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Why Wisconsin Should Renegotiate Its Foxconn Contract

Gov. Tony Evers should renegotiate Wisconsin’s contract with Taiwan’s electronics giant, Foxconn. Foxconn has repeatedly changed the terms of the original deal. Our governor and legislative leaders have a responsibility to respond by protecting the interests of Wisconsin.

It has been more than two years since Gov. Scott Walker negotiated the largest taxpayer-funded state subsidy to a foreign corporation in U.S. history. While Wisconsin and Mount Pleasant have lived up to the terms of the agreement, investing close to $1 billion and evicting local homeowners, Foxconn has not.

Foxconn contracted to invest $10 billion in a massive liquid crystal display Gen 10.5 plant, employing 13,000 manufacturing workers at an average salary of $35,000.

• Foxconn failed to meet its first-year employment target.

• Projected investment has plummeted from $10 billion to $2 or $3 billion.

• Instead of hiring manufacturing workers, Foxconn now claims most of the employees will be engineers.

• It now plans a much smaller Gen 6 plant, thus no vaunted multiplier effects from glass screens needed for the originally proposed Gen 10.5 facility.

None of this is surprising. Foxconn is notorious for promising massive job creation developments only to later renege on its promises. From Pennsylvania to Vietnam, from Brazil to Mount Pleasant, Foxconn hasn’t lived up to investment and employment promises.

It is clear that Walker’s rush to secure this deal was motivated by his failure to meet his first campaign’s failed promise to create 250,000 private-sector jobs by 2014. Following his short-lived presidential run, Walker needed something to revive his brand. “Wisconn Valley,” as he labeled it, was a politically expedient stunt, and one that President Donald Trump also championed in hopes of keeping Wisconsin in his electoral camp with a promise to bring back manufacturing.

Foxconn CEO Terry Gou’s actions were also politically motivated. He was justifiably concerned about the impact of Trump’s trade war with China on his firm’s profits. Promising a massive U.S. investment appeared an effective way to appease Trump. It didn’t hurt that the president’s then-chief of staff, Reince Priebus, and then-House Speaker Paul Ryan, had strong ties to Mount Pleasant. The bill for this Republican boondoggle was offloaded onto Wisconsin taxpayers, K-12 students, higher education students, the environment and Mount Pleasant-area homeowners.

Since Foxconn has changed its plans, it would be irresponsible to let the contract stand unchanged. No bank would loan you money to build a restaurant and then let you keep the cash to only open an ice cream push-cart instead.

What should the state ask for?

1. The state agreed to pay 17 cents on the dollar for job creation, 70 percent more than the 10 cents Wisconsin normally provides. This was presumably justified because of the scale of the Foxconn investment. Now that it is scaled back, so should the state’s commitment.

2. Wisconsin should not subsidize the employment of non-Wisconsin residents. The public rationale for investing in Foxconn was to promote employment for Wisconsin’s unemployed and underemployed workers. We should not use state tax dollars to employ Chinese executives or Illinois engineers.

3. Foxconn should commit to a “Buy Wisconsin” program. The inflated projections for what apologists call a “game changer” project were based on multiplier impacts with other Wisconsin firms. A “Buy Wisconsin” program will help maximize the impact of the Foxconn procurement in the state similar to China’s “Buy China” effort.

4. The contract should include a “Hire Wisconsin” program where Foxconn commits to hiring 35 percent of its employees from residents of disadvantaged communities. Northwest Mutual and the Bucks did it. There’s no reason Foxconn can’t.

It is important to remember that Wisconsin has all but eliminated manufacturing taxes. As a result, every dollar the state invests in Foxconn means less money for education — K-12 as well as higher education — infrastructure, and support for local government, including fire and police protection and for natural resource protection.

Evers has an obligation to Wisconsin’s taxpayers to ensure that our tax dollars are soundly invested.

Jeffrey Sommers is professor at the University of Wisconsin-Milwaukee, and senior fellow at its Institute of World Affairs. He also is visiting professor at Stockholm School of Economics in Riga. His views are his own and do not represent UW-Milwaukee’s.

Michael Rosen is a retired professor of economics at Milwaukee Area Technical College and retired head of their faculty union AFT Local 212.

This article originally appeared on The Cap Times (Madison).

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