Privatizing The Profits, Socializing The Loses

There the "free" marketeers go again. Milwaukee real estate execs question Housing Authority's high-rise plan.

So, the City is booming. Development, jobs, tourism, new businesses...things are looking up.

As usual, when things start to gentrify, certain people are priced out of the market...yet those workers are still necessary for the booming economy to exist.

Enter affordable housing. Another policy answer to a society that doesn't pay a living-wage. If you're not going to pay a downtown-wage for a downtown-worker, public policy steps in to subsidize and correct the market.

It's as much a subsidy to the employer as it is to the worker. By subsidizing the housing of these workers, the government is allowing the employer to pay below-market wages.

Also, as usual, and wanting to have it both ways, local developers are complaining when the government steps in to correct the market. The Milwaukee Business Journal reported, "The Housing Authority in April introduced its plan, which calls for spending up to $150 million on a high-rise tower with 350 apartments, a mix of market-rate and affordable units."

Tim Gokhman, director of New Land Enterprises, told the Business Journal:

He said if the city has figured out how to generate a profit from a high-rise to subsidize affordable units, “teach the rest of the market how those profits can be attained.”

Because the profits aren't high enough for private developers, because the returns on investment aren't elevated enough, because the government won't just give them the money to do it, private developers are complaining when the government enters the market to provide needed housing for citizens. (Privateers complain when the government does any of the many things the magic "free" market won't do.)

Developers can't have it both ways. They can't claim they're the experts - the "free" market and the private actors have all the answers and will provide as long as the government stays out of the way. But then, in the very next breath, they come to the public for giveaways, tax breaks and other hand-outs they claim the need for their projects.

If the public has to give tax cuts, subsidies and incentives to private actors to get them to do something, why shouldn't the public entity just complete the project?

The private sector does some things well. But it's time we re-realize the same can be said for the public sector.

Foxconn Folly Update

Foxconn Industrial Operations Would Represent A Major New Source Of Air Pollution In Region

Emissions from the company’s operations in Mount Pleasant would rank among the highest in southeastern Wisconsin for pollutants that create smog, also known as ozone pollution, state documents show.

Foxconn Keeps Racking Up Taxpayer-Funded Help

Which leads to an obvious question – why do numerous levels of Wisconsin government continue to bend over backward to shovel billions of tax dollars to help this one company, when we could pay to meet many other needs in the state that would benefit far more people for a much lower cost? The insanity of the Fox-con continues to grow with each story you read.

Journal Promotes Phony Foxconn "Report"

The Milwaukee Journal Sentinel has promoted, without questioning, a “report” on Foxconn by the Metropolitan Milwaukee Association of Commerce that seems more like a PR piece than a study. With the headline “Foxconn would provide $51 billion boost, report says,” JS reporter Rick Romell regurgitates the MMAC press release as if it were hard news, rather than a transparent attempt to sell the more than $4 billion in government subsidies going to the Taiwanese company. 

Both Romell’s article and the MMAC release refer to a “report” done by it, but there is no link to any report in Romell’s online article (isn’t that a basic requirement for a newspaper story these days?) and the MMAC website reveals the analysis has no named author and consists of a one-page breakout of what it contends is the likely economic impact. 

This is not a study. It’s more like a marketing tool by a Foxconn cheerleader. 

Simply stated, the MMAC’s claims seriously exaggerate Foxconn’s potential impact on the Wisconsin economy.

Foxconn In Choppy Waters Over Plan To Drain The Great Lakes

Perhaps the biggest question, however, is whether the deal violates the Great Lakes Compact, a 2008 deal signed between the eight Great Lakes states and whose governing body includes Ontario and Quebec. The agreement aims to keep Great Lakes water from being diverted to areas far beyond the Great Lakes Basin, but it also requires that any water that is diverted be used to serve mainly the public, not industry.

Scott Walker, Foxconn, And The Wisconsin Economic Development Corporation

The money spent on the Foxconn project will affect the state’s economy for the next several decades. The massive amounts of subsidies could create a higher tax burden and could divert resources from other state projects, especially because the deal would not begin to be a net return to the state until around the 2040s.

Even supposing that Foxconn employs the full 13,000 they say they will, if they fully meet capital investment requirements, the deal is far more expensive than is typical for incentives packages negotiated by the WEDC. For economic development programs that require job creation and capital investment, the WEDC, on average, plans to spend around $12,400 for each job created. The Foxconn incentive package would cost around $200,000 per job if only the tax credits are taken into account. That number rises to well over $300,000 if all aspects of the incentive package are included. This number could continue to rise if Foxconn does not follow through on its obligations, or if it continues to extract concessions from the WEDC and Governor Walker’s office (as they have already begun to do). Further, while Foxconn gets a large package of free land, infrastructure subsidies, and tax breaks, local businesses do not get the same. On top of that, Foxconn is not required to source materials from inside the state, so it will potentially bypass in-state suppliers. 

The Foxconn Deal would place unnecessary strain on the local economy. It will give a large foreign corporation a huge subsidy at the expense of everybody else. This unfair transfer of state funds happens as 27% of roads are in need of repairs, and schools need $800 million in additional capital funding. It is important that state economic development programs are transparent in their implementation, and that all contractual obligations are adequately enforced. Further, it is important that the Wisconsin government meet current funding obligations before smokestack chasing.

Evil Socialism At Work