“JOBS!”

Trump Blows a $10 Billion Kiss to Paul Ryan

The White House is taking credit for getting Foxconn to build a massive new factory in the House Speaker’s backyard.
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By Olivier Douliery/Pool/Getty Images.

With Washington in a frenzy this week over the possibility that Donald Trump might fire his attorney general or force him to resign in order to undermine Robert Mueller’s Russia investigation—a move that could spark a constitutional crisis—House Speaker Paul Ryan was characteristically unmoved. “The president gets to decide what his personnel is, you all know that.” the Wisconsin congressman said. “That’s his prerogative.”

Trump, meanwhile, was preparing to scratch the speaker’s back, too. That same day, the White House announced that Chinese manufacturing giant Foxconn Technologies would be investing $10 billion in a plant in Ryan’s home district. The deal, which the White House said was brokered by First Son-in-Law Jared Kushner over the past several months, will reportedly create 3,000 factory jobs, initially, with plans for as many as 13,000 new jobs, overall.

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The deal to build a major factory in Ryan’s backyard—part of the president’s push to bring manufacturing jobs back to the United States—doesn’t come free. In order to lure Foxconn, Wisconsin is reportedly giving the iPhone manufacturer $3 billion in tax incentives, which Bloomberg’s Tim Culpan calculates comes out to about $519 per Badger State citizen, about the price of an iPhone itself. Looked at another way, the factory will cost taxpayers about $1 million per job in lost revenue for each of the 3,000 jobs, which Governor Scott Walker said would pay an average of about $53,000 a year, plus benefits. (According to Walker’s office, the incentives would cost the state about $200 million per year, but that Foxconn’s payroll could reach $700 million.)

What are the odds of Foxconn actually creating 13,000 jobs or spending the full $10 billion? According to Culpan, about as good as the odds of Trump deleting his Twitter account:

Foxconn has factories in China and another dozen countries globally, yet that stated $10 billion investment is more than the group's publicly traded flagship—Hon Hai Precision Industry Co.—has devoted to capital expenditure over the past five years combined. There is potential for the payroll to climb to 13,000 in the future—a figure crucial to Wisconsin justifying the expense—but I wouldn’t bet your 401(k) on it. That’s because if [Chairman Terry] Gou really does dish out $10 billion on this facility, the only way to make it viable is by keeping staffing low and leaning on automation to boost productivity. This LCD factory will be either labor intensive or highly automated. It can’t be both.

And then there is Gou’s track record to take into account. Culpan notes that three years ago, the Foxconn chairman signed a deal with Jakarta to invest $1 billion and create jobs for local workers to manufacture electronics. Only, the pledge never came to fruition, nor did the $30 million Pennsylvania factory that was announced a year prior. In fact, Gou has been making a lot of promises to a lot of people this year, with pledges for investments in Guangzhou; Kunshan, China; and India. The total value of those deals, including Wisconsin, is about $27.5 billion, which Bloomberg estimates is “more than Hon Hai has spent in the last 23 years.”

Wisconsinites seem divided over the terms of the deal. “Throwing money into incentives makes a slippery slope”, University of Wisconsin-Madison professor Steve Deller told the Milwaukee Journal Sentinel, explaining that $3 billion over 15 years could be “too pricey in terms of potential economic benefit back to the state.” Tom Still, who heads the Wisconsin Technology Council, pointed to the possibility for knock-on effects spurring additional job creation: “I think the benefits need to outweigh the costs and I think they would over time if you construct the deal right.”

Trump, of course, has his own poor track record when it comes to taking credit for bringing jobs back to America. Even before moving into the White House, he’s been publicly patting himself on the back for saving jobs from being eliminated or outsourced from American companies and then, curiously, saying nothing when those companies ended up eliminating jobs or outsourcing production overseas. Just ask Carrier employees how Indiana’s Trump-backed $7 million tax break is working out for them.