FROM KIM and Jim Mahoney’s kitchen the view is spectacular. Reeds edge their garden. Beyond those, large lorries trundle past roughly once a minute. Each leaves its load on an immense rising pyramid of orange sand. Machinery clanks as yellow diggers and bulldozers toil. A white factory—a multipurpose space for robot assemblers, say the Mahoneys—recently rose where a copse once stood.
The couple had expected a bucolic life after finishing their house two years ago. It was not to be. Soon afterwards Scott Walker, then Wisconsin’s governor, said their neighbourhood would be handed to a Taiwanese manufacturer. Foxconn is building a huge, $10bn manufacturing plant on much of Mount Pleasant. Originally, at least, it promised to churn out large, latest model, LCD televisions there.
Things moved fast. Last year President Donald Trump, a golden shovel in hand, celebrated the deal just beyond the Mahoneys’ garden, declaring the plant will be the “eighth wonder of the world”. It will reportedly be America’s biggest single foreign direct investment. Local homeowners protested, but most sold up. The Mahoneys and their dog, stubborn sorts, still cling on.
Kim Mahoney says politicians abandoned them in a rushed, murky process. Republicans trumpeted economic benefits—especially Foxconn’s promise of 13,000 jobs, paying an average of over $50,000, for low-skilled locals such as those in the nearby, depressed, city of Racine. With a venture fund and other activities, Foxconn could transform a run-down industrial region in southern Wisconsin, once famed for making Horlicks and tractors, into a bustling hub for startups.
Democrats, in opposition, did not resist much. Some harrumphed about dodgy favours for the Taiwanese, such as the easing of a rule that limits smog. Foxconn, unusually, is allowed to soak up lots of water from nearby Lake Michigan. Bizarrely, because of a special law, in effect it can even operate above some courts: it may instantly appeal against any lower court ruling that is not in its favour to the state Supreme Court.
Tony Evers, a Democrat who has just replaced Mr Walker as governor, is no firebrand. He has been cautious about the deal, lest he be seen as opposing decent manufacturing jobs. In office he is loth to scare investors by breaking his predecessor’s legal contract. Urbane, educated and liberal types in Madison, the state capital, may wring their hands. But the blue-collar wing of his party, especially near Racine, is keen. Cory Mason, a philosophical type who was elected mayor of Racine in 2017, is an avid supporter who hopes Foxconn will revive his shrinking city.
As a state legislator he was one of three Democrats who backed Mr Walker’s deal. He saw a “breakdown within Democratic voters”, as “class lines defined views” in the party. Those with factory jobs, or who wanted them, cheered Foxconn; those with a college education opposed it, he says. Greta Neubauer, another Democrat, a state legislator and a fifth-generation resident of Racine, agrees. She disliked the deal but, she says, as “this is happening, I want to make the most of it”.
But Democrats run a risk in doing so. The Foxconn deal looks financially nonsensical. Mr Walker (pressed by Mr Trump) pledged an immense pile of taxpayers’ money for a foreign firm. Tim Bartik, an economist at the Upjohn Institute for Employment Research in Michigan, estimates that state governments typically offer big investors subsidies worth 3% of wages over 20 years. In luring Amazon last year, New York offered 6%; Virginia, just 1%, for example. Foxconn’s deal in Wisconsin, he says, is worth 30%, ten times the average.
Wisconsin has pledged almost $4.5bn to Foxconn, a sum Mr Bartik says is impossible to rationalise. “In 20 years people will point to this as an example of what not to do,” he says. As Wisconsin barely taxes manufacturers, the help will come as relief on sales tax, free provision of land, and direct payments. The effect will be to divert about $350m annually from the state budget for many years to come. Mr Evers has promised no tax rises, so spending, such as on education or health, may have to drop.
Worse, Foxconn, which is struggling with weak global sales of smartphones, is backing off its first bold promises. It will not make those big LCD televisions after all. Its local supply chain can shrink, doing without glassmakers. Instead goods will be shipped in and assembled. No one is yet sure what will be made; perhaps small screens for phones.
To lower costs, robots will do many tasks, so fewer low-skilled folk from nearby Racine will be needed than expected. Locals are also short on the necessary skills. Mark Muro, at Brookings, a think-tank, has analysed automation and the availability of workers. He says the Racine area is exceptionally short of engineering, computing or maths skills. Instead, the firm will look far and wide for engineers and developers. Foxconn rejects reports that engineers will come from China, but a person well informed about the deal says “a few hundred” Chinese workers already in America may have to move to Wisconsin.
Could the Democrats yet back away? Matt Flynn, an ex-chairman of Wisconsin’s Democratic Party, hopes to lead a private legal challenge, claiming the Taiwanese firm enjoys unconstitutional favours over its special legal arrangements. And he wants Mr Evers to see if Foxconn is in breach of contract for changing its plans. His attempts are unlikely to stop the trucks and diggers. The Mahoneys expect legal mediation over their home next month. Soon they will have no kitchen to stand in.