Monday, September 4, 2017

Real UW Profs call out Koch hack for inflating Fox-con benefits

Here's a good column in Urban Milwaukee by UW professors William Holahan and Charles Kroncke that basically calls "bullshit" on Koched-up hack Noah Williams and his claim that 10,000 Foxconn jobs will lead to another 27,000 jobs in the state of Wisconsin.

To start, Holahan and Kroncke point out that the extra jobs induced by having the Foxconn plant in Wisconsin will come from all over America, and it is therefore absurd to assume all of the job growth will happen in only our state.
But, note the presumption that all the firms which respond to Foxconn’s demand for supplies, from electronics parts to paperclips, will reside within the state. There is no reason to expect this: electronic parts can be transported at very low cost per dollar value from anywhere in the world. Even the heavy construction components can be shipped by rail from sites well outside the state and even the country. Wisconsin is a tiny portion in a huge US economy full of suppliers, and the US is part of an even bigger world full of suppliers. The multiplier of 2.5 might measure the addition of jobs around the world, but as a measure of the jobs added in Wisconsin, it is far too high.

But, it gets worse: even if their multiplier were measured accurately, it would be a “gross multiplier,” i.e., a multiplier that refers to Foxconn alone, without taking into account the negative effect of drawing the money totally from the Wisconsin economy. It’s as if the $3 billion fell out of the sky, having no valuable alternative use. When applying the multiplier concept to evaluate spending money that has alternative uses, we must calculate a “net multiplier” by simply subtracting the multiplier associated with the alternative spending from their estimated gross multiplier.
And this is the real killer with the Fox-con. As I've alluded to in the past, the false assumption with this scam is that somehow there will be no activity that occurs at that site or in other places unless we give away the state's treasury to Foxconn. Not only is that wrong, but Holahan and Kroncke point out that Wisconsinites will have to pay higher taxes and receive less services as a result of sending hundreds of millions of dollars a year to Foxconn, which will likely hamper the state's economy.
If the money is raised by new taxes, the taxpayers lose the opportunity to spend the money according to their own preferences. If the taxpayers had instead spent that money, their spending would have had a multiplier. That multiplier would then have to be subtracted from the Foxconn gross multiplier to yield the net multiplier. Alternatively, if the money is acquired through spending cuts, say, to the university system or K-12 education or more delays in road repair, spending on those activities would have to be reduced, and the state would forgo the spending multiplier generated by those activities. Again, this requires subtraction to arrive at the net multiplier; it’s the “net multiplier” that counts, not the “gross multiplier,” when estimating the net benefit of the Foxconn subsidy.

The closest we can come to spending money that has no alternative use is federal money earmarked for specific purposes, such us the money once offered Wisconsin to invest in trains, Medicaid expansion, and rural internet broadband expansion. Of course, the Governor and Legislature chose to spurn these billions of dollars. Because they were dollars from outside the state, the evaluation of the economic impact of those dollars circulating through the state economy would have a much higher net multiplier than the Foxconn net multiplier.
This point from Holahan and Kroncke underlies a facet that hasn't gotten enough debate with the Fox-con - what happens if the Legislature doesn't pass the Fox-con? Well then we continue on the same trend we've been on, with less of a chance of future budget cuts to K-12, the UW and highways, and likely not have to deal with higher property taxes around the Foxconn campus, as a result of TIF districts and extra infrastructure spending that has to be taken on.

Is the possibility of a few thousand jobs at Foxconn (something that's not close to guaranteed) worth all of those costs and reduced economic activities in the rest of the state versus staying on the (still subpar) track we are on?

The fact that an increasing amount of people are recognizing what an absurd corporate welfare scam the Fox-con is and that is a desperate political ploy by a Governor whose approval ratings are around 40% probably helps explain why the GOPs on the Joint Finance Committee decided late Friday to jam the Foxconn package through JFC tomorrow, along with the rest of the state budget. Maybe the public isn't as stupid as Walker and his corporate backers thought they were, and that the increasingly lame efforts to sell the Fox-con are being met with derision, so they want to get this thing out of the way ASAP before the people get even angrier.

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