According to the Oxford dictionary, a quandary is “a state of perplexity or uncertainty over what to do in a difficult situation.” Webster’s defines it as, “a perplexing situation or state.”
In Wisconsin, it’s Foxconn.
From the start, many of us in the Legislature were concerned about the size of the state’s commitment to this technological behemoth. My fears were intensified when I reviewed the Foxconn-enabling legislation and the contract and agreements between Foxconn and the state and found that little, if any, attention was paid to the actual cost of the state’s investment over time. The question we in the Legislature were left with was whether the state would ever get its money back. The answer by several economists was probably not.
The same question remains a pressing issue today. Foxconn unilaterally changed the nature of its industrial commitment from a large Gen 10.5 LCD factory to a smaller Gen 6 fabrication plant. Yet the state is still tied to the draconian contract with Foxconn entered into on the promise of a large manufacturing facility that would employ thousands. The question now is whether this constitutes a material breach of the original contract that would allow Wisconsin to escape its clutches.
Remember, the Foxconn contract represents a massive investment and commitment of the state to one technology manufacturer. To spend up to $3 billion on one company deeply rooted within one industry has always been a precarious investment. Just how precarious is shown by Foxconn’s dramatic downsizing of the project we were promised when President Donald Trump and Gov. Scott Walker touted the Foxconn deal.
Part of the Foxconn quandary is that, because of the size of the state’s “investment,” future legislatures will be pressured to keep the doors open in this factory no matter what the additional cost. If this company should fail or become obsolete, what size tourniquet would we need to arrest the economic bleeding?
And what about the lost opportunity cost because of this investment. Just think what $3 billion of investment in education or diverse businesses could do. For $3 billion, we could give tax credits or grants of $300,000 to 10,000 businesses in a host of different industries. Furthermore, think how many college or technical school educations there could be. Wouldn’t this make for a more stable and diverse economy?
To Foxconn’s credit, it seemed to understand the need for statewide investment or at least buy in when it announced its intention to locate research and development centers in Eau Claire, Green Bay and Milwaukee. Still, one must ask what progress has been made with these? At least in Eau Claire, the answer is none. The offices Foxconn leased are empty after more than a year, which leads me to believe that these offices were just for show. Moreover, what long-term economic difference is made with these centers since they are still tied to the belt of the same industry. If that industry falters, they all fail.
Now all of this rests on the shoulders of Gov. Tony Evers. He has been handed Trump and Walker’s Foxconn mess and is now harnessed to it. On the one hand, he could bring suit for breach of contract and try to put an end to this but, at best, that would leave Wisconsin with an eight-lane freeway to the equivalent of a 21st century woodworking shop. On the other, he can try to make the best of it by negotiating a new deal with Foxconn. However, Foxconn must negotiate in good faith to make this work. Given Foxconn’s history of unilateral change in its promises, this is unlikely to happen.
Hence, the Foxconn quandary. Brought to you by President Trump and former Gov. Walker.
Wachs, a partner in the statewide law firm of Gingras, Thomsen & Wachs, served in the state Legislature from 2012 through 2018 and was a candidate for governor in 2018.