.
Hundreds of millions were spent on variously infra improvements, eminent-domaining people out of the way, lawyers, etc.
This is potentially wasted money, but it did not go to Foxconn, and presumably created infrastructure jobs. Not defending the deal, but it is often mischaracterized. The benefits to the companies usually are tax rebates that are only valuable if the company makes real investments that are taxable. They are not direct payments.
Purpose-built infra is almost always wasted if the purpose is unfulfilled; sure, maybe someone else can find a way to use it, but it was built to do things nobody needed.
> and presumably created infrastructure jobs
Usually you hear people complain about dig-a-hole-then-fill-it-up jobs. But if we're going to start supporting those, it would be best not to tie them to scams, I think.
Yeah. Sounds a lot like the dig-up-all-the-carbon-burn-then-bury-it-again civilizational project going on the past 100, and next 100 years.
What exactly was the purpose to "re-arranging small bits of matter near the surface of the earth" again? [1]
Basically I wanted to make a comment about greedy exploitation-exploration trade-off strategies here but will stop short
at this kind of eliptical passing remark.
>What exactly was the purpose to "re-arranging small bits of matter near the surface of the earth" again?
From the same man that proposed the idea of "re-arranging small bits of matter near the surface of the earth".
>It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.
It's a social hack to get around idiotic situations. It's like moving to mars because you are worried about a nuclear war or climate change. Dumb games require dumb players.
>This is potentially wasted money, but it did not go to Foxconn, and presumably created infrastructure jobs.
If Foxconn tricked a local government into providing free "useful" infrastructure it could just rent that "useful" infrastructure out to a different company and thus capture the entire tax benefit. However, they didn't even do that... The money was fully wasted.
On top of everything else, abuses of eminent-domain, civil forfeiture, and so forth really, really bother me.
In principle, I unconditionally support the right of the polis (the government) to do what needs to be done. My own city basically used extralegal means to wrestle numerous blighted, condemned properties away from a trust. The creators of the trust were dead and no one was left to negotiate.
But hot damn these levers of power get abused.
Please recommend any books, articles, etc advocating reforms.
Well, as a Wisconsinite I'd be remiss in not pointing out that this is the Chicago Tribune. Chicago and Illinois are always gleeful about the various piles of excrement we land ourselves in here in Wisconsin.
That said, yeah, I also have to be honest. We're down about 1 billion dollars on that Foxconn thing. That's what we're out of pocket. The new governor, wisely, took what remained of our chips and left that table. You get mad, but you just have to chalk it up to a learning experience.
The Illinois people are right on this one by the way. Not even in Illinois would their leaders get away with a 5.5 billion dollar con. The people in Illinois are so used to dealing with corruption that they would have started asking questions and raising a fuss long before it got to that point. Our problem is that we're so accustomed to our corruption that we never raised a fuss until it was way too late.
All that said, in Wisconsin our leaders didn't get away with 5.5 billion dollar con either technically speaking. Scott Walker and his boys got us for about a billion, but they didn't get as much as they wanted. So fibs shouldn't gloat too much, because while I can't see anyone in Illinois getting away with a 5.5 billion dollar pure con, I could see someone getting away with maybe a billion. (It's just that they're far more wealthy than we are, so that billion doesn't hurt as much.)
> you just have to chalk it up to a learning experience
Everyone knew from the start this was a BS deal and never going to happen or make ANY sense. This was pure incompetence at a political level that was paid for by tax payers.
I absolutely don't understand Foxconn's game there. Was this just a scam from the start? What was the upside for them? Or did they actually intend to follow through and just failed?
Hope that the Governor of Wisconsin stayed a Republican? Now, that's not to say Democrats can't engage in grift, but, the deal was started under a Republican Governor in a notoriously corrupt state where the promise of Foxconn jobs was lauded by legislators, the governor, and the former President as a win for the people of the state, for our country, and a blow to China (that we were taking jobs back).
Foxconn's incentives seemed aligned with promising the moon and if those people were reelected, well, wouldn't compensating Foxconn for those promises and their outcome (the election outcome, not the factories) be fair?
But what the hell does Foxconn get out of it? The deal was for tax breaks which only pays off if you have taxes to pay on profits or real estate and they don't have either. They didn't come close to meeting the employment goals for the deal to kick in either. So, they puff up some local Republicans which reflects a bit on the president. Then they embarrass themselves and everyone who promoted the deal and end up in the exact same financial position as before. This just feels like a big screw up more than a conspiracy.
Perhaps you should ask Foxconn why they are so strenuously objecting to the new leadership not holding up their end of the deal?
Many people's gut reaction to a whiff of partisanship here or suggestion of corruption or conspiracy is to push back hard. Well, dammit, what did Foxconn want to get out of it except for billions of dollars in ill-gotten tax incentives?
I'm responding so incredulously to you because everyone's motivations here was advertised loudly. It's not a conspiracy if it happens in broad daylight.
It seems clear to me that they wanted to not have to pay taxes in Wisconsin for many, many years to come.
Foxconn leaders seemed to be trying to create a big project that appeared to create lots of jobs to appeal to Trump (perhaps so the prez could point to it as jobs created, and then maybe Foxconn would get something out of it?) and less caused by the gov of Wisconsin. I agree it looked obviously like a silly deal that made no sense.
Foxconn negotiated a deal with members of a political party that was in power, that deal was an empty promise, and those power brokers used that promise from Foxconn as part of their political messaging with the hope of being reelected.
Had those politicians stayed in office, it's possible they would reward Foxconn for participating in the charade that helped them obtain reelection. Is it certain? No, I won't say it is.
But, what else was Foxconn's goal if not to actually realize those incentives without having to make the investment to justify them? They knew they were promised an enormous incentive by the state, and they knew that they would not fulfill their end of the bargain. If they also knew that they wouldn't realize those incentives, why did they pursue them? The simplest answer is that they fully intended to realize them.
Surely at least some of the negotiators of that deal legitimately believed that the other party - the Republican Governor and majority legislature in the state - would play ball?
If the deal never really made sense and was just a ploy by the Governor to drum up support, then a change in administration would mean that the new administration has no interest in paying off Foxconn for their part in the charade.
My read on the situation is they saw the opportunity to get subsidies and so negotiated to maximize what they were given. I imagine it comes from some maximalist position that says that if you plan to do X, you need to say you'll do 10X so you never 'lose out' on subsidies you might have been able to take advantage of in the good years.
A lot of the reporting at the time emphasized that Foxconn had a history of doing this in other countries. It seems like a negotiating tactic that evolved in an age of cynical political environments where everyone's proximate goal is to announce a 'deal' with the full expectation that they won't be in a position to take credit (or blame) for the quality of that deal.
I don't think Foxconn saw this as screwing anyone. I think they saw it as doing business the way they typically do in China.
What would have happened if this deal had been done in China?
No one would have reported on the failure. The local jobs numbers would have "jumped." Infrastructure would have been "built." Everyone would have gotten a pat on the back and/or promotion for hitting their economic targets.
The weakness of command-style political systems have always been that they incentize systemic lying.
Foxconn is an international company that operates in many countries outside of China. Suggesting they are too simple to realize the business climate is different outside of China seems insulting and infantilizing. Their operating income is ~$180 billion USD a year. They are aware that business conditions are different in different countries.
The Foxconn deal had $3-4.8B worth of subsidies attached, and investigative reporting says the branch of the company executing on the opportunity couldn't even accomplish basic tasks like "Decide what to build" or "Decide what skills were needed in hired staff."
The takeaway is that either (a) everyone who touched the Wisconsin project is an idiot, but an outlier in the company, or (b) the failure to execute in Wisconsin is indicative of the general state of the company.
(a) seems like a stretch, given the project's size and visibility. Ergo, (b).
Leaving a subsidy on the table is not exactly like leaving money on the table for either party. They lower costs and lower the tax revenue from a business, but they don't represent a cost (outside of the cost to negotiate and write the deal). It seems like calling the people involved idiots (or suggesting the entire company is...setting itself up to fail to execute?) requires knowing internal details of Foxconn's financials.
A $1bn increase in revenue would be less than a 1% increase for Foxconn overall. That suggests they're probably willing to bear extremely high costs to establish new sites, as long as those sites will eventually yield significant revenue. Their negotiating tactics here seem short sighted from my point of view, but when you're as large as they are you create your own conditions.
Edit: Like...this deal seems to allow them to operate any of their businesses in Wisconsin. If they decide not to, they burn bridges in Wisconsin, but they wouldn't care about burning those bridges because burning them means they don't want to do business in the state. It seems like all they lose is their negotiators' salaries, small (for them) facilities costs, and whatever general goodwill they lose.
Foxconn was an obvious con from the start. If you go back and look at contemporaneous reporting, even the "MSM" reporting was a bit incredulous - it just was really obvious, with only certain politicians claiming otherwise.
Which is not to say this won't become a cesspool, too. But at the very least, I don't see scummy pols waving wads of cash at Samsung right now.
Another thing is the type of manufacturing Foxconn does is extremely labor intensive, it's essentially assembly shops. No way paying US wages would be competitive for them. But things like semiconductor manufacturing requires way less people so salary differences are negligible.
Foxconn promised a giant fab in exchange for massive tax breaks, and then just took the tax breaks and did nothing. Any reason to expect this is different?