Sunday, November 5, 2017

The Wisconsin Idea: The Possibilities Of Cooperation

The push and pull forces of development seem to be at odds across the State of Wisconsin. Rarely does it seem that cooperation or a more regional perspective takes precedence in molding economic development around the state. The Governor has his take, mayors have theirs and different private players in the different cities have theirs.

Transportation (and its routes) takes a certain shape in one locality, while a completely different strategy prevails elsewhere; with no cooperation between the two in the final product, even though agglomeration economies are there to be had.

Energy and environmental policy shares this same blinder. Rather than working together to decrease energy costs, to upgrade systems, to protect the environment, parochial self-interest prevails and we all end up less efficient and less attractive for businesses or residents.

Public policy (heavily influenced by private interests) seems to be encouraging a "me first" attitude. Which is fine for many decisions. But when transportation, the environment, education, and health care issues (which impact every citizen) are being planned, a broader metropolitan, statewide or regional perspective is imperative.

We need to retreat from the quick, flashy impulsive economic development paradigm that currently operates across the state.

PAY-TO-PLAY DEVELOPMENT

Corporate welfare is growing in Wisconsin. Scott Walker has transformed public aid to encourage private investment into a shadowy backroom shakedown. The former Commerce Department was turned into the Wisconsin Economic Development Corporation (WEDC) by Scott Walker.

The WEDC has been unaccountable and unable to track job growth or even keep good records on how much they are giving away and to whom.

Walker and Wisconsin Republicans have whole-heartedly embraced crony-capitalism. They are more than happy to mortgage the future of Wisconsin residents and the environment for flashy press releases, news conferences, and campaign contribution promises.

Giveaways to Amazon in Kenosha and the looming Foxconn welfare are the most recent examples of Scott Walker's corporate welfare bonanza. And, Amazon has their hand out again hoping to bribe their way to a few more bucks at the Wisconsin taxpayers' expense. As Henry Grabar wrote, "North American cities have debased themselves in the Amazon HQ2 reality show. The worst is yet to come."

As John C. Brown detailed:
The Foxconn project comes at a high cost with uncertain economic benefits, but clear political payoffs. The political economy of Foxconn suggests who the winners will be: the governor of the state, for whom the proposal is the cornerstone of an effort to redeem himself on a pledge of job creation; the Speaker of the House of Representatives, who can claim credit for a multi-billion infusion of investment in his district; and owners of land for the greenfield site, who will be paid sums well above the going price for farmland. For most of the rest of the state’s 2.8 million employed residents, the Foxconn deal likely misses the target. Near-term, it guarantees all residents will pay millions of net costs in higher taxes or reduced services. Promised for the longer term are jobs most likely concentrated in one of the most prosperous regions of the state and mostly inaccessible to those in the greatest need of an effective—and equitable—strategy for economic development.
Bruce Thompson concluded, "Bribing companies to relocate here doesn't work...Wisconsin’s attempts to lure companies—particularly manufactures—through subsidies have been largely ineffective and threaten to become increasingly expensive, by promoting an arms race among states...It is past time for our state’s leaders, particularly those charged with development in Wisconsin, to take advantage of increasing research data on what works and what does not."

Marc Eisen highlights better public policy pillars for economic growth:


ENVIRONMENT & DEVELOPMENT

In an odd (dis)incentive toward good environmental policy, Scott Walker is proposing a fee for Wisconsin electric and/or hybrid vehicles. A policy which would end up discouraging behavior that would be environmentally and economically positive. We would all (logically) prefer less dependence on oil, less pollution and the encouragement of green policies.
Walker's comments put him in the camp of Republicans who have argued owners of electric and hybrid vehicles should pay higher fees because they don't contribute as much toward maintaining roads. The state's 32.9-cents-per-gallon gas tax is its main source of funding, but electric vehicles don't use gas and hybrid vehicles use far less of it than standard vehicles.
It's all about the road-building cabal and the Republican's never-ending boosterism for such. The persistent march of sprawl ... wasteful, inefficient and unhealthy. Walker and Wisconsin Republicans would rather discourage clean energy (which results in cleaner air and water) and connective mass transit options; they prefer roads, interchanges and off-ramps.

Yet this continual spreading of concrete is also waterproofing the land from absorbing rain water...which is resulting in more destructive flooding.



Here, again, in numerous (environment, energy, development, transportation) instances we see the Republican position is in direct opposition to the best interests of the citizens. In fact, their position is wasteful, inefficient and harmful.

MILWAUKEE: WISCONSIN'S ECONOMIC ENGINE

Milwaukee has been on a roll. New development and redevelopment has been at a brisk pace for the past few years.

Often, surrounding such development, there are questions about funding, winners and losers, and equity in the location of these investments.

Recently there has even been talk of allowing a dedicated sales tax to fund certain programs.

Minneapolis/St. Paul and Indianapolis have been the economic stars of the Midwest over the past few decades. One of the key tools used in their ascension was the implementation of regional tax sharing. Rather than one suburb competing against another, or the city competing with a suburb, they pool tax dollars to enable an equitable growth to benefit the entire metropolitan area, rather than pitting one area against another.

As Whet Moser put it, "Building connections, both transit and political, between its municipalities while sharing the financial burden."

After speaking with Tom Weaver of the Minneapolis Metropolitan Council, Ed Brock reported :
Seven counties in the Minneapolis metropolitan area have had a tax-sharing agreement since 1971, says Tom Weaver, regional administrator for the Metropolitan Council. The point of the programs is to discourage competition for the tax base created by shared infrastructure. "All this public infrastructure is paid for by all of us, so you shouldn't have one particular community where this infrastructure just happens to be located that gets all the tax benefits from that infrastructure," Weaver says.
As the Institute for Local Self-Reliance wrote:
The drive for increased property tax revenue, and in some cases sales tax revenue, can lead local governments to make land use decisions that conflict with other planning and economic development goals. A community might reject much needed affordable housing in favor of expensive homes, for example, or forgo office buildings with high-paying jobs in favor of big box retail stores with low-wage jobs, in anticipation of generating more tax revenue with a comparatively smaller burden on public services. 
The quest for revenue-generating development creates competition among neighboring jurisdictions, which may engage in bidding wars to offer developers the biggest tax breaks or least stringent environmental regulations. From a regional perspective, providing subsidies for businesses that have already decided to locate in the area is unnecessary and even destructive. A big box store, for example, will cannibalize sales from existing local businesses and shopping centers and, for the region as a whole, there will be no net gain in economic activity. 
In metro areas, the “fiscalization of land use” or “cash box zoning,” as this problem is known, fosters sprawl and polarization. Some jurisdictions are winners; others are losers. New suburbs on the urban fringe with extensive new commercial development and relatively affluent homes will have high quality public services with a relatively low tax rate. The central city and older suburbs, with declining commercial centers and lower-income families, will be forced to impose higher tax rates and deliver poorer quality services. This disparity tends to snowball and engender a cycle of sprawl as more middle-income families flee to the suburban fringe. 
Regional tax-base sharing offers one way to alleviate this problem. Under tax-base sharing, all of the municipalities within a metropolitan area agree to share tax proceeds from new development. This eliminates inter-regional competition; facilitates other planning goals such as preserving open space or maintaining a vibrant downtown; encourages suburbs and central cities to cooperate on regional economic development goals; and leads to a more equitable distribution of tax burdens and public services. 
State legislation is generally required to implement regional tax-base sharing. 
Here again, the state seems to be unduly burdening the primary wealth generator of the state whilst also handicapping Milwaukee's ability to raise revenues. Sadly, Milwaukee and its surrounding neighbors have never had a meaningful conversation about regional taxation and our shared interests. This is the outside-the-box thinking we need from our public policies to make the state a more attractive place for living and for investment.

CONCLUSION

Until, as a state, we can get past our prejudices about what we think about the big city, a small town, a rural area, etc., we won't be able to thoughtfully and adequately address the issues that impact everyone in the state.

Clean air, clean water, efficient transportation options, clean energy and other smart public investments benefit all citizens. If this state has any practical and forward-thinking leaders, we should be able to move forward to address some of these policies and implement meaningful action plans to not only benefit the citizens of Wisconsin, but to also make Wisconsin a more attractive place for business and tourists.

The current "me first" blackmail and bribery school of development isn't working.



For Further Reading:
Ending Job Piracy, Building Regional Prosperity
Regionalism On Purpose
Regionalism For Financing Development
Multilateralising 21st Century Regionalism
Regionalism: The New Geography of Opportunity
Comprehensive Study of Regionalism
The Calculus of Coalitions
The Regional City
Reflections On Regionalism
Governing The Fragmented Metropolis
Metropolitics
A Policy Agenda For Older Suburbs In The Midwest
Chicago Metropolitics
Fiscal Regionalism Levels Playing Field
Regional Tax-Base Sharing
Progressive Policies For Raising Municipal Revenue
Regional [Metropolitan] Tax-Base Sharing
Introduction to Tax-Base Sharing
How Minneapolis Is Growing
U.S. Metro Economies
2016 Public Transportation Factbook

Saturday, October 28, 2017

The Foxconn Con Update

Democrats Question State's Ability To Track Foxconn Job Creation
What Foxconn Means For Wisconsin
WEDC Won't Release Foxconn Contract Before It's Signed
The Secrets of Foxconn
Start Me Up: Wisconsin Needs More Than Foxconn To Fix Its Economy
Fox-con Secrecy And WEDC Arrogance Continues
How Legislature Is Bypassing The Courts
Foxconn Water Diversion Story Needed More Attention
How To Build Wisconsin's Economy
Why Foxconn's Wisconsin Promise Of 13,000 Quality Jobs Is An Empty One
Walker's "Wisconn Valley" Is A Con All Right
Paper Peddles Bogus Foxconn Report
Trump, Walker and The Foxconn Con
Foxconn Deal Suspends Judicial Rules
Newest Deals Shows Foxconn Flaws

Safety, Guns and Opportunists

As our media continues to sell fear to our increasingly consumerist culture, we are allowing a militarized mindset to rule our emotions, policies and initiatives. More guns and more police has been the rallying cry.

As Politico found, "Mass public shootings are roughly as common now as they were in the 1980s and ’90s. What has changed? The death toll."

And, as CNN discovered, this is primarily and American problem:
From 1966 to 2012, nearly a third of the world's mass shootings took place in the United States. A 2016 study looked at 292 incidents in which four or more people were killed. It found 90 of them occurred in America. Put another way: While the United States has about 5% of the world's population, it had 31% of all public mass shootings.

An odd aspect in all of this, as Five Thirty Eight detailed, is that although mass shootings have become more common in the U.S., overall gun homicides have declined.

New York Magazine looked at FBI data from 2000 to 2013:


"Yes, there’s an upward trend. But the fact is that these incidents remain exceedingly rare,declares Jesse Singal.


Singal concludes:
While there’s been a short-term increase in one very specific, narrowly defined kind of violence, the overall homicide rate in the U.S.(the purple line) is on a long-term downward trend that includes the period covered by the FBI report. Mass shootings account for a tiny, tiny percentage of the total murders in the country — in 2012, the worst recent year for mass shootings, just 0.6 percent of total murders, according to the FBI’s 2012 homicide numbers
Overall, when it comes to violence the country is safer now than it has been in decades. Obviously there’s still much vital work to be done when it comes to gun control, understanding why violent people snap, and so on. But talk of “sharp increases” in terrible, shocking, but extremely rare crimes promotes an alarmist view of the world that doesn’t quite match the facts.
City of Milwaukee Alderman Tony Zielinski has been banging the police and safety drum lately. In his view, police are the answer. Mayor Barrett has proposed eliminating some police and fire positions in his latest budget. Zielinski has taken every opportunity he can to get in front of the camera and to issue press releases pleading for more police.

Here, again, what we think we know is false. The tripe Zielinski is peddling is false.

As Alex S. Vitale proclaims, We Need Less Policing. His research into the issue concludes:
Any real agenda for police reform should not look to make the police friendlier and more professional. Instead, it must reduce their role and replace it with empowered communities working to solve their own problems. We don’t need community control of the police. We need community control of services that will create safer, more stable neighborhoods and cities.
In We Don't Just Need Nicer Cops. We Need Fewer Cops Vitale continues:
We have to take steps to dial back our reliance on the police as the primary tool of resolving neighborhood crime and disorder problems.
And, not only do the police and fire departments take up over 87% of the entire City of Milwaukee budget. The cost of police misconduct in Milwaukee is growing.
Police misconduct has cost Milwaukee taxpayers at least $17.5 million in legal settlements since 2015, forcing the city to borrow money to make the payouts amid an ever-tightening budget.

That amount jumps to at least $21.4 million when interest paid on the borrowing and fees paid to outside attorneys are factored in.
Milwaukee Adlerman Zielinski's willingness to keep increasing the police force (and departmental budget) will do nothing for the safety of Milwaukee, but will surely crush the City budget with ever-increasing police costs. And, as the police costs continue to increase, less and less money with be available for any other programs or projects. This is ill-informed, misguided and suicidal public policy from a public servant seemingly more concerned with personal attention than with City efficiency and a responsible budget.

For those pundits and politicians that keep proclaiming more police is the answer to safety concerns, it really just shows that they haven't done their research or looked very hard at the issue.

The answer isn't more police, it's less guns and more community-oriented policies and programs.

For Further Reading:
What Does It Mean To Be Anti-Police?
Why Police Are Rarely Indicted For Misconduct
No, Protests Against Police Brutality Are Not Increasing Crime
Barrett Versus The Backdrop Boys

Saturday, October 21, 2017

Statement From Chief of Staff Patrick Curley

“Attempting to toss aside 100 years of good government and progressive policies is absurd. As Alderman Borkowski said, the file to gut the citizen member Fire and Police Commission powers was for show. I understand why Alds. Zielinski and Borkowski want to put on a show at a time the City needs to address an $83 million pension payment and escalating salaries and budgets for public safety. As members of the County Board they both voted for the infamous county pension backdrops that have cost taxpayers hundreds of millions of dollars. The last thing these two backdrop boys want to do is take on another pension issue, do their jobs and protect the taxpayers. Putting on a show is so much easier.” [source]

Wisconsin Reading

During "Recovery" Much Of Wisconsin Stayed Subpar
The Two Wisconsins
The Man Who Beat The Highway Lobby
Little-Known Wisconsin Finance Authority Draws Scrutiny For Debt Deals Worth Billions
Wisconsin, Midwest Rejecting Coal
What Happened To Wisconsin?
Abele Battles Board On Budget
An Arena Fairy Tale With Blurred Morals
WEDC Failing To Track Job Creation, Retention
Rigged: How Voter Suppression Threw Wisconsin To Trump
Taxes Down, But No Impact On Jobs
The Bizarre Politics of Ald. Tony Zielinski
Zielinski Bashes Barrett, Flynn
Missing Out: Recent Tax Cuts Slanted In Favor Of Those With Highest Incomes
Middle of The Pack: Wisconsin Government Revenue Is Similar To That Of Other States

Weekend Reading

The Transfer Problem and Tax Incidence
You Better Learn Our Lesson
Lies, Lies, Lies, Lies, Lies, Lies, Lies, Lies, Lies, Lies, Lies, Lies
Subsidies, Spite, and Supply Chains
There's Very Little Welfare Left For Trump To Reform
Economic Might By U.S. Metro Area
The More Guns, Less Crime Scam
Intellectual Property For The Twenty-First Century Economy
Those Luxury Condos Look A Little Drab
Insects Are In Serious Trouble
How Amazon Undermines Jobs, Wages, and Working Conditions
Amazon HQ2 And The Rise of Big-Ticket Megadeals
Big Question For U.S. Cities: Is Amazon HQ2 Worth The Price?

Tuesday, October 3, 2017

Streetcars, Safety and Hucksters

Constituents of City of Milwaukee Alderman Tony Zielinski may want to read his recent bloviating regarding the Mayor’s 2018 City of Milwaukee Budget.

He’s wholeheartedly opposed to the City’s streetcar project. Yet, and this shows his desperation to develop a coherent rebuttal, Zielinski is presenting this as a choice between either funding the streetcar project or eliminating some police and fire fighter positions.


Because that’s the only two choices we have as a City – streetcars or safety? More appropriately, it’s a safe political road to getting Zielinski some attention – playing off the misplaced fears of citizens to continually funnel more and more money to police and militaristic options. 

For some context, Wisconsin has spent over a billion dollars on new stadiums for the Brewers, Bucks and Packers in the last decade. Private sport structures whose benefits go to their private owners. The State and the City has also doled out millions in subsidies to businesses for years and years.




But here comes Zielinski with numerous press releases condemning the Mayor and the streetcar.

Where were all of Zielinksi’s press releases condemning the millions of dollars in giveaways to stadiums, developers and other corporate interests?

Milwaukee is spending $128 million on a streetcar to be used by residents, tourists and businesses.

How is this a waste?

Every other major city has some sort of streetcar, light rail or similar. So, it seems more like Milwaukee is behind the curve as far as what businesses and workers want in amenities and infrastructure. Local infrastructure is what creates jobs and draws businesses, residents and tourists.

As an alderman supposedly so concerned with constituents’ tax dollars being spent efficiently, how much of the entire Milwaukee budget does Mr. Zielinksi want going to police and fire?

As Bruce Murphy highlighted in a recent article, “In 2004, when Barrett started as mayor, the police and fire budget represented 62.7 percent of the city’s combined shared revenue and property tax levy; by 2017 the police and fire budget accounted for 87.7 percent. Increasingly, it’s become difficult for the city to pay for anything but police and fire services…Today, police and fire workers account for 77 percent of all taxpayer contributions to city employee pensions.”

So, Mr. Zielinski, how much more of the City of Milwaukee budget should go to just police officers and fire fighters?

How much more do we need to spend on public safety Mr. Zielinksi? How many police officers does Milwaukee need? Let’s see the numbers. Let’s see your analysis. How are you arriving at your conclusions?

Milwaukee has 42 police employees for every 10,000 people in the City of Milwaukee. Ranking Milwaukee 14th in the U.S. The average in the U.S. for cities with a population over 500,000 is 24 police employees for every 10,000 people. The population of the City of Milwaukee ranks 30th among the 100 largest cities in America.

Milwaukee already has almost twice as many police employees as other similar-sized cities.


To pretend to be concerned about the budget or to present this as acting fiscally responsible is deceitful. Just like when federal politicians complain about the federal budget while simultaneously pumping more money into the Pentagon. For Zielinski to talk of City budget woes, yet he wants to throw more money at the two most heavily-funded departments, he cannot be taken seriously.

Maybe if we focused more on infrastructure to attract businesses we could create more jobs, alleviating some of the poverty and inequality in Milwaukee and, thus, reducing the need to spend a majority of the City of Milwaukee budget on police officers.

As City of Milwaukee resident who voted for Zielinski as my representative, I am extremely disappointed by his position. It is incredibly short-sighted.

Maybe Tony should do some reading about urban infrastructure, transit, connectivity and smart growth. Does Mr. Zielinksi not realize that his Bay View neighborhood benefits from the growth in downtown Milwaukee? Does he not understand that the construction, new restaurants and positive developments occurring in Bay View are related to the boom that is taking place in downtown Milwaukee? It’s partially because of the FIRE industries located in the downtown, where many Bay View residents work, that Bay View residents have the disposable income to spend on bars, restaurants and other attractions. (Not to mention all the workers involved in the construction and/or renovation of these projects.) To hamper the streetcar, and thus the potential and attractiveness of the downtown, is to hamper Bay View. The investment in the streetcar is an investment in all of Milwaukee, including Bay View.

To start, the streetcar will connect the downtown – its employment centers, the lakefront and the major attractions (Summerfest, Art Museum, the Bucks arena, etc.). Hopefully, if Milwaukee can be as forward thinking as every other city its size, we will expand the system…connecting to Miller Park, UWM, Marquette and Mitchell airport, to name a few.




Zielinski’s latest press release - October 2, 2017 - proposed eliminating $208,000 for two streetcar management positions and instead moving that money to police officer positions. Since police officers average around $65,000 per year, this would equate to roughly three police officer positions. Which, of course, makes no sense. Are these just political ploys to introduce Zielinski to a wider audience within the City for a possible mayoral run? Plus, eliminating management from the streetcar only burdens its potential. Citizens, businesses and tourists will benefit from a well-run streetcar.

The City of Milwaukee has made repeated cuts to other departments and vital community services while, up to this point, leaving untouched the fire and police department. This cannot continue. Should the Mayor continue to allow the police and fire departments to strong-arm the City of Milwaukee budget? Why should every other department, worker, and/or project continue to accept less, while the police officers and fire fighters continue to get more and more?

The Mayor is functioning with less and less. And, in the face of such adversity, his budget seems practical and reasonable.

Where were Zielinski's press releases when other vital departments’ budgets were being cut and their employees were getting furloughs, laid-off, not getting raises, paying more for health care and contributing more to retirement? Was he bashing the Mayor then for not funding those departments? Other departments’ budgets haven't seen increases in years, many have seen cuts, yet the police and fire fighters keep getting theirs. They always do. And that’s why they take up 88% of the entire budget!

Zielinski's comments and position on the streetcar should definitely be in the forefront of his constituents' minds during his next re-election campaign. His short-sighted outlook will have negative long-term consequences for Bay View, Milwaukee and the citizens.

For Further Reading:
Infrastructure Financing Options for Transit-Oriented Development
Measuring Benefits of Transit-Oriented Development
Impact of Transit Cuts On Access To Jobs In Metropolitan Milwaukee
Light Rail In Milwaukee: An Analysis Of The Potential Impact On Economic Development
Strategic Value Creation In Infrastructure Projects
Why America's Public Transportation Is Crumbling

Aside:
Alderman Zielinski has just released yet another press release.

A driver ran a red light the other day and killed a woman and her daughter. The accident is terribly saddening (any avoidable accident such as this always is).

Zielinski is now demanding city-wide installation of red-light cameras.

Here, again, we have a situation that will cost the taxpayers money. The red-light cameras will need to be purchased, installed, monitored, repaired and occasionally upgraded.

I'm not against such technology. I'm just saying, this, too, costs money.


For Zielinski, the money spent on cameras would be fine. But spending on a streetcar, which would also benefit local citizens, is too much. Even though a streetcar would mean less people having to drive and, thus, less people possibly blowing through red lights.

It should also be noted that red-light cameras will not prevent accidents. They don't stop cars that have gone through red lights. If you're not noticing the red light and blowing through it, you're also not going to notice the camera.

Guns Matter











For Further Reading:
The American Impulse to Equate Guns With Freedom and Masculinity With Violence Is Killing Us

Midweek Reading

Solidarity's End. Neil Gorsuch is giving conservatives the chance to virtually destroy American unions.
More people were arrested last year over pot than for murder, rape, aggravated assault and robbery - combined.
Republicans propose tax cut plan to give more money to wealthy contributors.
Yellen's masterful bond-market puppet show.
Washington Post news article argues it is better to tax work than vacant property in London.
Three important points about the Republican tax plan.
I helped create the GOP tax myth. Trump is wrong: tax cuts don't equal growth.
How to make 500-year storms happen every year.
Supply-siders still push what doesn't work.
Why American workers pay twice as much in taxes as wealthy investors.

The Kremlin Konnection

Sunday, September 24, 2017

Choice Helps Few Public School Students

Choice Helps Few Public School Students. 68% of voucher students already attended private schools.

From Each According To His Ability, To Each According To His Needs


The chart above, again, is a startling reminder of why the federal government (along with states and cities) keeps saying they don't have enough money to fund public programs.

Enough of this talk about being broke, we can't afford this and we can't afford that.

Follow the money and tax those who have it!

We've gone from a country that built the best products, roads, trains, infrastructure, and had pride in having the best education and health care.

A country where the well-to-do and the wealthy felt an obligation to give back, to help build this country and to invest in the future of infrastructure and citizens.

Now we're defunding these initiatives while simultaneously cutting taxes on the richest individuals and corporations, building sports stadiums for billionaire owners, and being blackmailed by billionaire companies to fund part of their operations under the guise of job creation.

Taxes are being pushed, more and more, onto the income of workers, and less and less on - corporations, investments and capital gains - the income of the wealthy.

Inequality is greater than ever before. The richest .01% are modern-day kings and queens. We allowed an oligarchy to purchase our democracy and subvert the will of the people.

We've heard this trickle-down story for decades. Let the rich have more of the pie and somehow, someday it will work its way back to the rest of us and a better life for us.

But that hasn't happened and it's not going to happen. The more the richest of the rich have, the more they want to have. And that's exactly what they've done.

The United States has more than enough money to support parks, clean
air and water, the arts, and to provide world-class education, transportation and health care options, to name a few.

Taxes are the price of a civilized society. To continually erode the tax base, is to continually undermine the foundation and fabric of the American experiment.

It's time to tell the "winners" they need to give back to the country that's given them so much.

Read my lips: more taxes on the rich!

For Further Reading:
Corporate profits are way up, corporate taxes are way down
A Guide to Statistics on Historical Trends in Income Inequality

Friday, August 11, 2017

The Con That Is Foxconn or How Republicans Learned To Stop Worrying And Love Socialism For The Rich

Seems everyone is writing and talking about Foxconn possibly building a $10 billion factory in Wisconsin. Governor Walker has been talking up the jobs angle. Other lemmings are being good little boosters and putting slogans like "big league" and such out there to describe the situation and what is could mean for Wisconsin. 

Luckily, there has been some push-back. Hopefully we can muster enough resistance to sway opinion against this mega-corporate-welfare boondoggle.

I've written about economic development incentives many times before. To reiterate:
This whole incentive game is blackmail and is terribly inefficient. It makes cities bid-up giveaways to corporations dangling jobs in front of city leaders. It leads to less-than-optimal locational decisions, and often cities never recoup the subsidies. Local leaders, legislators, and public servants should be cooperating with national leaders to enact federal legislation banning such zero-sum games.
So what do we know about this latest specimen of corporate welfare?

Well, let's back up a bit first and add some context to the discussion. 

Republicans are always droning on and on (pretending to be economists and financiers) about the "free" market, capitalism and how, if government just got out of the way, the private sector will lead us all to the promised land.

As Barry Ritholtz wrote:
America’s titans of industry and finance work hard to convince us that they are masters of their fate, unbeholden to anyone or anything aside from the profit motive and whatever serves the greater good of business and free enterprise. 
If only it were so, because the reality is that too many of them are afraid of undertaking new ventures without government holding their hand for reassurance, tax abatements, loans, subsidies or -- in some instances -- all of the above. 
Last week, was a case in point: Wisconsin, a state controlled by that patron of free markets otherwise known as the Republican Party, announced a deal with Foxconn Technology Co. to give $3 billion in incentives for the Taiwanese manufacturer of iPhones to build a flat-panel TV factory within its borders. In exchange, Wisconsin got ... well, some nice words.
Here is yet another example of their blatant, self-serving hypocrisy. Republicans (the dutiful little servants of the top 1%) love socialism for the rich, but not so much for the little guy.

As with all corporate welfare, the first question should always be, "Why is the public providing money to millionaires and billionaires?" If they are so all-knowing, efficient and bottom-line oriented, shouldn't they be making locational and company decisions based on comparative advantage, labor force needs, and other business-specific concerns? If they are simply locating in the place offering the largest welfare package, how is that efficient or good for long-term business? 

Typically companies simply put out the idea that they have a few locations in mind to get those locations to start bidding up the welfare package against each other. As some have termed, the war among the states or the war among the cities. Yet, the companies actually already know where they'd like to build - based on actual quantified site selection variables. This dangling of potential jobs really just results in leverage for the companies in their blackmailing of cities and states. 

And, for Wisconsin, why would the state spend $3 billion to attract jobs when the state's unemployment rate is, as of April 2017, at 3.2%? 

So, now, what do we know about this latest specimen of corporate welfare?

Michael J. Bologna detailed, "WEDC said Foxconn would be eligible for up to $3 billion in tax credits over 15 years. That total includes up to $1.5 billion in state income tax credits for job creation, up to $1.35 billion in state income tax credits for capital investment, and $150 million for sales and use tax exemptions."

The Wisconsin Democracy Campaign also discovered, "The bill, which is expected to be voted on by the legislature this month, includes $10 million in tax breaks intended to keep Fiserv, a Brookfield-based company that makes products for banks and credit unions, from relocating its headquarters to another state." It's just raining corporate welfare in Wisconsin.

Regarding the Foxconn boondoggle, The Wisconsin Budget Project found:
  • The cost per job is somewhere between $200,000 and $500,000.
  • At a minimum, the corporate welfare will cost state taxpayers over $17,000 per job, per year, for 15 years.
  • The cost of tax breaks for manufacturers, with state taxpayers making a guarantee to cover up to 40 percent of local losses from spending for the project, and the unknown costs from unprecedented exemptions from environmental regulations. 
For some perspective, Timothy Bartik, of the W.E. Upjohn Institute for Employment Research calculated the typical subsidy, in these situations, is $2,457 per year. Thus, the Wisconsin project cost ($17,000 per year) would be 567% higher than the typical subsidy. “It’s a very, very costly package, and I’m skeptical that the benefits justify such big incentives,” Mr. Bartik said. “This is well beyond the typical deal.”

Bartik also elaborated:
Any benefit-cost evaluation of tax incentives needs to take into account that even without the incentive, a considerable portion of the incented activity would have occurred anyway, or that other substituted business activity would occur. For example, even without incentives, vacant buildings zoned for development will help attract new business activity. Incentives can help speed up this process, and may help target new development toward business activities with a higher payoff for state economies in increasing average earnings per worker. But this requires that incentives be carefully targeted and designed to maximize benefits while minimizing costs. 
Bartik has also argued that economic development incentives that are delivered in the form of customized services, such as customized job training and manufacturing extension services, are likely to be more cost-effective than most business tax incentives.
As Ben Lovejoy enlightens"The state would be paying for 30% of Foxconn’s total investment in the plant, and this wouldn’t be the end of it. In addition, like other manufacturers in Wisconsin, Foxconn would pay no corporate taxes on profits from sales on products made here. The incentives would cost the state about $200 million a year."

Patrick Marley and Jason Stein found, "The memo signed by Walker and Foxconn executives would: Lift caps on TIF deals and extend them for longer durations. Expedite government permit reviews for the project. Expand a tax credit program known as enterprise zones that the state uses for its biggest jobs deals."


Bruce Murphy revealed:
But the Foxconn deal will give away tax money in a style that makes the WEDC look like a piker. Rather than a tax credit for seven percent of payroll, Foxconn will get 17 percent, and for 15 years, not nine. In short, the state will get less than 30 percent of the tax credit back in income taxes paid by workers, losing a huge amount of money for 15 straight years.

But the Foxconn deal offers much more than this. The company also gets a 15 percent tax credit on all capital expenditures it makes for seven years. Since Foxconn, due to Walker’s Manufacturing and Agriculture Tax Credit, will pay little or no corporate tax, probably none of this giveaway will be recovered. Indeed, the company is being given “refundable tax credits,” meaning these are cash giveaways, not tax reductions. 
But the deal offers much more than this. Foxconn will get a state and local sales tax exemption on the cost of all building materials, supplies, and equipment and landscaping and lawn maintenance services, estimated to be worth $139 million.
But the deal offers still more. Local governments will be pressured to create special Tax Incremental Financing districts, and the subsidy is expected to be so massive that the Foxconn bill provides an exemption from the state law limiting the size of such districts and lengthens the statutory payback period from 20 to 30 years. 
But the deal offers still more. The bill would exempt Foxconn from some state requirements on: (1)discharging dredged or fill material into a wetland; (2)water quality certification related to discharges into wetlands; (3)construction, placement, or maintenance of bridges or culverts in or over navigable waters; (4)construction, dredging, or enlargement of an artificial water body that connects with an existing navigable waterway; (5)grading or removal of topsoil from the bank of a navigable waterway; (6) public utility projects consisting of high-voltage transmission line relocations.
In short, Foxconn will be able to operate as a kind of outlaw company that can simply ignore laws that regulate every other business or individual in the state. And that is because it promises to create up to 13,000 jobs in return for accepting $3 billion in tax subsidies or $585 per person for every adult resident in this state, not including the additional TIF subsidies, which have yet to be tallied. 
And what guarantee is there that Foxconn will create 13,000 jobs? None. The company could collect $345 million of the maximum $1.5 billion payroll credit for just the 3,000 jobs it promises to start with and grab the sales tax exemptions and TIF subsidies while using the $1.35 billion tax credit on capital expenditures to automate the factory and gradually lower the employment even further. With no penalty. And given the company’s reputation for embracing robotics at ever opportunity, that is surely the most likely result.
Murphy concludes, "But for every other legislator in the state, Republican or Democrat, there is no reason to vote for this unprecedented giveaway for a few thousand jobs, following a game plan that if applied to all businesses, would bankrupt the state and destroy its environment. This isn’t a sound conservative solution to economic development, it is fiscal liberalism run rampant."

David Haynes, of the Milwaukee Journal Sentinel, spoke with Kenneth Thomas about Foxconn and Wisconsin's subsidy package:
Kenneth Thomas, of the University of Missouri-St. Louis, has studied state and local subsidies for business and believes Wisconsin and other states hold more cards than might be evident at first glance. “Foxconn's fear of protectionism (probably well-placed) makes it want to be here, and the U.S. unemployment rate is finally well down, though we could certainly use wage growth. So my recommendation to Wisconsin would be, ‘Just say no,’ " he wrote me in an email. "There is no reason Foxconn should get a free facility plus whatever else it wants; what it wants most of all is to be in the United States. Moreover, a 3.1% unemployment rate is another reason for the state not to throw a lot of money at new jobs. ... If the state does yield to temptation, it should compare the proposed cost per job and percentage of investment paid by the subsidy package to packages given for other large manufacturing facilities, and try to spend less, given Foxconn's weak bargaining position.” And if the bidding gets too rich, the state should be willing to walk away.
Foxconn has done this song-and-dance before. They've gotten promises of millions of dollars and then failed to deliver the projects and the jobs. As Marjorie Kelly wrote, "Foxconn also has failed to deliver on similar deals in India, Vietnam and Pennsylvania." In 2013, Foxconn promised to invest $30 million and hire 500 workers in Pennsylvania, yet this has not materialized.

Luz Sosa listed the many broken promises of Foxconn, "In 2013, the company signed a letter of intent to invest up to $1 billion in Indonesia. Nothing came of it. Foxconn announced it would invest $5 billion and create 50,000 jobs over five years in India as part of an ambitious expansion in 2014. The investment amounted to a small fraction of that, according to The Washington Post’s Todd Frankel. Foxconn committed to a $5 billion investment in Vietnam in 2007, and $10 billion in Brazil in 2011. The company made its first major foray in Vietnam only last year. In Brazil, Foxconn has an iPhone factory, but its investment has fallen far short of promises. Foxconn recently laid off 60,000 workers, more than 50 percent of its workforce at its IPhone 6 factory in Kushan, China, replacing them with robots that Foxconn produces."

Sosa makes another great point, "Cyber component manufacturing with large numbers of employees has mainly occurred in low-wage, marginally regulated countries. Wisconsin can’t and shouldn’t compete with Vietnam and China for the lowest wages and intolerable working conditions."


The working conditions at Foxconn's factories are another cause for concern. As detailed by Jay Greene in 
Riots, suicides, and other issues in Foxconn's iPhone factories. "There have been employee suicides, explosions at two plants that make Apple gadgets, and reports of harsh working conditions."

As the New York Times reportedregarding Foxconn's Zhengzhou China plant, "The local government doles out more than $1.5 billion to Foxconn to build large sections of the factory and nearby employee housing. It paved roads and built power plants. It helps cover continuing energy and transportation costs for the operation. It recruits workers for the assembly line. It pays bonuses to the factory for meeting export targets."

Another big concern, for those questioning this giveaway, are the possible environmental issues. Air and water quality, and solid and hazardous waste standards, and wetland regulations should not be relaxed. Tourism is an important part of the Wisconsin economy. Wisconsin's lakes, rivers and woods are big business. To not only subsidize a company, but to then also allow them to degrade Wisconsin's environment is inexcusable. Foxconn should not be allowed to bypass an environmental impact statement (this is an analysis describing the positive and/or negative effects of a proposed project).  

As Rick Barrett notes, "The electronics industry has been called a major source of environmental pollution, and its large presence in China and South Korea has raised concerns about the environment and the health of workers there. The industry uses dozens of chemicals and heavy metals, including lead, in its processes."

Greg LeRoy remarked, “The states are orchestrating a process that benefits large, politically connected corporations and harms small employers, which form the backbone of the economy … President Trump is also blessing the ‘buffalo hunting’ school of economic development, in which a few companies get huge ‘megadeals’ while programs that benefit many employers suffer budget cuts, and small businesses and entrepreneurs get shortchanged … the ‘war among states’ way in which the United States allows even foreign corporations to extract huge taxpayer subsidies is a troubling reminder of how federalism undermines economic development in America.”

“We can only describe this as a gift from Wisconsin taxpayers to Foxconn shareholders,” Mr. LeRoy said. “This is a guaranteed loser for the state.” LeRoy continued, "At that price, the deal is a sure loser for Wisconsin taxpayers. That’s because there is no way the typical Foxconn worker will pay $230,000 more in state and local taxes than she and her family will consume in public services over her work time there. At that price, the deal can only be accurately described as a transfer of wealth from Wisconsin taxpayers to Foxconn shareholders."

Wisconsin lawmakers have said the incentive package will be pro-rated on how many jobs the company creates and how much it spends. This sound like an admirable claw-back provision. But the devil is in the details, and unless the public knows the details, we can't really be sure there are any teeth in those provisions.

Scott Walker said, “We are calling this development ‘Wisconn Valley,’ because we believe this will have a transformational effect on Wisconsin just as Silicon Valley transformed the San Francisco Bay area.”

Another glaring miscalculation from our inept governor. If Silicon Valleys could be reproduced in state after state, it would have already been done. The idea that you can subsidize and bribe your way to a competitive advantage and establish a long-term business and growth model is ludicrous. Also, manufacturing doesn't pay what it used to, employment is declining, much of the work is being automated, and manufacturing operates practically tax-free in Wisconsin. So it doesn't make sense to pile subsidies upon tax breaks to a dwindling sector that doesn't even pay its fair share of taxes.

To paraphrase a University of Wisconsin-Milwaukee Center for Economic Development research paper:
The subsidization/tax-incentive contribution to local economic development has been wildly exaggerated. Although it has become almost a cliché to boast of becoming “the next Silicon Valley,” a review of the historical record reveals that the celebrated success stories of economic development are more the exception than the rule. Far more typically, the investments have had little discernible impact in reshaping the economic trajectory of cities or regions. Nor have they produced the internal returns envisioned by proponents. The case for the tax incentives as a “game changer” or “driver” of local economic development is more chimerical than compelling.
Jon Talton explained, "These are all reasons to be skeptical of subsidies that pick winners - typically multinationals with huge profits - at the expense of existing tax-paying companies... Wisconsin doesn’t have a world-class flat-screen cluster supporting tens of thousands of jobs that it needs to protect from poachers...The Wisconsin paradox is that Walker refused $810 million in federal help for a higher-speed rail line between Milwaukee and Madison. Why? Because it came from Obama and because Republicans have a strange anti-rail fetish (Florida’s and Ohio’s governors did the same). In addition to offering more transportation options - including one with far fewer greenhouse gas emissions - the rail project would have provided large numbers of construction jobs, as well as good operating and maintenance jobs. The trains would have been assembled there, too, with the potential of billions in contracts to build trains for other states."

But, of course, Scott Walker's dutifully endless ass-kisser, Christian Schneider can't see anything wrong with the deal. As usual, his article in the Milwaukee Journal Sentinel simply dug into Democrats and anyone else who would dare question this "great" deal. According to Schneider anyone that would raise concerns over this massive corporate welfare is a "member of the deranged lefty echo chamber rooting against the state's economic success."

Here again we can see the gigantic hypocrisy of Republicans. When Republicans are the ones doling out public dollars, it's warranted, needed, proper and, of course, it will be a huge success. But when Democrats want money for infrastructure, health care, education, poverty, Social Security, etc., they're just wasting taxpayers hard-earned dollars. Just imagine if Jim Doyle (Democratic governor before Scott Walker) had proposed giving billions of dollars to not only a private company, but a Taiwanese one at that. Republicans would have gotten out their pitchforks and torches and hailed Doyle as a pinko-commie, socialist, another tax-and-spend liberal, giving away taxpayer money.

Schneider seems to be of the economic development school which believes that any development is good development. He mocks those who question if these are good jobs or if they pay a living wage. I guess Schneider's message is, "A job is a job, so just take it, be happy and shut up!"  

In passing, Schneider mentions, "The state has had a spotty record in providing tax subsidies to business." He doesn't go any further in his analysis. For Schneider, Walker, Republicans and their willing corporate welfare recipients, there is no need to analyze this deal - just get it done! Never mind this would be one of the biggest corporate giveaways in the history of the United States, nothing to see here. As Walker has said, critics can "suck lemons." Now that's diplomacy!

In another Orwellian fever dream, Republican Party spokesman Alec Zimmerman said, "Governor Walker's reforms have taxpayers back in charge while liberals like Dana Wachs would take us back to the days of special interest control in Madison." Dana Wachs is a Democrat planning on challenging Scott Walker in the next gubernatorial election. Yet, how the Republicans can make the claim that Walker is putting taxpayers in charge and cutting off special interests all while hoping to give away one of the largest corporate welfare packages in our nation's history is dumbfounding.

As the New York Times informed
Big companies like Foxconn possess leverage to extract concessions from state governments that smaller firms cannot, said Carl Davis, research director at the nonpartisan Institute on Taxation and Economic Policy in Washington. “This is not a comprehensive strategy for economic development,” he said. “If Wisconsin were going to offer this kind of subsidy for every employer within its borders, the state would be bankrupt.”
John McCormick, of Bloomberg, highlighted Walker's barefaced hypocrisy:
Walker’s embrace of taxpayer money for Foxconn is in conflict with his limited-government philosophy. He’s also previously backed public subsidies for a Milwaukee professional basketball arena and for Wisconsin-based companies such as Kohl’s, subsidies that would be described as "corporate welfare" by some in his party. “I believe people create jobs, not the government,” the governor said in an April 2015 speech in New Hampshire as he explored a presidential bid.
The New York Times also picked up on Walker's duplicity:
“It doesn’t fit with a governor that said we can’t spend much money,” said Martin Baily, a senior fellow at the Brookings Institution and a member of President Bill Clinton’s Council of Economic Advisers. “This is a guy who decimated the University of Wisconsin by budget cuts. On the one hand, he’s saying we can spend billions to pay Foxconn, but what about our own prized educational institution?”
Steve Deller, a University of Wisconsin-Madison professor of agriculture and applied economics, said in addition to the cost to state taxpayers, schools and local governments could also be pinched because deals to large companies often allow them to escape paying property taxes, which pay for some local services. This deal could not only increase the state's indebtedness, but it could also put schools and other services at risk.

Investments in transportation, greening of public buildings, upgrading energy and water infrastructure, critical environmental areas remediation, to name a few, are much better investments for cities and states looking for the best return on investment. We surely can do better than backroom deals, bribery and blackmail as our modus operandi for economic development policy.


For Further Reading:
Foxconn Bill Contains Another Big Potential Obligation For Wisconsin Taxpayers
Wisconsin Foxconn Deal Could Include $1 Billion To $3 Billion In Taxpayer-Backed Incentives
Foxconn Could Be Environmental Disaster
Show Us The Local Subsidies
Will Amazon Fool Us Twice?
Smart Skills Versus Mindless Megadeals
Shortchanging Small Business
Evaluating State Tax Incentives For Jobs And Growth
The Foxconn Con
Will Foxconn's Manufacturing Promises In Wisconsin Prove To Be A Con?
Wisconsin's Corporate Welfare
Site Selection Shenanigans
WEDC Not A Good Model For Deploying Scarce Resources
Tax Incentives: Costly For States, Drag On The Nation
One Take On How Tax Incentives Work
State By State Incentives Guide
Why Have So Many Cities And Towns Given Away So Much Money To Bass Pro Shops And Cabela's?
As Companies Seek Tax Deals, Governments Pay High Price
Foxconn, Wisconsin's Manufacturing Future?