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AUGUST 23, 2023
On the Prospect website

Dayen on TAP
The Foxconn Debacle Is What Economic Development Used to Look Like
A valuable lesson for the industrial policy of the future
As we await a Republican presidential debate that will not feature the man who will win the Republican presidential nomination, the mind naturally wanders. The Washington Post, in fact, wandered about 30 minutes from the Milwaukee location of the debate, and found the Foxconn globe, a white elephant that symbolizes much more than the failure of Trumpian boasting on industrial policy.

In 2018, then-President Trump bragged that this facility in Mount Pleasant, Wisconsin, would be a shining example of MAGA, proof that he could bring back Midwestern manufacturing jobs. Foxconn, the Taiwanese conglomerate, was lured to cheese country by the promise of $3 billion in tax credits if it supplied 13,000 jobs. Local governments and the state spent a further $500 million to secure the land, pay off homeowners and bulldoze their properties, and lay down roads and power to the plant.

Outside of trying to market the globe as an event space, the results have been meager. After racing through numerous ideas for what to actually make at the facility, currently it houses a small computer server operation and solar inverter company Enphase, which ironically expanded into the operation mainly because of the Inflation Reduction Act (IRA). Much of the space is being used for storage. There are fewer than 1,000 jobs at the site, more than 90 percent below what was promised. The few local defenders of the project are touting a Microsoft data center on the campus, but data centers are just racks of servers, with few if any jobs created.

The $3 billion, offered by Republican Gov. Scott Walker, was downgraded to an $80 million subsidy by Democrat Tony Evers, on the condition of 1,500 jobs. Foxconn to date hasn’t hit that. But the Village of Mount Pleasant and Racine County are on the hook for significant borrowing costs on money issued for water and sewer systems. If Foxconn stiffs the village starting in January on its approximately $26 million in annual property taxes, the fiscal situation could turn dire.

It should be said at this point that this is what the last 40 years of what passed in America for government-directed economic development looked like. Cities and states gave away scads of public money to corporations, who maybe or maybe not fulfilled their promises. There were few if any strings attached, and little recourse if the whole enterprise didn’t pan out. These were corporate welfare payments that pitted localities together in a race to the bottom for how much to shell out to get some glimmer of hope on job creation.

It didn’t work. And though the Post story hints at how the Foxconn debacle could make the Biden administration’s industrial-policy measures look bad, this White House is trying something a bit different. The IRA gives tax credits to specific types of manufacturing production, with bonuses for specific conditions, like prevailing construction wages and local apprenticeship programs. In implementation, agencies have given weight on the handful of grants available from the IRA and the CHIPS and Science Act to good jobs and community benefits. It has not all been smooth—look at the TSMC plant in Phoenix—and more could be done. (Some of the more stringent conditions didn’t get through Congress.) But there’s at least a semblance of a plan in the Biden industrial policies to ensure that the successes of this policy benefit workers, communities, and the broader economy.

That’s a very different thing than just throwing money at whatever company comes along. The Biden policies have taken incoming fire from the center-left for trying to do too many things at once. Foxconn is what it looks like when you do the opposite, when you just give away money for nothing.

The Foxconn model was the standard of economic development in cities and states for decades. (There’s frankly too much of that being replicated at the state and local level today, on the backs of the federal IRA and CHIPS benefits.) It’s been shown to be extremely treacherous and costly even when it works out. As we enter this era of experimentation where the state has renewed interest in industrial policy, Foxconn should be a lesson to everyone.

Big Tech Has Penetrated the GAO
How the industry is positioned to shape the debate over U.S. industrial policy, and generally lobby for its interests, from within the ‘congressional watchdog’ agency BY MARIAM BAKSH
The Return of ‘Whites Only’ Signs?
A ruling in Illinois from a Democratic-approved judge would invalidate the Equal Credit Opportunity Act in actions taken before the application stage. BY DAVID DAYEN
The Conflicted Analysis of What an Auto Workers Strike Would ‘Cost’
General Motors and Ford are clients of Anderson Economic Group, which released a study about a potential strike’s cost to ‘the economy.’ BY SARAH LAZARE
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