AHEAD, A
% NEW
ECONOMIC
ANALYSIS OF THE
% COSTS
AND
BENEFITS OF
THE
% FOXCONN DEAL
IN
WISCONSIN SHOWS
% THE
INCENTIVE
PACKAGE WAS
SO
% OUTSIZED
EVEN IF
THE
CONTRACT
IS
% RENEGOTIATED, WISCONSIN
WILL
% STILL
BE ON
THE
LOSING
END,
% POTENTIALLY TO
THE
TUNE
OF
% COSTING
THE
STATE
$290,000
PER
% JOB
CREATED.
% THE
STATE DEPARTMENT
OF
% ADMINISTRATION REQUESTED
THE
% STUDY
BECAUSE THE
SIZE
AND
SCOPE% OF
THE
FACILITY
HAS
CHANGED
% SINCE
FOXCONN
PROMISED A
$10
% BILLION
INVESTMENT AND
13,000
% JOBS FROM
FLAT
PANEL
SCREEN
% PRODUCTION
IN
RACINE
COUNTY.
% THE
COMPANY
STANDS
BY
ITS
% ORIGINAL
PROMISE FOR
JOBS,
BUT% GOVERNOR
EVERS
HAS
SAYS
THE
% PLANT
WOULD
EMPLOY
ONLY
1500
% PEOPLE
BY NEXT
YEAR.
% WE
CHECK
IN
SENIOR
ECONOMIST
% WITH
W.E.
UPJOHN INSTITUTE
FOR
% RESEARCH TIMOTHY
BARTIK.
% THANKS VERY MUCH FOR
BEING
HERE.
% >>
THANKS
FOR
HAVING
ME.
% >>
HOW IS
IT IF
THE
FOXCONN
DEAL
% IS
RENEGOTIATED
IT
ACTUALLY GETS
% WORSE FOR
WISCONSIN
TAXPAYERS,
% THAT
$290,000
PER
JOB
CREATED?
% >>
WELL,
IF YOU
HAVE A NEW
% CONTRACT BUT YOU
USE
THE
SAME
% CREDIT
RATES,
THE
COST
PER
JOB
% ACTUALLY CAN
GO
U
P
BECAUSE
THE
% DISCUSSION NOW
IS
THAT
THE
NEW
% PROJECT WITH
FEWER
JOBS WILL
BE
% MORE
CAPITAL
INTENSETIVE,
HAVE A
% HIGHER
RATIO
O
F
ROBOTS
TO
% WORKERS.
% THE
INVESTMENT TAX
CREDITS
WOULD
% END UP
ACTUALLY
BEING A
HIGHER
% CREDIT
RATE
PER
WORKER.
% ORIGINALLY IT
WAS
OVER
$170,000
% PER
JOB.
% NOW
WE'RE
TALKING
ABOUT
% SOMETHING THAT MIGHT
BE
AS
MUCH
% AS
$290,000 PER
JOB.% >>
SO
WHAT
KIND
OF
RENEGOTIATION
% WOULD HELP
LEVEL
THE
COST
% BENEFIT
RATIO
HERE?
% >>
WELL,
I
THINK
THE
STATE
% SHOULD
EXPLORE AT
LOARG
!
LOWERING
THE
% COST
PER
JOB
TO
SOMEWHERE
% BETWEEN
$20,000
AND
$30,000
PER
% JOB.
% EVEN
THE
MA'AM
!
AMAZON
NEW YORK DEAL
% WAS
ONLY
ABOUT
$40,000 PER
JOB.
% WHEN
THE
JOB
WAS
ANNOUNCED,
% PEOPLE WERE
KIND
OF
FREAKED OUT
% BY
THE
WHOLE
THING
BECAUSE
IT'S
% SO
FAR
OUTSIDE WHAT
WE
USUALLY
% SEE
IN
ECONOMIC
DEVELOPMENT.
% IT'S
AT
LEAST
SIX
TO
SEVEN
TIMES
% TYPICAL INCENTIVE.
% IT'S
EVEN
MUCH
GREATER
THAN
THE
% INCENTIVES
OFFERED
TO
AMAZON
BY
% NEW YORK.%>>
ACCORDING
TO
YOUR
ANALYSIS,
% UNDER BEST-CASE
SCENARIOS
FOR A
% RENEGOTIATED
DEAL, HOW
MUCH
% COULD
WISCONSIN
SAVE?
% >>
OH,
WELL,
YOU
COULD
SAVE AN
% AWFUL LOT.
% YOU
COULD
GO
-- AS
I
SAID,
YOU
% COULD
GO
FROM
MAYBE
$290,000 PER
% JOB
TO DOWN
TO
$25,000
PER
JOB
% AND
THEN
THE
DEAL
MIGHT
ACTUALLY
% PAY
OFF
FOR
WISCONSIN
RESIDENTS.
% THE PROBLEM
IN
PAYING SO
MUCH
% PER
JOB,
IT'S
NOT
THAT
NEW
JOBS
% AREN'T WORTH
SOMETHING.
% THEY
ARE
WORTH
SOMETHING.
% THEY
BRING
US
TAX
REVENUE.
% BUT
THERE
ARE
ECONOMIC
COSTS
TO% THESE
THINGS.
% THEY
COME OUT OF
THE
STATE
% BUDGET SOMEWHERE.
% AND WHETHER OR NOT
YOU
RAISE
% TAXES
ON
HOUSEHOLDS
OR
OTHER
% WISCONSIN
BUSINESSES OR
CUT
% SPENDING,
CUT
PUBLIC
SCHOOL
% SPENDING,
CUT
UNIVERSITY
% SPENDING,
THERE'S AN
ECONOMIC% COST TO THAT.
% THERE'S
NOT A
FREE
LUNCH.% >>
IMPLICATIONS
ALL
AROUND
% EITHER
WAY.
% >>
RIGHT.
% I
MEAN,
BASICALLY, YOU
KNOW,
% CREATING
JOBS
IS
VALUABLE.
% AND
STATES
ARE
ACTIVELY
ENGAGED
% IN THIS.
% WE NEED TO THINK ABOUT WHAT ARE%
THE BEST
WAYS
TO
CREATE JOBS.
% DO WE
NEED
TO
OFFER
TAX
% INCENTIVES?
% DO WE NEED
TO
OFFER
BUSINESSES% VARIOUS
TYPES
OF
SERVICES?
% CUSTOMIZED JOB
TRAINING, SMALL
% BUSINESS
DEVELOPMENT
CENTERS,% SMALL
BUSINESS
INCUBATORS.
% ALL
THESE
THINGS COST
MONEY,
% SOME
MORE
EFFECTIVE THAN OTHERS.
% IF YOU
END
U
P
SPENDING
$290,000
% PER
JOB,
IT'S
VERY
HARD TO
HAVE
% THAT
PAY
OFF
BECAUSE
THOSE
ARE
% BENEFITS.%YOU HAVE TO PAY
FOR
THE
% INCENTIVES AND
THAT
ENDS
UP
% COSTING YOU MORE
THAN
THE
JOBS
% ARE WORTH.
% >>
SO WHAT
IS
YOUR RESPONSE
TO% THE
OUTGOING
CEO OF
THE
% WISCONSIN
ECONOMIC
DEVELOPMENT
% CORPORATION WHO
DISPUTES YOUR
% NUMBERS AND
SAYS
YOU
MAKE
% ASSUMPTIONS THAT
COULD
NOT
OCCUR
% UNDER
THE
CONTRACT,
NAMELY,
THAT
% THE
COMPANY
WOULDN'T
BE
ELIGIBLE
% FOR
JOBS
PAYMENTS WITH
THE
% NUMBER
OF
EMPLOYEES AND IT
WOULD
% DEFAULT ON THE
CONTRACT
IF
IT
% DOESN'T
HAVE
5,850 JOBS
BY
THE
% END OF
2023?
% >>
I THINK
IT'S A
WEIRD
DEFENSE
% TO
SAY BEST-CASE SCENARIO IS
THE
% COMPANY
DEFAULTS
AND
WE
CALL
% BACK
ALL
THE
INCENTIVES
AND
% ASSUME
FOXCONN
STILL KEEPS
ALL
% THE JOBS THERE.
%
THAT'S KIND
OF A
WEIRD BEST-CASE
% SCENARIO,
THAT
SOMEHOW
1500
JOBS
% ARE
CREATED,
W
E
PAY
OUT A
HUGE
% AMOUNT
UPFRONT,
WE
ESSENTIALLY
% PROVIDE
FOXCONN
WITH A
% NO-INTEREST LOAN
FOR A
NUMBER
OF
% YEARS.
% THEN WE
GO
TO
COURT
AND
TRY
TO
% CLAW THAT
BACK.
% IS
THAT
GOING
TO
OCCUR
LEGALLY
% OR
POLITICALLY?
% WOULD THAT
ACTUALLY
OCCUR?
% THAT'S
THE BEST-CASE
SCENARIO.% ON THE OTHER HAND,
IF
FOR
SOME
% REASON ALL
THE
JOBS
WENT
AWAY,% WE
COULD
STILL
DO
THAT.
% WE'D
HAVE A COST OF
MAKING
THIS
% NO-INTEREST LOAN
AND
HAVE
NO
% JOBS IN
THE
END.
% CLAIMING
THAT
DEFENDING A DEAL
% BY
SAYING
THAT
DEFAULT IS
THE
% BEST
OPTION FOR
RESIDENTS
OF
% WISCONSIN
IS A
SOMEWHAT STRANGE
% DEFENSE OF THE
DEAL.% >>
FOR
ITS
PART,
FOXCONN SAYS
% THAT YOU
MISREAD
THE
IMPORTANT
% MULTIPLIER
EFFECT
OF
ECONOMIC
% DEVELOPMENT
PROJECTS LIKE
% THEIRS?
% DID
YOU
MISREAD
THE
MULTIPLIER
% EFFECT?%>> I
USED
THE
MULTIPLIERS THAT
% WERE USED BY
THE
VARIOUS
% CONSULTING FIRMS
THAT
ADVISED
% BOTH
FOXCONN
AND
THE
STATE.
% PEOPLE ALWAYS
LIKE
TO
CLAIM
% MAGIC
MULTIPLIERS.
% IF YOU
ASSUME A
LARGE
ENOUGH
% MULTIPLIER,
ANY
INCENTIVE
% PACKAGE CAN PAY
OFF.
% FOR
EVERY
JOB,
THERE'S
GOING TO% BE
FIVE,
SIX,
TEN
OTHER
JOBS.
% BUT
USUALLY
WHEN
PEOPLE
LOOK
% HARD
AT
MULTIPLIERS,
IT'S
PRETTY
% HARD TO
GET
THEM
MUCH
GREATER
% THAN
TWO
OR
THREE.
%
YOU
KNOW,
I
ASSUMED A
MULTIPLIER% BETWEEN TWO
AND
THREE, WHICH
WAS
% THE
MULTIPLIER
ASSUMED
BY
THE
% CONSULTING FIRMS
THAT
BOTH
THE
% STATE AND
FOXCONN
RELIED
ON.
% >>
ALL
RIGHT.
% WE
LEAVE
IT
THERE.
% THANKS FOR
TALKING
WITH
US