My column for the Washington County Daily News is online. Here you go.
It is almost impossible to overstate how important the recently announced Foxconn deal is for Wisconsin. Economically, culturally, and politically, it is the biggest deal for Wisconsin in a generation.
The economics of the deal are astounding. Foxconn is a Taiwanese company that manufactures thousands of products all over the world. Its revenues exceed $136 billion per year and it employs well more than a million people all over the globe. The plant planned for Wisconsin to build advanced screens will be huge, but it will not even be Foxconn’s largest.
At 20 million square feet, the planned Foxconn facility in Wisconsin will be one of the largest in the world. It is estimated that Foxconn will spend $10 billion to build and equip the new facility and they have committed that $5.7 billion of that will be spent in Wisconsin. The construction alone will support 10,000 construction jobs for four years and 6,000 additional indirect jobs.
That’s just to build it. The ongoing economic impact is even more massive.
Foxconn estimates that the facility will eventually directly employ 13,000 people and indirectly employ an additional 22,000 people at an average wage of $53,875 plus benefits per year. They plan to spend $4.26 billion per year to supply the facility with about a third of those purchases happening in Wisconsin. All told, the facility is estimated to have at least a $7 billion annual impact on Wisconsin and generate an estimated $181 million in annual tax revenues. All of these estimates were done by Ernst & Young.
Economically, this single facility will have a generational impact on Wisconsin on the scale of some of the other major manufacturers of Wisconsin’s storied past. Culturally, it will have a similar impact.
Wisconsin has a proud legacy in making things. Manufacturing has been a pillar of the state’s economy for over a century. Due to many trends outside of the state’s control like automation, globalization, trade policies, etc., the state’s manufacturing sector has been eroding for years. Since 2006, Wisconsin shed 45,598 manufacturing jobs as other sectors grew. The state boasts some terrific manufacturing businesses, but as a sector, it has been in decline in the state.
The drain of manufacturing out of the state has not only drained jobs, it has drained neighborhoods, towns, and communities of their vitality. The Foxconn plant plugs that drain and pumps new manufacturing jobs, money, and investment into the state. It is also almost certainly the beginning of a flow of companies investing in Wisconsin. Wisconsin has made its mark again as a global center for high-tech manufacturing. Other companies will undoubtedly follow Foxconn’s lead.
The political impact of Foxconn is also substantial. There is no dispute that Gov. Scott Walker and the Republican leaders deserve a tremendous amount of credit for brokering the deal to bring Foxconn to Wisconsin. As the legislature goes into a special session this week to finalize and pass the incentive package, it appears that the state is getting a bargain. In a perfect world, taxpayers would not have to compete to lure businesses with tax incentives and corporate welfare, but that is not the world we live in.
Taxpayers are offering Foxconn about $3 billion in mostly income tax credits over 15 years and a $150 million sales tax exemption. Bearing in mind that this is mostly exemption from taxes that would not have been collected anyway without Foxconn locating in Wisconsin, it is a good deal and the taxpayers will reap a substantial return on their investment. Furthermore, the credits are tied to Foxconn’s actual performance in creating jobs and making capital investments in Wisconsin. If Foxconn fails to live up to its commitments, the taxpayers are not obligated to extend the incentives.
It must be acknowledged, however, that the Foxconn deal would not be happening had it not been for Walker and the Republican transformation in Wisconsin over the last seven years. Decisions like Foxconn’s consider hundreds of factors that are outside of the realm of politics. Conservatives often remind that government do not create jobs, but they create an environment in which business can flourish and create jobs. Walker and the Republicans have created just such an environment. Things like a balanced budget, regulatory reform and right to work combine with a general business friendly attitude to create an environment in which businesses can succeed. The Foxconn decision is not just the result of an agreement on an incentive package. It is the culmination of years of decisions making Wisconsin a better place to do business.
The Foxconn deal may have guaranteed Walker’s third term, should he choose to run for reelection, but more importantly, it has affirmed the correctness and importance of the conservative policies he has advanced. Now we must continue and accelerate those policies to capitalize on the momentum.