There’s been plenty of debate on the pros and cons of a proposal that would provide incentives for Taiwanese LCD manufacturer Foxconn to build a factory in Wisconsin. Criticism increased after a legislative analysis said the state wouldn't financially break even on the deal until 2043.
But on two Sunday morning political talk shows, “UpFront with Mike Gousha” and “Capital City Sunday,” officials in Gov. Scott Walker's administration said the analysis doesn’t tell the whole story of the benefits or risks of the deal. Proponents said the report doesn’t account for other positive economic effects, while others said it’s tough to predict economic conditions decades in the future.
Foxconn has pledged to invest $10 billion and create up to 13,000 jobs, initially hiring 3,000 employees. The state Legislature is currently considering an incentive package bill that would give Foxconn $3 billion in tax breaks and exempt the company from certain environmental regulations.
Last Tuesday, Wisconsin’s nonpartisan Legislative Fiscal Bureau released an analysis predicting it will take 25 years for the state to recoup its investment.
That’s an important calculation, said Zach Brandon, president of the Greater Madison Chamber of Commerce on “Capital City Sunday,” but one that’s difficult to accurately make when looking so far into the future.
Generally, when looking at economic development, the “window of clarity” only extends to 12 years, he said.
“Thinking about what happens 10 to 12 years from now is really hard, 25 is impossible,” he said.
He gave examples to illustrate the “cautionary tale” of trying to predict the future 25 years in advance. Exactly 25 years ago, he said, Blockbuster Video was the “dominant VHS distributor in the world,” and was bought out by Viacom two years later for over $8 billion.
“What they didn’t see is a guy in Silicon Valley who was mad about a $40 late fee on 'Apollo 13' starting Netflix,” he said. “You can’t expect that what you assume today will be there even in 10 years.”
But the limits of the analysis also hide the potential of the deal, Scott Neitzel, secretary of the Department of Administration said on “UpFront.” Neitzel appeared on a segment with Mark Hogan, CEO of the Wisconsin Economic Development Corporation. Both men were involved in crafting the deal.
The breakeven analysis accounts for the 13,000 Foxconn jobs, but not for the “indirect and induced jobs across the whole state” or a “whole new high tech manufacturing ecosystem.”
“There are going to be benefits beyond what is just in that report that are very hard to quantify using historic models,” Neitzel said.
Brandon pointed to another hard-to-quantify benefit of the deal: the potential re-branding of Wisconsin, which has historically focused on manufacturing and agriculture.
“If we’re able to weave technology and software and hardware into that story line … you actually change the rest of the world’s perception,” he said, adding that would not happen organically, but would require a “concerted effort.”
Neitzel and Hogan also took time to address several points of criticism about the deal.
Some critics have asked for a guarantee that Foxconn will rely on Wisconsin residents and suppliers, expressing fear that Illinois residents will commute across the border to work at the plant. Hogan said that would go against the nature of pro-business legislation passed in Wisconsin in recent years.
Hogan also said that even if the company hires Illinois residents, they would still have to pay taxes to Wisconsin. And with 10,000 construction jobs and 13,000 ongoing jobs, “the fact of the matter is we will have to recruit from outside of Wisconsin,” he said.
Neitzel added that Foxconn is “very committed to being part of the Wisconsin business community.”
Other critics have asked for greater specificity concerning the timeline for job creation. On "UpFront," host Mike Gousha asked if there will be language that will “spell out out job creation goals and target dates,” and Hogan said there would be.
Finally, other critics are concerned that the state is planning to waive certain environmental regulations for the deal, including State Rep. Dana Wachs, D-Eau Claire, who in a separate segment of “UpFront” called the deal a “carte blanche exemption in terms of ecological issues.”
“If you let corporate America just have their way with the environment, you're not going to have good results,” said Wachs, who has announced he's running for governor in 2018.
Neitzel argued that Foxconn “will still have to meet every requirement for air, water, hazardous waste and solid waste.”
“All we’re doing is streamlining some of the upfront paperwork,” Neitzel said. “That doesn't relieve them from anything as far as meeting any environmental regulations.”
Gousha asked whether Hogan believed the state could have “driven a harder bargain” on the deal.
“No, I don’t believe so,” Hogan said. “We truly can sit here today and look at it and say that Wisconsin got a good deal for a lot of money, there's no doubt about it, but there's an incredible commitment on the part of the company, and the opportunity for the state of Wisconsin is limitless.
The potential of the opportunity is why Jeff Mayers, president of WisPolitics.com and a guest on “UpFront,” agreed that the deal would probably pass because “the promise, the potential of it is hard to vote no against.”
Brandon also said he expected the legislation to pass because “it’s a good short-term win,” adding that “in order to guarantee 25 years from now it’s a win, it’s going to take a lot more effort.”