Give Foxconn Nothing

Lansing politicians should not make tools out of taxpayers

Photo via Wikicommons

Last Thursday night the Wisconsin Assembly passed a $3 billion subsidy package for Foxconn, a multinational corporation famous for manufacturing Apple’s iPhone, among other items. The subsidy, Republican leaders and others said, was needed to ensure the corporation would choose Wisconsin for a new manufacturing facility.

I say that Foxconn’s decision to locate in Wisconsin is just one more way for Badgers to lose to Wolverines. It has been reported that the state of Wisconsin will spend $230,000 or more for each new worker. Michigan may, however, be in the running for a different Foxconn plant. It is one we should not subsidize. This corporation has a reputation of making promises it doesn’t keep and has made public statements about future investments around the world that strain credulity.

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State politicians run “economic development” programs that do not create net new jobs. They are so ineffective, in fact, some evidence shows they may hurt economies. They rob the many to pay the few, which is fundamentally unfair. They also limit revenues for vital public services — police and courts, for instance — that would make our streets, cities and states safer. If Wisconsin politicians want to open the wallets of their residents and burn the cash inside, let them. Michigan lawmakers should spare our residents the same indignity.

Last July Michigan’s lawmakers started a new program called “Good Jobs for Michigan.” Supporters swore it was a “tool” necessary to create new jobs in Michigan. I call it “New MEGA” because of its many similarities with the failed Michigan Economic Growth Authority, which handed out business subsidies.

Many people told the Legislature that this so-called tool could help lure Foxconn to Michigan. (Watch the video.) One Lansing political operative even told the press, “It would be fun to create the mail piece that blames a member for losing good paying manufacturing jobs to Wisconsin thanks to their ‘no’ vote” on the legislation.” The bill was passed into law, but Foxconn went to Wisconsin anyway.

There is a long list of academic studies from researchers with no stake in business attraction that show business subsidy programs are largely ineffective. One paper, “The Failure of Economic Development Programs,” gives interested readers a review of what other scholars have had to say on the subject.

There are plenty of other studies, including five on Michigan’s old MEGA jobs program alone, and four of those show a zero or negative impact. So whether we’re talking about old or new MEGA, the programs are ineffective. Lansing politicians have already put up billions of our dollars in the name of job creation with little to show for the effort. These big business subsidy programs should be discarded, not adopted anew.

There are other reasons not to dangle taxpayer loot in front of Foxconn. Chief among these, arguably, is that they already have a strong incentive to choose Michigan. Published reports indicate Foxconn is interested in doing research and development for autonomous vehicles. Michigan is one obvious, natural choice then: This is where a great deal of the R&D talent is already located.

Foxconn has also made promises it has not kept. During the debate over whether to pass New MEGA, a story emerged about Foxconn and its promise to build a manufacturing facility in Pennsylvania. The promised $30 million investment to create 500 jobs never happened. Reporter Todd Frankel wrote, “It was the start of a mystery, created by a chief executive known to promise projects all over the world that never quite pan out.” Another reporter, Tim Culpan, has added up $27.5 billion worth of investment commitments purportedly made by Foxconn in the last year alone. He says that figure is more than Foxconn has spent in the past 23 years.

Maybe this is a cynical observation, but I would suggest that Foxconn knows how to play politicians against each other to wrest subsidies away from taxpayers. It’s been done before and none other than Detroit automobile legend Lee Iacocca has said as much, as quoted in the book “Poletown: Community Betrayed.”

Ford, when I was there, General Motors, Chrysler, all over the world, we would pit Ohio versus Michigan. We would pit Canada versus the U.S. We’d get outright grants and subsidies in Spain, in Mexico, in Brazil — all kinds of grants. With my former employer (Ford), one of the last things I did was, on the threat of losing 2,000 jobs in Windsor, I got $73 million outright to convert an engine plant. … I’ve had great experience in this. I have played Spain versus France and England so long I’m tired of it, and I have played the states against each other over here. … You could give a litany of these kinds of things.

Supporters of corporate handout programs such as New MEGA swear their new and old subsidy “tools” are necessary to create jobs. But if they succeed in subsidizing Foxconn and its chairman, then Lansing politicians have made tools of taxpayers. They’ve turned us into a clumsy and ineffective machine for ladling wealth into the laps of a multinational corporation and its billionaire chairman.

The Legislature should end all of Michigan’s corporate handout programs and it should start with the one it just adopted.

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Back to the MEGA Future: Good Jobs for Michigan Reinvents Failed MEGA Program