Wineke: We overpaid for Foxconn
Amazon has chosen New York City and Crystal City, Virginia, as sites for its new headquarters, and already critics are complaining about the subsidies being offered to the giant online retailer.
New York is offering the company $1.5 billion in subsidies. Virginia is kicking in another $573 million and change. In return, each entity will receive an estimated 25,000 new jobs paying an average wage of more than $150,000 per year.
The critics’ argument is, basically, that it is insane for governments to offer such massive subsidies to a company worth a trillion dollars, plus or minus a few billion.
Maybe so. But we live in Wisconsin, which is investing something like $4 billion in Foxconn, a Taiwan-based corporation that promises to create 13,000 new jobs over time to build – well, we aren’t yet quite sure because the company keeps changing its story.
What struck me reading these reports is that, if all goes well, Virginia will be spending something like $22,000 per job created and Wisconsin will be spending north of $315,000 per job.
The Wisconsin jobs, at first estimate, were to pay an average of $53,000 per year. I’m not sure the comparison is totally relevant, given the fact that living expenses in the Washington D.C. and New York City areas are much higher than they are here – and because Foxconn now plans to build much of its product with robots, suggesting it will hire far fewer blue-collar workers than originally estimated.
Also, the Amazon project will involve all sorts of infrastructure proposals that will raise the taxpayers’ price tab, just as the Foxconn project did in Wisconsin.
Nevertheless, the difference between $25,000 per job created and $330,000 per job created is kind of noticeable.
Especially since Amazon has a record of doing what it promises and Foxconn doesn’t.
Can some of this be renegotiated? I have no idea. My guess is that companies like Foxconn (and, for that matter, Amazon) hire very good lawyers who know how to negotiate very good contracts.
I know that Foxconn won’t get all the subsidies it promises if it doesn’t hire all the workers it promises to hire. I also know that we’re on the hook for at least $1 billion of those subsidies no matter what the company does.
So, welcome to the mansion, Gov.-elect Tony Evers.
The other thing I find weird about the Foxconn deal is that, from everything I have read, it was originally spelled out on a napkin when Gov. Scott Walker and Terry Gau, chairman of the company, met to discuss the possibility.
What is it that Republicans have about napkin negotiations?
In 1974, economist Arthur Laffer met with Dick Cheney and Donald Rumsfeld and spelled out his famed “Laffer Curve” on a restaurant napkin. The idea was that cutting taxes would result in increased government revenue – an idea that remains popular in Republican ideology to this day, despite the fact it doesn’t work.
Alas, it’s all water over the dam. We are going to be on the hook for Foxconn subsidies for decades to come and everything else in the state is going to suffer because of it.
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