When Scott Walker announced his candidacy for the President of the United States on July 13, 2015, he sent an email to supporters explaining why he was running for the Republican nomination.
“I’m a conservative because I believe in a smaller government, lower taxes and a free market,” Walker wrote.
744 days later, sharing a stage with Donald Trump, the man who defeated him, Walker announced he was giving $3 billion in taxpayer money to a Taiwanese electronics manufacturer, Foxconn. The company is best known for making component parts for the iPhone and other Apple products. The stunning deal is 50 times larger than any previous public incentive package.
The Foxconn factory will likely be located in the Congressional district of House Speaker Paul Ryan, an Ayn Rand acolyte and avowed champion of free enterprise. Ryan, who joined Trump and Walker for the announcement, lashed out Obama for supporting “big business” with “crony capitalism” in a 2012 column entitled “Republicans Must Return To Free Market Principles.”
The protection of big business remains a common thread in Mr Obama’s policies, which have come at the expense of the consumer, the taxpayer and the entrepreneur. A growing coalition of reformers — rooted in citizen movements across the political spectrum — reject this pernicious crony capitalism. Our solutions promote an opportunity society, one that is rooted in the US commitment to free enterprise
As it turns out, this professed commitment to “free enterprise” was a fraud.
In announcing the deal, Walker took no questions from the press. Asked later about critics who say the massive taxpayer subsidy to a profitable foreign manufacturer is unjustified, had a tart response: “Go suck lemons.”
A workforce paid for by Wisconsin taxpayers for the benefit for Taiwanese shareholders
Walker claimed a new Foxconn manufacturing plant in Wisconsin will create 13,000 new jobs.
— Wisconsin DSPS (@WI_DSPS) July 28, 2017
But the Memorandum of Understanding between FoxConn and Walker only states that Foxconn will create “up to 13,000 jobs.” Meanwhile, the company says it “would be hiring 3,000 workers over four years.”
If 3,000 jobs are created, that means Wisconsin taxpayers will be paying Foxconn $1 million per new job. Walked has touted that the average pay for newly created jobs will by about $53,000 annually. At that salary, the subsidies paid out by taxpayers over 15 years will exceed that total amount paid to workers by more $200,000 per worker.
Foxconn will essentially be run by a workforce paid by Wisconsin taxpayers, while the profits go to Taiwanese taxpayers at the behest of politicians who cast themselves as champions of the free market.
A $200 million check
Normally, state incentives are dolled out in tax credits. This makes them a little easier to swallow. Effectively, the companies are being paid through relief from a tax bill that might not otherwise exist.
Wisconsin, however, already has eliminated taxes for state manufactures.
That means the incentives to Foxconn will have to be paid to the company in cash. Wisconsin taxpayers would send a $200 million check to the company every year for 15 years.
Beyond $3 billion: “Huge undisclosed subsidies”
The $3 billion subsidy is stunning, but it’s also just the beginning. It does not account for local governments which “will almost certainly have to put up huge undisclosed subsidies.”
Local governments will have to shell out for “the sewer lines, streets and other infrastructure to be built in what are now undeveloped fields.” In order for the deal to go through, state law would have to be amended to allow for local governments to borrow more money to finance the products. No one knows exactly how much.
Ideally, the loans are paid back through local tax revenue from Foxconn and others. But the deal could place local communities are serious financial risk.
The state would also need to borrow another $250 million to complete a highway.
The silence of the Kochs
Charles Koch, in a 2015 speech, made an impassioned case against “corporate welfare.”
Conservative billionaire Charles Koch told his ultra-rich friends that they face a “life and death” decision whether to keep lobbying for tax breaks and government subsidies.
“Business leaders (must) recognize that their behavior is suicide, that it is suicide long term. To survive, long-term, they have to start opposing, rather than promoting, corporate welfare,” Koch told about 450 allies at an Orange County, Calif., summit that began Saturday.
But the Wisconsin branch of Americans for Prosperity, the political group created by the Kochs, has remained conspicuously quiet about Walker’s deal with Foxconn.
The group itself has not officially commented although its executive director, Eric Bott, retweeted another organization praising the deal.
The MacIver Institute is another “free market” group in Wisconsin that works closely with Americans For Prosperity. It has unabashedly promoted Foxconn’s $3 billion subsidy.
Big promises, modest delivery
Foxconn has a reputation for making big, flashy announcements and failing to follow through. The company announced plans to build a $30 million plant in Pennsylvania and then dropped it. It also announced a $1 billion investment in India that never happened.
The company has promised capital investment in Wisconsin, “up to $10 billion,” which exceeds the total capital investment the company has made over the last five years. Around the world, it has committed to $27.5 billion in capital investments, more than the company has made in the last 23 years.
Not a done deal
Although Walker invited Trump to celebrate, the Foxconn deal is not done. Walker needs approval from the legislature to actually provide Foxconn what he has promised. He just called a special legislative session for that purpose.
The legislature would need to sign off on the state subsidies and the local government subsidies. Walker is also asking the legislature to waive the environmental impact report and a slew of environmental regulations.
The bill would “allow Foxconn, without permits, to discharge dredged materials, fill wetlands, change the course of streams, build artificial bodies of water that connect with natural waterways and build on a riverbed or lake bed.”