Foxconn, pro and con

With a vote on the Foxconn incentive package reportedly set to take place today, the Wisconsin Policy Research Institute looks at the pros and cons of what is likely to be approved today:

Much of the discussion thus far about Foxconn Technology Group bringing an LCD screen manufacturing plant to southeastern Wisconsin has focused on the deal itself and the money that could flow out of — and eventually into — our state Capitol.

That’s important, and we synopsize the key numbers below. But the sheer size and scope of the deal raises unprecedented questions about everything from job creation and impacts on economic growth in the decades ahead to how free markets and economies work best, most fairly and efficiently, for everyone in the long term.

There are smart people coming down on both sides of this one, and the divergence of opinion stems at least partly from how far down the road (no, not just I-94, though that’s a question as well) one thinks he or she can clearly see.

As a key analysis of the deal by the nonpartisan Legislative Fiscal Bureau states, “Technological advances and changes in Foxconn’s market share, operating procedures or product mix could significantly affect employment and wages at the proposed facility over time.”

The impending legislative decision — the Assembly is expected to vote Thursday, but no vote has yet been scheduled in the Senate — will require peripheral vision as well, and that’s always the blurriest. Proponents call the deal “transformational.” Opponents worry about the precedent it would set and all the other roads and businesses that exist — or might want to — in other parts of our unique state.

To help shed light on a complex deliberation, we’ve asked three of the smartest economists in Wisconsin (or with Wisconsin roots) to share their thoughts prior to action in Madison. Their initial takes — one skeptical, one largely sanguine and one against — are summarized below, along with an analysis of the prospects for Taiwan-based Foxconn and LCD technology.

Why Wisconsinites should be skeptical by Andrew Hanson
Taxpayers should ask, “Is this a good deal for us?” Among the reasons why it’s not: The billions of state dollars could be used for economic development with a better track record, the economic-multiplier estimate for the Foxconn plant is extremely generous and the deal sets an ill-advised precedent for other large employers in Wisconsin.

Fiscal costs certain, but a potential for large gains by Noah Williams
The high upfront costs must be weighed against the potential that Foxconn may help Wisconsin develop as a hub of high-tech manufacturing, which could generate gains far beyond the direct jobs created.

There are better ways to create jobs and growth by Ike Brannon
Governments aren’t very good at figuring out which businesses are likely to grow and which are likely to fail. What governments can do is create an environment that’s conducive to small and medium-sized businesses to invest, grow and expand.

What will the future of LCDs mean for Wisconsin? by Robert S. Anthony
Will technology inside the plant be obsolete the day it opens? While Foxconn has shown itself to be a smart and agile company, its future here depends on how it reacts to the ever-evolving display industry.

Finally, we synopsize key points being made by Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce and, in the interest of full disclosure, a Wisconsin Policy Research Institute Board member.

Sheehy concedes that in general there is risk in granting individual corporate economic incentive packages in a market-based economy. But he argues that for most every state, incentives are a necessary tool in the competition for jobs and capital investment and asks, “What is Wisconsin supposed to do, disarm?”

The Legislative Fiscal Bureau memo, worth reading in its entirety, includes a wide variety of points:

• Foxconn agrees to build a $10 billion facility over six years and create up to 13,000 jobs, with a reported average salary of $53,875.

• The state will provide up to $3 billion through two types of tax credits (which can mean cash payments) and a construction sales tax exemption. Foxconn could be eligible for the maximum if employment reaches 13,000 positions by 2021 and remains at that level.

• A Foxconn payroll tax credit over 15 years would relate to any employee with wages of at least $30,000 and up to $100,000. It could amount to $1.5 billion.

• A Foxconn capital expenditures credit would be paid over seven years and could amount to $1.35 billion.

• It is believed that Foxconn would be able to claim the 7.5 percent manufacturing and agriculture credit.

• The bill would create a sales and use tax exemption. Based on estimated capital expenditures of $10 billion, Foxconn and its contractors would save $139 million. “However, since it is highly unlikely that Foxconn would locate in the state without the incentives provided under the bill, this amount should not be viewed as a state revenue loss,” notes the LFB analysis.

• The state could make up to $10 million in grants to local governments for development costs related to infrastructure and public safety.

• The bill would authorize $252 million in bonds for use in the I-94 North-South corridor project. If fully issued, estimated general fund-supported debt service payments on the bonds would be $408 million.

To estimate how long it will take for state government to recoup its investment, the LFB made a variety of assumptions. Much of the following is taken directly from the LFB analysis:

• Average annual employment of approximately 10,200 construction workers and equipment suppliers earning an average total compensation of approximately $59,600 (including benefits) per year during the four-year construction period.

• Nearly 6,000 indirect and induced jobs created during the construction period, with an average total compensation of $48,900.

• Indirect and induced construction-period jobs generating increased state tax revenues equal to approximately 6.3 percent of the additional gross wages.

• Indirect and induced jobs associated with the project totaling 22,000 beginning in 2021. Average annual wages for these individuals are estimated at approximately $51,000. Total ongoing wages are estimated at $1.12 billion annually, and related state taxes are estimated at $71 million per year. Smaller impacts are estimated in calendar years 2017 through 2020 as the project ramps up. (A new report paid for by the Wisconsin Economic Development Corp. adjusted job-creation estimates outside the plant, with fewer long-term jobs expected but more short-term jobs expected during construction.)

The LFB  analysis says: “Based on these figures, DOA projects that the cost of the refundable state tax credits under the bill will exceed the potential increased tax revenues until fiscal year 2032-’33. As of the end of that year, the cumulative net cost of the incentive package is estimated at $1.04 billion. Beginning in 2033-’34, payments to the company would cease and increased state tax collections are estimated at $115 million per year.

“DOA estimates that the project’s break-even point would occur during the 2042-’43 fiscal year.”

“It should be noted,” according to the LFB, “that the analysis focuses only on the impacts of the Foxconn project on the state treasury, but does not account for other benefits to the state’s economy and residents.” These include Foxconn’s $10 billion investment, employment opportunities for the state’s workforce and adding a new sector to Wisconsin’s manufacturing economy.

MMAC’s perspective

The Metropolitan Milwaukee Association of Commerce points to this bigger picture. MMAC says tax revenue is only one long-term measure — wages and benefits paid to Wisconsin workers during construction and during operation of the complex should also be considered.

• During construction: Based on a $10 billion capital investment, the project would create over 10,200 new jobs for prime and sub-contractors and equipment suppliers; over 1,700 jobs for suppliers and another 4,200 jobs that would result from new household expenditures — a total of over 16,200 jobs with $3.6 billion in labor income over the four-year construction period, according to an EY Quantitative Economics and Statistics analysis, paid for by Foxconn.

• During operation: If Foxconn employment reaches 13,000, the EY analysis projects over 11,400 jobs among suppliers. The household spending from those direct and indirect jobs would produce another 10,800 jobs. The total ongoing job impact could reach over 35,200 and total annual labor income of $2 billion, under those assumptions.

Ultimately, according to MMAC, a $10 billion Foxconn investment with 13,000 jobs could have a cumulative impact of $78 billion to Wisconsin’s gross domestic product over 15 years.

WPRI has an underlying and guiding belief in the efficacy and promise of free markets and limited government that allows the private sector to flourish. We espouse sound public policy that ensures opportunity and enables prosperity. Our function today — and in the weeks ahead — is to provide the best information possible to legislators, who are being asked to make one of the most important and impactful decisions of their careers. We urge them to consider all potential benefits and ramifications before voting.

These are legitimate points. An excerpt from Brannon:

In my first year as a professor at the University of Wisconsin-Oshkosh in the mid-1990s, I had a colleague who spent his summers consulting for a small tech firm with a couple hundred employees called Epic Systems. At the time, the state was vigorously giving subsidies to manufacturing companies to come to the state or not leave the state, while benignly ignoring companies like Epic.

Today, Verona-based Epic employs nearly 10,000 people, most of whom live and work in the state and most of whom have skilled, well-paying jobs that any state would kill to attract.

There are better ways to attract new jobs than to give billions of dollars to one large manufacturer. The state can do more to attract entrepreneurs.

A lower tax rate on businesses would be one way to do this. And doing more to encourage foreign-born students — who are much more likely to start businesses than U.S. born-students — to remain in Wisconsin would pay dividends in the long run, I believe.

Neither reform would produce immediate returns, but they would plant the seeds for the next Epic Systems and leave the state less dependent on the fortunes of one company or industry.

Brannon doesn’t point out that Epic is in Verona and not Madison, where it began, because Verona gave Epic tax incentives to move that Madison refused to give. Paul Soglin won’t mention that in his potential loss for governor.

Brannon is correct though naïve because he doesn’t mention how politics works. Encouraging foreign-born students to remain here misses the fact that the Trump administration is trying to slam the door on immigration. There is, sadly, no real support for severely reducing business taxes even in the supposedly pro-business GOP. When politicians feel they must make pledges of job creation to get and stay elected, well, that’s how we have the system we have today.

Illegitimate points are illustrated by Sen. Van Wangaard (R–Racine):

M.D. Kittle brings up an illegitimate issue brought up by opponents:

Opponents of Wisconsin’s potentially massive economic development deal with Foxconn Technology Group like to point to Pennsylvania’s tale of heartbreak at the hands of the Taiwanese tech giant.

That’s certainly how the Washington Post painted the picture earlier this year when Foxconn, in the first few weeks after President Trump’s inauguration, announced it plans to invest billions of dollars in the United States and create as many as 50,000 jobs.

In 2013, the post reported, Foxconn Chairman Terry Gou pledged to build a $30 million factory in Pennsylvania’s capital, Harrisburg, and hire 500 workers.

“But the factory was never built. The jobs never came,” the Post morbidly reported.

True. The deal didn’t go down.

But the story, and others like it, left out some very important details, according to a guy who has gotten to know Gou and Foxconn over the past several months: Gov. Scott Walker.

In a key way, Foxconn didn’t leave Pennsylvania; Pennsylvania left Foxconn, according to administration officials.

After Democrat Tom Wolf unseated Republican Gov. Tom Corbett in 2014, Foxconn saw the writing on the wall, Walker said.

“In the case of Pennsylvania, they changed leadership, they changed who the governor was,” Walker told MacIver News Service Tuesday on the Vicki McKenna Show, on NewsTalk 1130 WISN in Milwaukee.

“I jokingly, but only half jokingly, say, it’s probably a pretty good reason not to change who the governor is for the next few years,” Walker, who is expected to run in 2018 for a third term, added.

The Badger State’s proposed $3 billion incentives package would no doubt play a big part in sealing Foxconn’s plan to build a $10 billion high-tech manufacturing campus in southeast Wisconsin – a development project that could ultimately create 13,000 jobs at what would be Foxconn’s first North American manufacturing operation.

But Walker said Wisconsin offers Foxconn intangible benefits that other states cannot, chief among them, stability.

Pennsylvania Gov. Tom Wolf, billed as “The most liberal Governor in America,” brought into office an agenda of big tax increases and stiffer government regulations on business.

“The idea that the new governor, with new terms, a new potential business climate, might come in, was something that was a grave concern for (Foxconn), and so they backed away,” Walker said.

Foxconn, too, slowed its investment in Brazil, as the South American nation reeled under corruption and the impeachment and removal of its president.

That point, too, is not noted in the Washington Post story, which all but accuses Foxconn of being a deadbeat business. Foxconn, according to the newspaper, “spoke of a $10 billion plan in 2011” in Brazil.

“In Brazil, Foxconn has an iPhone factory, but its investment has fallen far short of expectations,” the Post reported.

Gou has made it clear that Foxconn needs to be in the United States. The proposed southeast Wisconsin operation would make super-high-definition liquid crystal display panels to be used in various industries. The United States remains the largest consumer market in the world, and “Made in the U.S.A.” is critical to Foxconn’s growth prospects, the chairman told the Milwaukee Journal Sentinel late last month.

Gou pointed to Wisconsin’s advantageous geographical location, its transportation and logistics strengths, and its vibrant university and technical college system. He said Wisconsin has the assets to again become a center of manufacturing.

“You have a good foundation,” he told the newspaper.

Walker said Foxconn wanted to be in the middle of the United States, near a major market like Chicago, “but not in the state of Illinois.”

“Rather, in a state like Wisconsin, where we balance budgets, we have a fully funded pension system, we have a rainy day fund that’s 165 times bigger than when we took office, we have a business climate that went from the bottom 10 to the top 10,” Walker said.

The Washington Post piece suggests Gou and Foxconn are nothing more than big corporate teases — that Pennsylvania isn’t the only state that has loved and lost a potential Foxconn development deal.

But, as Walker administration officials have pointed out in recent weeks, if Pennsylvania truly was broken-hearted about Foxconn’s departure, why was it so heavily courting the deal that Wisconsin appears to be on the brink of landing? Pennsylvania was noted as several states in the running for the Foxconn project.

What’s not been widely reported is the fact that Gou’s $10 million commitment to Carnegie Mellon University in Pittsburgh for robotics research didn’t end after the Pennsylvania economic development deal fell apart.

“Foxconn said its $10 million donation … was ‘moving forward very successfully,’ with half of the funds having been spent four years later,” the Washington Post reported.

Walker blames politics for the half-truths about Foxconn in Pennsylvania and elsewhere.

“As we know with other issues, there are some people who are so bothered by the idea that we might have success here, particularly because they somehow think it might be beneficial to me or to some future campaign,” the Republican governor said.

“The bottom line is this is just good for Wisconsin.”

The most important point to be made is that none of what is in the Foxconn package is money the state would have were it not for Foxconn. There would be no infrastructure spending and no tax breaks if Foxconn wasn’t coming to this state. This is money that does not exist right now.

 

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Curb your fiscal enthusiasm

George Mitchell:

One of three national debt-rating firms, Moody’s Investors Service, has upgraded Wisconsin’s debt a notch.

Befitting a candidate preparing for a re-election campaign, Governor Scott Walker called this “historic” news driven by “bold reforms and accountable stewardship of the taxpayer’s dollar…[It] shows that Wisconsin is working.”

Added Assembly Majority Leader Jim Steineke, “[C]onservative reforms and fiscal responsibility are translating into a stable and accountable future for Wisconsin’s finances…[O]ur reforms are working for Wisconsin.”

Of course the party in power will credit itself with any positive development. So, in the spirit of this topic, I rate the Walker and Steineke statements as typical political exaggeration.

On examination, the debt upgrade falls rather short of being explained by “bold reforms.” And, of greater interest, are factors that could lead to a reversal, i.e., a future downgrade. As I will explain, early warning signals merit watching.

The upgrade by Moody’s groups Wisconsin with 18 states that are one notch below the top tier of 14 states. It remains to be seen whether the other two rating services (Standard and Poor’s and Fitch Ratings) will follow suit. Currently, S&P rates Wisconsin in a group that is below 29 other states.

The explanation offered by Moody’s is as follows:

The upgrade…reflects the proven fiscal benefits of the state’s approach to granting and funding pension obligations when many other states are experiencing stress from rising costs and heavy liabilities; an economy that delivers steady but moderate growth; conservatively managed budgets; and adequate liquidity.

Of the four factors cited, Republicans can claim direct credit for “conservatively managed budgets.” (As for those who tout “the state’s approach to granting and funding pension obligations,” that reflects longstanding practices that pre-date the 2010 Republican takeover of state government.)

Things get interesting — and, for me, perplexing — when one looks at (1) the actual trajectory of the Wisconsin budget since 2010 and (2) factors that Moody’s says could lead to a downgrade. Specifically, two budgetary measures that Moody’s cites are moving in the wrong direction.

For conservatives, the 2011-13 state budget was a major step forward. Walker and the Legislature eliminated the “structural” budget deficit and moved away from one-time budget gimmicks that were a hallmark of the administration of former Governor Jim Doyle.

The record since then is decidedly less impressive. Campaign-driven budget measures have brought the structural deficit back to life. According to the Legislative Fiscal Bureau, the forward looking structural imbalance reached nearly $1.8 billion after the 2013-15 budget and now stands at $1.1 billion.

Moody’s cautions that a debt downgrade could be prompted by a “return to structural budget imbalance…” As that clearly has happened, I asked Moodys to clarify. A spokesman said that “outyear budget gap projections are well under 5 percent of revenues which is typical of such forecasts…We weigh projected gaps against a state’s resources and its track record of [eventually] balancing budgets.” In other words, for Moodys the $1.1 billion projection is manageable. The caution about a “return to structural budget imbalance” likely harkens back to the sustained and larger deficits of the Doyle years.

A second caution factor that Moodys says could prompt a downgrade would involve “accelerated deterioration of the state’s financial position resulting in…larger GAAP-negative fund balances.” That refers to “generally accepted accounting principles,” a benchmark of a state’s fiscal position in light of projected obligations.

GAAP deficits soared under Doyle. Predictably, the return to fiscal sanity in the 2011-13 state budget reversed the Doyle trend. Just as predictably, the less prudent budgetary record since then has GAAP deficits back on the upswing. Walker’s proposed 2017-19 budget would boost that shortfall by about 30 per cent. (Walker pledged to eliminate the GAAP deficit in his 2010 campaign, a pledge that obviously came with an early expiration date.)

Moodys told me “the GAAP deficit is one area where Wisconsin does not compare well” with other states.  It further observed that a portion of the deficit effectively is artificial (my word, not Moodys) because of difference in the state’s fiscal year and that of local governments that receive state aid.

At the risk of getting even more wonky, here are the state’s “GAAP-negative fund balances” for the last five years.

2012: -$2.63 billion

2013: -$2.34 billion

2014: -$2.02 billion

2015: -$2.44 billion

2016: -$2.39 billion

It remains to be seen what level of “acceleration” in those numbers would prompt Moody’s to revisit the Wisconsin debt rating.

The biggest reason for Walker’s backsliding on and Doyle’s ignorance of fiscal responsibility is that neither they nor any other politician in this state are required to be fiscally responsible. Despite six years of total Republican control in Madison there remains no Taxpayer Bill of Rights in the state Constitution to mandate spending and tax controls on every level of government, particularly state government. The requirement for a balanced state budget is on a cash basis, unlike every other level of government in this state, which must GAAP-balance their budgets. There are no referendum requirements for tas increases.

The school-district revenue caps are law. Laws can be changed. The only way to ensure real fiscal responsibility is to constitutionally require it.

 

Fighting (Bob) words

I bet this opinion from RightWisconsin will stir up the lefties:

Wisconsin may not have statues dedicated to leaders of the Confederacy (we were on the good side), but we have a suggestion of a statue in desperate need of being taken down.

It’s time for the statue of Robert La Follette at the National Statuary Hall Collection in the U.S. Capitol to come down. While we’re at it, let’s remove the bust of La Follette from the Capitol in Madison as well. There will be protests. But let’s face it, the Progressive Era is over. Thank God.

Wisconsin is now a red state, won fairly by former Governor Tommy Thompson (three times), Governor Scott Walker (three times) and President Donald Trump. We re-elected a conservative senator in a presidential year, Ron Johnson, when every pundit said it couldn’t be done. The majority of our representation to Congress is conservative. Conservatives control the state Assembly and the state Senate with record numbers, and conservatives even control the state Supreme Court 5-2.

Ironically, the only remaining Democratic statewide office-holder is Doug La Follette, a poor relation and a pale shadow of the La Follettes past.

So why continue to honor Robert La Follette? Seriously, who would miss him?

Let’s start with the statue in Washington. Wisconsin has two statues at the U.S. Capitol, one of Fr. Jacques Marquette and the other of La Follette. La Follette is actually the only Wisconsin statue in National Statuary Hall while Marquette is somewhere else sulking about the lost Catholic mission of the university named after him.

To get rid of the La Follette statue, all it would take is for the Wisconsin legislature to pass a resolution, with the governor’s approval, suggesting an alternative. Then Congress’ Joint Committee on the Library would approve it and, voila, no more monument to Progressive politics. Given Republican control of Congress, how could they say no?

We can replace La Follette with a more deserving representative of Wisconsin: Supreme Court Chief Justice William Rehnquist, a native of Shorewood, WI. Rehnquist served for 33 years on the Supreme Court, 19 as Chief Justice. His role in shaping the conservative direction of the court is a legacy worth remembering for all time, and Wisconsin should be proud to have a statue of the Chief Justice representing the state in our nation’s Capitol.

As for the bust of La Follette in the state Capitol, the state should just box it up and send it to the Wisconsin Historical Society. Future tours of school children can play guess who is the grumpy old man. If we have to replace it, who better to honor than former Governor Tommy Thompson?

La Follette was Wisconsin’s governor and a U.S. senator, a presidential candidate, father of another governor and senator (and grandfather of former attorney general Bronson La Follette) and one of those atop the Progressive Era. The high school I went to has Fighting Bob’s bust in its library. (Why the La Follette teams were called the Lancers and not the Fighting Bobs is not something I can explain.)

About La Follette’s progressivism, a comment on RightWisconsin’s Facebook page says:

Yes. La Follette was one of the first communists to advocate stealing your money and mine to buy votes.

The Progressive Era is taught as a period in which government went back to the people instead of the moneyed interests, through, for instance, the 17th Amendment allowing direct election of U.S. senators instead of having them chosen by state legislatures, and primary elections instead of party candidates chosen in smoke-filled rooms. The latter process gave us Donald Trump. (Just saying.) The former is a favorite target of conservatives, but is unlikely to follow the 18th Amendment and be removed from the Constitution.

RightWisconsin doesn’t say why Fighting Bob should be condemned to the treatment of disfavored Soviet Union leaders, other than that, well, liberals aren’t in power in state government. (Despite one of Wisconsin’s U.S. senators and three of its U.S. representatives.) Political power comes and goes. Recall that the state Legislature swung from Republican control through most of the 2000s to Democratic control after the 2008 elections and then back to GOP control after the 2010 elections. It seems unlikely, to say the least, that Democrats will repeat their 2008 feat, but in these turbulent political times it’s not impossible.

The lefties will not tell you the numerous negatives of progressives, partly because self-analysis is not a strength of theirs, as shown in their post-2016 circular firing squad. The core belief of progressives from La Follette’s day is that man can be improved, and government and experts are the people to do it, and should have the authority to mandate improvement.

Whether or not you like primary elections, that accomplishment pales in comparison to the income tax, designed to separate people from their money to feed Govzilla on the concept that, yes, government and its experts know better than you what you need and what society needs.

If they only stopped there. Let’s go to Princeton University:

After the largest recession in history, a political movement comprising mostly white, small-town, Protestant voters grabbed the reins of power from elites under the banner of making America great.

Sound like 2016? Try 1900. And these weren’t conservatives. These were progressives. “They described it as a revolution, the likes of which the world had never seen,” says Thomas Leonard, a research scholar in the Humanities Council and a lecturer in economics at Princeton and author of Illiberal Reformers: Race, Eugenics & American Economics in the Progressive Era(Princeton University Press). While corporations were checked and progressive presidents Theodore Roosevelt and Woodrow Wilson 1879 were voted in, the Progressive Era — 1900 to 1920 — was marred by a darker history of racism and xenophobia among its politicians. …

Leonard shows, however, that their policies were undergirded by social Darwinism and eugenics and excluded groups deemed inferior — including women, Southern- and Eastern-European immigrants, Catholics, Jews, and blacks.

“They wanted to help ‘the people,’ but excluded millions of Americans from that privileged category on the grounds that they were inferior,” he says.

Progressives pushed for voter registration, literacy tests, and poll taxes to mitigate fraud and corruption, bolstering the Jim Crow South. In 1913, they proposed a minimum wage to benefit skilled Anglo-Saxon workers by requiring immigrants to prove they had a job paying that wage to enter the country.

Thomas Sowell adds:

An influential 1916 best-seller, ‘‘The Passing of the Great Race” — celebrating Nordic Europeans — was written by Madison Grant, a staunch activist for Progressive causes such as endangered species, municipal reform, conservation and the creation of national parks.

He was a member of an exclusive social club founded by Republican Progressive Theodore Roosevelt, and Grant and Franklin D. Roosevelt became friends in the 1920s, addressing one another in letters as ‘‘My dear Frank” and ‘‘My dear Madison.’‘ Grant’s book was translated into German, and Adolf Hitler called it his Bible. …

Progressive intellectuals who crusaded against the admission of immigrants from Eastern Europe and Southern Europe, branding them as genetically inferior, included many prominent academic scholars — such as heads of such scholarly organizations as the American Economic Association and the American Sociological Association.

Southern segregationists who railed against blacks were often also Progressives who railed against Wall Street. …

Wilson introduced racial segregation into the government agencies where it didn’t exist at the time, while Republican President Calvin Coolidge’s wife invited the wives of black congressmen to the White House. As late as 1957, civil-rights legislation was sponsored in Congress by Republicans and opposed by Democrats.

Later, when the Civil Rights Act of 1964 was sponsored by Democrats, a higher percentage of congressional Republicans voted for it than did congressional Democrats. Revisionist histories tell a different story. But, as Casey Stengel used to say, ‘‘You could look it up” — in the Congressional Record, in this case.

Another progressive was Margaret Sanger, who said …

“The third group [of society] are those irresponsible and reckless ones having little regard for the consequences of their acts, or whose religious scruples prevent their exercising control over their numbers. Many of this group are diseased, feeble-minded, and are of the pauper element dependent upon the normal and fit members of society for their support. There is no doubt in the minds of all thinking people that the procreation of this group should be stopped.”

“Birth control is not contraception indiscriminately and thoughtlessly practiced. It means the release and cultivation of the better racial elements in our society, and the gradual suppression, elimination and eventual extirpation of defective stocks— those human weeds which threaten the blooming of the finest flowers of American civilization.”

“I think the greatest sin in the world is bringing children into the world that have disease from their parents, that have no chance to be a human being, practically. Delinquents, prisoners, all sorts of things just marked when they’re born. That to me is the greatest sin — that people can — can commit.”

“As an advocate of birth control I wish … to point out that the unbalance between the birth rate of the ‘unfit’ and the ‘fit,’ admittedly the greatest present menace to civilization, can never be rectified by the inauguration of a cradle competition between these two classes. In this matter, the example of the inferior classes, the fertility of the feeble-minded, the mentally defective, the poverty-stricken classes, should not be held up for emulation…. On the contrary, the most urgent problem today is how to limit and discourage the over-fertility of the mentally and physically defective.”

Two progressives with Wisconsin ties were fans of eugenics as well.  John R. Comons, an advisor to La Follette, was described thusly here:

One result of our study is that, in his analysis of institutional dynamics in the United States, Commons’ rejection of laissez-faire is derived from a racist analytical framework: the “superior races” should be protected from the “inferior races”. Another result is that Commons adopts a neo-Lamarckian framework which takes education as the basis for the assimilation of “inferior races”. This article then shows that policies often defended as progressives, as education policies, may be derived from racist foundations.

A Wisconsin State Journal story about the strange history of Alma includes this:

And even a University of Wisconsin luminary such as Charles Van Hise, as president of the university, gave lectures in which he supported eugenics as a way to conserve human resources. He said that “as a first very moderate step toward the development of the stamina of the human race, defectives should be precluded from continuing the race by some proper method.”

La Follette’s position on eugenics is unknown. There is considerable evidence that La Follette didn’t have the same racist views as other progressives. However, his economic views are not an endorsement of the progressive era. Christian Schneider in 2012 chronicled progressivism:

“I believed then, as I believe now, that the only salvation for the Republican Party lies in purging itself wholly from the influence of financial interests,” wrote La Follette in his autobiography. But after 112 years of La Follette’s Progressive vision coming to fruition, it is worth considering: What now constitutes the state’s most powerful “financial interest”?

Government unions are a good place to start. While things like “public sector unions” and “women voting” were still dreams when La Follette was governor from 1901 to 1906, government unions now spend more than any other single group to affect campaigns in Wisconsin. And this spending is rarely intended to forge a new Progressive vision in Wisconsin. It is generally used to protect what the unions already have. …

One of La Follette’s many sworn enemies, Republican Gov. Edward Scofield, dismissed his rage against the party “machine” in 1900, predicting that government would one day become the same type of machine La Follette purportedly loathed. …

And in 2012, it was that machine of 284,963 Wisconsin state and local government employees and their spouses who sought to recall Scott Walker from the governorship, thereby attempting to overturn a popular election held little more than a year earlier. (The recall election is also a product of the Progressives, having been added to the state constitution in 1926 by La Follette loyalists.)

In his time as governor, La Follette could not have imagined the breadth and scope to which government would grow in Wisconsin. In 1899, the state spent $4.7 million on everything, from public education to universities, to the court system, to “insane county asylums.” (About 32 percent of all government was funded by railroad license fees.) That amounts to $121.5 million in 2012 dollars, or $58.73 per capita. This year, Wisconsin state government is scheduled to raise and spend around $32.4 billion, or $5,696.52 per capita.

The imposition of the nation’s first income tax in 1911 — and the commensurate revenue it produced — sparked an inexorable 100-year march toward government as the state’s largest employer:

Even in the past 35 years, government has become the primary employer for more and more Wisconsin citizens. Today, 71,552 more Wisconsinites are employed by state and local governments than in 1976, an increase of 33 percent.

All those new government jobs came with a cost; especially once Democratic Gov. Gaylord Nelson signed the nation’s first law allowing public sector collective bargaining in 1959. Within a decade, unionized teachers were participating in illegal strikes to force higher salaries and better benefits. As a result, Wisconsin passed a new landmark mediation-arbitration law that virtually guaranteed that teacher compensation couldn’t be cut.

Geographical-pattern bargaining strategies were perfected by the teachers union, forcing school districts to match the gaudy compensation packages passed in comparable districts around the state. By 2011, state government employee salary and benefit packages averaged $71,000. In the Milwaukee school district, average employee compensation soared to more than $100,000 per employee — for nine months of work.

In recent decades, the growth in the cost of government has exceeded the growth in the state’s economic output. In 1980, state spending accounted for 12.9 percent of the state’s gross domestic product. By 2010, that number had grown to 16.2 percent of Wisconsin’s GDP:

The financial cost to taxpayers is just the beginning. Bob La Follette stood on hundreds of stages, wagons and soapboxes upbraiding railroads for their monopolistic practices. The railroads, he argued, preyed on the public, soaked customers for excessive fees, then turned around and bought legislators with campaign contributions.

But now that party standard-bearers are picked through primary elections (thanks to “Fighting Bob”) and not backroom dealings, the most powerful monopoly that still exists can be found in the state’s public education system. …

It isn’t incumbent on you, as a Progressive, to learn that after two unsuccessful gubernatorial runs, Robert La Follette’s third campaign was funded almost entirely by wealthy U.S. Rep. Joseph Babcock, who thought bankrolling La Follette would catapult himself into the U.S. Senate. According to author Robert S. Maxwell, in  La Follette and the Rise of Progressives in Wisconsin:

“La Follette also received valuable assistance from the leader of the congressional delegation, Joseph W. Babcock. This politically ambitious ex-lumberman had already served four terms in Congress and was seeking a larger field for his talents. He was quite aware of the disintegration of the Republican organization and sought to organize the machine to advance his own interests. Babcock was sure that his support of a La Follette ticket would be both popular and successful. It is probable that he thought he would be able to control the new governor and use the state organization to elevate himself to the senatorship.

“Events were to prove that he misjudged his candidate completely and vastly overestimated his own abilities, but during the campaign of 1900, Babcock’s financial assistance and organizing skill contributed greatly to its success.”

You aren’t expected to know that La Follette, in his 1900 campaign, completely changed course and positioned himself as a pro-corporate candidate to earn the approval of the public. When one supporter urged La Follette to talk about regulating railroad fees, La Follette bristled because of the backlash it might cause. …

You are also supposed to forget the black marks of Progressivism: the virulently racist eugenics of La Follette’s handpicked president of the University of Wisconsin, Charles Van Hise, who once said, “He who thinks not of himself primarily, but of his race and of its future, is the new patriot.” You have to forget that Progressives played a part in foisting Prohibition on the nation, an unforeseen effect of which was people either blinding or killing themselves by drinking substitute alcohol made of chemicals such as paint thinner.

What about La Follette and prohibition? La Follette and His Legacy, written by the UW–Madison La Follette Institute of Public Affairs, wrote:

Elected and reelected as Dane County District Attorney, he enhanced his reputation by doggedly prosecuting all types of offenders, especially drunkards and vagrants. Espousing the Republican belief in hard work to achieve self-sufficiency, La Follette had no sympathy for the lawbreakers.
But he also didn’t advocate any stiffer laws regarding alcohol use. Throughout his political career he avoided the divisive prohibition issue and instead concentrated on what he felt to be more weighty problems-oppression of individuals by powerful corporations, undemocratic decisionmaking and corruption in government, and foreign military actions by the national government.

What Fighting Bob hath wrought is almost all negative. Bigger government has gotten us less freedom. Replacing the supposed monopoly power of wealth with the actual monopoly power of government is not an improvement. If you don’t believe in individual freedom, then it’s easy to take the next step and oppose freedom for those who don’t look like you. (Labor unions have opposed free trade and immigration for decades because they believed foreign-born workers would drag down their members’ wages.) The primary election, which seemed like a good idea at the time, gave us Donald Trump, and yet in the Democratic Party the smoke-filled rooms still gave Democrat Hillary Clinton, not the alleged people’s choice, Bernie Sanders. Prohibition gave us organized crime, and if La Follette didn’t go out of his way to support Prohibition, there is no evidence he publicly opposed it, in a state full of breweries.

I don’t support the whitewashing of history. Maybe La Follette’s bust should remain public view, but there needs to be a better explanation of how the Progressive Era was a step backward for this state and this nation.

 

The (more than) 50 states and (fewer than) 72 counties

Something called The Jack News writes:

A recent lawsuit in the Golden State has brought attention to an interesting, and mostly ignored, problem: California is simply too large of a state. …

But the lawsuit raises an enticing possibility: Has the time come to add more stars to Old Glory by breaking up the union’s biggest states?

Splitting Up States

Most discussion about potential new states, focus on the longstanding desires of America’s two most populous non-state territories: The District of Columbia and Puerto Rico. Statehood is a divisive question in Puerto Rico, however, and the status of the nation’s capital city raises complicated questions of sovereignty that could likely only be solved by constitutional amendment.

Creating new states out of existing ones, on the other hand, has a long history. The framers of the Constitution included a clause specifically allowing for it, with the consent of both Congress and the state or states concerned. Vermont, Kentucky, Maine, and West Virginia were all carved out from existing states using this method.

Consent for West Virginia was, controversially, granted by the “restored” unionist government of Virginia during the height of the Civil War, but the legitimacy of that move has been long-settled. In each of the other cases, state legislatures responded to public demand by giving their consent, and Congress dutifully obliged. By exercise of democratic consent, America’s sovereign states can divide themselves, and sometimes they have.

Goldilocks States

Proposed movements to split existing states have a wide history; but not all such proposals have much chance of gaining traction. Adding a new member to the union requires not just the consent of the state being broken up, but also Congress, and Congress has usually had some broad principles in mind.

The first, and most important consideration, is population. As the United States expanded westward across the continent, Congress always required a minimum population before a territory could apply for statehood. Since becoming a state comes with two senators and at least one representative regardless of population, Congress is unlikely to ever approve a state less populous than the current 50thlargest, Wyoming (585,501 as of 2016). This also happens to be reasonably close to the size of the average U.S. House district, which is just over 700,000.

That rules out most of America’s territories outside of Puerto Rico and the District of Columbia, since the largest, Guam, has just under 160,000 residents. It likewise makes unlikely proposals like Superior, to make a new state from the upper peninsula of Michigan, or splitting a state like Colorado, which ranks 22nd in population of the states. The resulting states simply would not have enough people to justify the Constitution’s minimum federal representation.

The Big Five

Because of this aversion to low-population states, it is probable that only the nation’s largest and most populous states would be eligible for partition. Those also happen to be the states were movements for partition have been strongest, and a serious topic of debate over the years.

The five most-populated states and their 2016 population are, in order: California (39 million), Texas (27 million), Florida (20 million), New York (19 million), and Illinois (12 million). All are good potential candidates to carve out newer, smaller states.

California

California already hosts the oldest and most persistent partition movement, the would-be “State of Jefferson” that aspires to encompass far-northern California as well as adjacent parts of southern Oregon. There is also a persistent split between the central part of the state, centered around the Bay Area, and southern California centered around Los Angeles.

A recent proposal to split California into six states ended up failing and folding, largely because six was too ambitious a number, and the proposed borders too arbitrary. A state split into the three parts, however (with the northernmost possibly picking up part of Oregon) would neatly follow the existing political and cultural divisions.

Jefferson already has a suitable name, and several counties in the region have approved of it in referendums. There are many potential options for naming the other two; but for simplicity’s sake let’s call them North California and South California. Alternately, geographical features like “Sierra” or “Mojave” could provide each with a fresh start and a distinct identity.

Texas

Texas is unique in a lot of ways, but one of the most unusual is an obscure bit of trivia tucked into the joint resolution annexing the then-independent Republic of Texas in 1845. In order to sweeten the deal, Congress offered its pre-approval to for Texas to split itself into as many as five states.

Whether or not that offer still stands is unclear and debated among constitutional scholars. Texas has seen many partition proposals, but none ultimately overcame the state’s uniquely strong sense of identity.

The sprawling state encompasses many distinct regions; but the most common proposals have centered around the southwest portion of the state nearest the Mexican border. After the Civil War, it was briefly proposed to create a state named Lincoln from the parts of Texas between the Rio Grande and the Colorado River, roughly dividing the state in half.

A similar modern proposal, could perhaps result in a state of Rio Grande, extending from Brownsville to El Paso, and with its capital in San Antonio. The result would leave the more predominately Latino and Democratic parts of the state, free to govern themselves without being dominated by the rest of Texas’s overwhelming Republican supermajority.

Florida

Florida is another state where the cultural and political divide is stark between two regions: the predominantly conservative and Republican northern half of the state, versus the more Hispanic and Democratic south centered around Miami.

The idea of division has attracted enough support to be endorsed by county legislators in Ft. Lauderdale, and a handful of state legislators. It’s less clear where the border would be drawn. Which side would get Orlando, Tampa, and Cape Canaveral?

Central Florida is a culturally mixed region, politically purple, and home to some of the state’s most famous and valuable assets. While residents of the conservative panhandle on the one hand, and liberal Miami on the other, might relish being free of the other, there is no clear dividing line between them. Where exactly to draw the border, would probably end up being a contentious, and potentially unsolvable question.

If a fair border could be agreed upon, America’s most famous swing state might instead become one reliably red state and one reliably blue state. A repeat of the 2000 election fiasco, where a few hundred votes decided the state and thus the presidency, would be very unlikely.

New York

The Empire State has always housed two very distinct regions: the metropolis in and around New York City, and the rural bulk of the state’s landmass that has become known as Upstate New York.

On both sides of that divide, frustrations run high and proposals for a split have been persistent for decades. Upstaters chafe at the domination the city exercises by having the majority of the population, while residents of the five boroughs have little connection to places like Buffalo and Rochester.

If there is any metropolis that can make the case for its own statehood, it would be New York City’s eight million inhabitants. Extending that to include Long Island and the adjacent counties immediately north of the city, would push the population north of ten million.

Which half would get to keep the name “New York” could be debated, but to avoid confusion it would probably be best if that name stuck with the city that shares it. The rural rest of the state, perhaps picking a new name based on geography or the local Native American tribes, could govern itself without being overshadowed by the metropolitan neighbors. The state of Adirondack, or Mohawk, or Erie, or Hudson, could even put the question up to vote. After all, “upstate” would no longer work as a description.

Illinois

Illinois suffers from a similar dynamic as New York: a single dominating metropolis at one end, split from the predominantly rural and politically conservative rest of the state. Chicago’s sense of identity is drastically distinct from the rest of Illinois, to the degree that the city’s distinctive flag is a much more common sight on its streets than Illinois’s banner.

Partition already has a degree of perennial support, with legislators from both Chicago and “downstate” introducing bills to that effect in the legislature. The political calculus is obvious: Democrats who dominate Chicago could firmly control any new state built around it, and Republicans consigned to permanent minority status in southern and central Illinois would instead have a solidly red state to govern.

It’s not just politics, of course. There is a real social and cultural divide between diverse and cosmopolitan Chicago, and the vast stretches of small towns and farmland that occupy the rest of Illinois.

A recent survey even found that Illinois was the only state where a majority of its residents said they would move to a different state if they could. They might just have that option, without having to move at all. Like the Czech Republic and Slovakia, Illinois and Chicago could go through a velvet divorce that leaves both happier.

Two by two in the Senate

In the era before the Civil War, it was common practice to admit new free states and new slave states together in pairs, to maintain the precarious balance of power in the Senate. That is a practice that could be revived in the 21st Century, albeit in the much less troublesome context of partisan politics, instead of human bondage.

Past election results provide an easy and fairly reliable guide to guess the partisan tilt of any new state. Pairing likely-Republican and likely-Democratic states would be necessary to secure bipartisan buy-in at all levels of the decision, and solid majorities in favor in both the state and national legislatures.

The State of Jefferson, for example, would most likely give its two Senate seats as well as its electoral votes to the GOP. Splitting the rest of California in two, would produce two Democratic states from what had previously been one. Thus the net effect would be to add two Senators for both parties.

Florida, currently has one Republican Senator and one Democratic Senator. A split state would, most likely, send two from each party, for a neutral net effect. This same calculations can be played out elsewhere. Two new Republican Senators from upstate New York, could balance two new Democratic Senators from southwest Texas.

That kind of partisan horse-trading might sound unseemly, but it could be the necessary grease to arrive at a good policy result: state governments that are more representative, effectively providing localized laboratories of democracy. More states means more experimentation, and a stronger sense of federalism across the country.

There’s nothing magic about 50 states and 100 senators. It’s more than time for us to reopen the political debate about state sizes. Admitting six new states into the union, for the first time since 1959, would solve a multitude of state problems without upsetting our current national political balance.

David Blaska suggests the opposite, and has a map to match:

No county has ever merged with another. Now, apparently, Ozaukee and Washington Counties are raising the possibility. Both counties are populous (Ozaukee: 88,314; Washington: 134,296). Both counties are wealthy Republican exurbs of Greater Milwaukee. Which means they recognize the value of a dollar and are not in thrall to More and Bigger Gummint.

WTMJ-4 reports that Washington County, faced with budget troubles, is “thinking out of the box [including] dissolving county lines and completely merging with Ozaukee County.

“I know that if we go down this path, that guys like me don’t have a job but I’m good with that,” the Washington County administrator said.

His County has already saved $300,000 by merging its health department with Ozaukee and another hundred grand merging with the Waukesha County medical examiner.

The Washington County Administrator sent a letter to four of its neighboring counties, letting them know about their fiscal health status.

Of Wisconsin’s 72 counties, 71 had been formed by 1901 when most people moved by horseback. The Menominee reservation was carved out of Oconto and Shawano counties in 1959 to create its own county, in an experiment that failed. It was intended to wean it off reservation status but 35% of the 4,533 population are mired in poverty. Florence County (population: 4,423)  and Menomonee (population: 4,232) are the two-least populous counties and have not a single incorporated village or city. For comparison purposes, Dane County is home to 531,273 (2010 Census).

The stickler is that all counties must provide the same array of services: law enforcement, roads, courts, health, general welfare, property records, etc. It’s a matter of economy of scale.

No county has ever merged, but they can

State law, specifically Chapter 59.08, provides for “consolidation” of counties, which is put to referendum. Let’s explore consolidation in low-population southwest Wisconsin, now divided among Grant (population: 52,214), Iowa (population: 23,654), and Lafayette (population: 16,753) for a combined 92,621. Lafayette was cleaved from Iowa County in 1846. You could argue: leave Grant alone. It’s large and fairly populous, but let’s go with the three-fer for this example.

County boards would take the lead. But if Lafayette’s county board remained silent, for instance, voters could petition for a referendum in their county. If its board still dragged its heels, a judge would appoint five citizens to work out the details with the merger partners. If the referendum on consolidation fails in any one of the counties, the whole deal goes down. Although long state law, no county has ever merged. Instead, most of our counties were cleaved from existing counties — originally just three in 1818: Crawford in the west, Brown in the east, and (encompassing the far north and the Upper Peninsula of Michigan) Michilimackinac.

The hard, cold numbers may argue for consolidation but emotions could scuttle the whole thing. First, what to call the new, consolidated county? Nothing wrong with “Iowa-Lafayette” county unless the Lafayetters insist on “Lafayette-Iowa.” You see the problem! But the three-county merger we have imagined includes Grant County. That calls for a completely new, neutral name. “Driftless County”? “Lead County”?

Who gets the courthouse?

But it raises the question even more likely to sabotage merger than the consolidated county’s name: which city gets the county seat?

That question is particularly poignant in our three southwest county seats. Lancaster, Dodgeville, and Darlington have glorious old courthouses and, frankly, not a whole lot else going for them. Could some functions continue in each courthouse? The law specifies that the courts be consolidated at the county seat. But could the referendum specify all three as county seats? Our reading of 59.08 does not seem to rule out that possibility.

Existing sheriff’s facilities could continue as precinct houses. Dane County has three such sheriff’s precincts outside of Madison. If new, modern jails would required, the merged county would need build only one, not three.

We could find no authorization to carve up one county between two neighbors, even though it would seem to make sense in some cases.

i am a resident of one of those indigo-colored counties (or is that periwinkie?), which, I was told upon full-time arrival 29 years ago, was larger than the state of Rhode Island. Since Blaska concedes that maybe Grant County shouldn’t be part of Tri-Indigo County, reuniting Iowa and Lafayette counties (the latter was created from the former before statehood), that would create a county larger in land area than Grant County, and yet would be smaller in population.

An outstanding weekly newspaper carried Blaska’s column and the editor’s brilliant response. (Beginning with the possibly surprising fact that Wisconsin has fewer counties than all our neighbors.) Whether or not you like Blaska’s idea generally or map specifically, certainly this state needs fewer, not more, lines between providers of government services. My favorite (if you want to call it that) example is the Fox Cities, which runs roughly from Neenah to Kankauna and includes parts of three counties, four cities, four villages, seven towns and several police departments and fire departments, despite the fact that two houses next to each other in the same neighborhood could be in different municipalities. The Fox Cities is a demonstration of how, if not why, this state has 3,120 units of government, second only to Illinois.

Somewhere in the mists of time is probably evidence that I once proposed merging towns that include cities within the original town boundaries — such as the City of Ripon and the Town of Ripon given that the latter has a police department whose purpose is only to generate town revenue by writing speeding tickets. Of course, people live in towns instead of cities because the former has something the latter lacks in their opinion. Usually, lower taxes.

The tricky subject is getting politicians to voluntarily merge their units of government and thus lose some of their political power. It’s not very federalist to mandate, for instance, Blaska’s map(re)making. But having 3,120 units of government fits no one’s definition of good government.

 

Free speech and Charlottesville

RightWisconsin:

A group of vile racists in Charlottesville, VA, planned a rally for Saturday, “Unite the Right,” in part to protest the removal of a statue of Confederate General Robert E. Lee. The protest was met predictably by a counter-protest, including by members of the “Antifa” movement, the left’s violent protest wing.

The Charlottesville newspaper, The Daily Progress, has the best description of the events of Saturday. We strongly recommend everyone read it to learn how both sides were prepared for violence. It’s still unclear how the violence broke out, although by most accounts the police were inadequate to the task of keeping the two sides separate. Given the desire for both sides for a confrontation, it was probably expecting too much of the police to keep order completely, and the city did try to change the venue to make the rally safer.

As the violence escalated, a state of emergency was declared and the rally, comprised of the KKK, Nazis, the “alt-Right,” and other racists, was canceled. Unfortunately, the violence didn’t end.

A young man from Ohio, James Fields, allegedly intentionally drove his car into the crowd of demonstrators, killing at least one person and injuring 19 others, an act of terrorism similar to terror vehicle attacks elsewhere. He is currently charged with second degree murder.

The day’s tragedies continued with the crash of a helicopter containing two state troopers who were monitoring the events on the ground. Both were killed.

The lesson some would draw from the events of Saturday is that free speech is too high a price to pay, that Nazis and other racists should not be allowed to have free speech, or for that matter anyone that the left deems unacceptable. Glenn Greenwald has an article in The Intercept defending the ACLU and its defense of the rally planners in Charlottesville after the city council tried to move the rally. As the article points out, the ACLU is no friend to the racist organizers of the rally, but they recognized (just as they famously did in Skokie, IL) that defending the right to unpopular, even racist hate speech, is defending the right to all speech. Unfortunately, that understanding, always fragile in America, is rapidy becoming lost.

And, on cue, groups like One Wisconsin Now (OWN) are already using the violence in Charlottesville to attack a bill in the Wisconsin legislature that would protect free speech on college campuses by punishing those that would disrupt the free speech of others. Of course, OWN is mischaracterizing the bill, claiming it would punish people for protesting. It does not. It only punishes those would try to prevent others from speaking.

Republican legislators should not be cowed by this tactic of a political left that wishes to preserve their ability to decide what speech can and cannot be protected, expressing that power through mob violence. As liberal writer Peter Beinart in the Atlantic points out, “Antifa believes it is pursuing the opposite of authoritarianism. Many of its activists oppose the very notion of a centralized state. But in the name of protecting the vulnerable, antifascists have granted themselves the authority to decide which Americans may publicly assemble and which may not. That authority rests on no democratic foundation.”

The real lesson of Charlottesville is that racist speech should be condemned loudly and often, but confronting the racist organizations with violence is not the answer. Because, as Beinart also points out, while attempting to suppress racist speech through violence, the left is becoming racism’s greatest ally in spreading the hate. The “alt-right” will just attract more adherents convinced that their speech needs to be defended by violence, too. In the escalating political fire, the First Amendment freedoms we cherish are those that will be at risk.

Possibly the best thing Walker has ever done

While political geeks were obsessing over Foxconn and the state budget, Eric Bott writes:

Gov. Scott Walker and Wisconsin are once again showing conservative reformers nationwide how to get the job done. This month, lawmakers sent Walker the first state version of the REINS Act to be passed by a legislature, and Walker, who has championed the reform, is expected to sign the bill soon.

The REINS Act, introduced by state Sen. Devin LeMahieu (R-Oostburg) and state Rep. Adam Neylon (R-Pewaukee), restores much-needed transparency to the rule making process by requiring that the costliest of regulations receive approval from the full legislature before taking effect. The need for this reform is clear.

Our jobs and our businesses have become so heavily regulated by unaccountable government agencies that a 2016 survey of U.S. small business owners revealed that an average of “4 hours per week is spent dealing with government regulations and tax compliance, which totals to over 200 hours per year.”
This growing regulatory burden at the federal and state levels represents a threat to both our economy and our democratic institutions.

Under the REINS Act, any regulation costing businesses, local governments or the public $10 million or more over a two-year period will require approval by the legislature.

It’s a change that’s long overdue.

In 2010, the Wisconsin Department of Natural Resources promulgated strict new limits on phosphorous released by factories and wastewater treatment plants. The “Phosphorus Rule” is now estimated to cost more than $7 billion over the next 20 years.

According to the state’s economic impact analysis, “When fully realized, the cumulative impact of these additional costs are expected to result statewide in lower Gross State Product (“GSP”), reduced wages, fewer jobs and a smaller statewide population.”

No elected official ever had the opportunity to cast a vote on a regulation that will cost Wisconsinites billions of dollars and directly affects some of Wisconsin’s biggest industries, including cheese making, food processing and paper mills.

Had the REINS Act been in place, this rule would likely have been stopped, or at least made less costly and more effective. And any legislator who approved it would have been held accountable to voters.

The REINS Act also allows the Wisconsin legislature to request independent economic impact analyses to ensure that state government cost estimates for proposed regulations are accurate. This is key to preventing rogue agencies with their own agenda from gaming the system.

By limiting the power of state agencies to unilaterally impose costly rules, these reforms will provide long-term regulatory certainty to Wisconsin businesses. Over time, an improved and honest regulatory environment will attract new investment and jobs.

Gov. Walker deserves tremendous credit for championing this bill. It’s rare for a governor to acknowledge that the executive branch has become too powerful and return power to the people – but that is exactly what Gov. Walker is doing.

As a further check on executive overreach, the bill gives the legislature the ability to indefinitely suspend existing administrative rules. Thanks to these measures, future governors will not be able to circumvent the legislative process and enact their costly agendas by executive fiat. …

The bill will do much to restore democracy to the administrative rules process, improve transparency and allow citizens to better hold elected officials accountable.

It will also serve as a model to other states seeking to cut red tape. No American should be subject to the arbitrary whims of the regulatory state, and legislation like the REINS Act can help counter this growing threat.

Walker signed the bill into law yesterday, saying, “One of our top priorities for Wisconsin is ensuring government services are effective, efficient, accountable, and operate at good-value for the citizens of our state. This bill allows for more input from citizens and stakeholders before a new rule is drafted, ensures expensive or burdensome rules are subject to legislative scrutiny and approval, and creates additional oversight over state agencies.”

The reason this law is grossly overdue is explained by the MacIver Institute:

A brand new report has found that Wisconsin’s administrative code contains nearly 160,000 regulatory restrictions. The report was published by the Mercatus Center at George Mason University, a market-oriented academic research center.

It would take the average person 667 hours, or almost 17 weeks, to read the 2017 Wisconsin Administrative Code, assuming that person spent 40 hours per week reading at a consistent rate of 300 words per minute. Utilities, food manufacturing, and chemical manufacturing are the top three most-regulated industries in Wisconsin, according to the report.

Law through administrative rule is one of the worst features of state government because the Legislature never has an opportunity to vote on the law. That is fundamentally unconstitutional, regardless of what the administrative rule is. If it’s a needed rule, the Legislature should vote on it.

Foxconn’s ROI

Matt Kittle reviews the proposed Foxconn agreement:

A new memo from the nonpartisan Legislative Fiscal Bureau details a hefty state commitment to the mammoth Foxconn economic development plan with a lengthy break-even schedule.

But the LFB acknowledges it has no way of accounting for all the potential positive economic impacts the proposed Foxconn manufacturing campus could bring.

The analysis, released Tuesday, was among state agency memos breaking down the fiscal impact of the proposed $3 billion in incentives tied to the estimated $10 billion project.

Foxconn would receive a total of $2.9 billion in tax credits over the 15-year lifetime of a specially created Electronics and Information Technology Manufacturing Zone (EITM) – if the world’s largest manufacturer of liquid-crystal display panels comes through on constructing its first North American plant in Wisconsin and fills all of the proposed 13,000 jobs, at an average annual salary of $53,875.

An incentives package bill introduced last week in the Assembly provides Foxconn with refundable tax credits for each job it creates paying between $30,000 and $100,000. The credit would be based on 17 percent of the company’s payroll in the EITM zone, for a total of up to $1.5 billion in tax benefits.

As the LFB points out, Foxconn plans to have about 1,000 permanent positions in Wisconsin this year (at an estimated payroll of $13.8 million), with plans to increase its workforce to 13,000 positions and a total annual payroll of $700 million by the beginning of 2021.

State payments of the payroll tax credit are estimated to begin in 2018-19, at $2.4 million, rising to $119.1 million annually between fiscal years 2023 and 2033. That assumes Foxconn’s workforce remains at 13,000 from 2021 through 2033.

And Foxconn would be eligible for a refundable credit of up to 15 percent of its capital expenditures in the zone. Aggregate payments for the capital tax refund could not top $1.35 billion. Credits would be paid from the state’s General Purpose Revenue appropriations.

State capital tax credit payments to Foxconn would total $192.9 million annually in fiscal years 2020 through 2026, according to LFB.

“The company would receive the full amount of credit, even if it has little or no Wisconsin income or franchise tax liability,” the LFB analysis states.

The state Department of Administration projects the “cost” of the refundable state tax credits under the incentives package would exceed the potential increased tax revenue until fiscal year 2032, when the last EITM payroll credit is paid.

But as project supporters note, the tax benefits wouldn’t exist without Foxconn building and hiring in Wisconsin. They call it a “pay-as-you-grow” economic development proposal.

In that vein, Foxconn and its contractors would save $139 million through a sales and use tax exemption, according to the LFB report.

“However, since it is highly unlikely that Foxconn would locate in the state without the incentives provided under the bill, this amount should not be viewed as a state revenue loss,” LFB notes.

In a Break-Even Analysis, the DOA projects the state wouldn’t begin making money on the Foxconn deal until 2042. The Fiscal Bureau notes such a timeline must be viewed cautiously.

“(A)ny cash-flow analysis that covers a period of nearly 30 years must be considered highly speculative, especially for a manufacturing facility and equipment that may have a limited useful life.”…

The Fiscal Bureau memo cautions that its analysis focuses on the impacts of the Foxconn project on the state treasury. It does not take into account the other “benefits to the state’s economy and residents.”

While Foxconn would receive up to $1.5 billion in capital expenditure tax credits and sales tax exemptions, the incentives would “induce private investment of $10 billion from Foxconn alone, for a leverage ratio of $6.70 of private investment for each $1 of public outlay. The payroll credit would spur a leverage ratio of 5.9 to 1. And those ratios climb higher when indirect and vendor-related jobs associated with the project are factored.

“Most state expenditures do not result in private investments of this nature,” the LFB report states. “The project would also provide greater employment opportunities for the state’s present and future workforce, and add a new sector to the state’s manufacturing economy.”

Then there are the trades jobs needed to construct a dozen or more buildings on the proposed 20 million-square-foot manufacturing footpad. DOA estimates peg an average annual employment of some 10,200 construction workers and equipment suppliers earning average total compensation of $59,600 during the four-year construction period. Total income is estimated at $2.4 billion.

Another 6,000 indirect and related jobs are estimated to be created during construction, with average compensation of $49,900, according the Fiscal Bureau report. The total increased state tax revenue – primarily income and sales taxes – associated with the construction period is estimated at nearly $190 million.

DOA estimates a total of 22,000 indirect jobs and those secondary positions (suppliers) supporting Foxconn’s operations will be created, with combined annual wages of $1.1 billion per year beginning in 2021.

“The way to judge this project is not by government revenues, not by government figures. It’s what it means to our overall economy,” said state Rep. Adam Neylon (R-Pewaukee), chairman of the Assembly’s Jobs and Economy committee. The committee held a hearing on the bill last week.

Foxconn “will grow our GDP, it will have a tremendous impact on our economic activity in the state. A lot of people will benefit because of this incentives package. We have a situation where we will be attracting talent instead of losing it,” Neylon added. “It’s a mistake to think that government revenue is the end goal. The ultimate goal is economic benefit, not how much more state government can take in and spend.”

Neylon said his committee still plans to vote Thursday on the bill, with amendments. The lawmaker says he has received at least 50 amendment ideas on the legislation since the bill was introduced last Tuesday, from technical matters to more significant issues such wetland relocation.

“I think reading these new fiscal analyses reaffirms a lot of what we were told during the public hearing and what we were led to believe,” Neylon said. “It also exposes some areas we are working on to clean up or clarify or make sure there are safety nets in place within the language of the legislation.”

Facebook Friend Christopher Scott replies:

who is going to be the first Wisconsin Conservative blogger/ Radio show host to point out. That you have Democrats politicians who swore up and down how great of deal the Buck’s arena is, but are the same ones now telling us the FoxConn deal is bad. When the FoxConn deal has a higher return in our investment. I am waiting for SOMEONE, ANYONE in this state to knock that one out of the park right now. It’s right there for the taken. Show the world how slimy these democrats are.

Well, wait no more, Christopher. We’ll even throw in this graph comparing Foxconn and, perhaps, Foxconn Arena:

 

OutFox(conn)ed

The Chicago Tribune editorializes:

Illinois recently got a humiliating rejection notice from Foxconn, the Taiwanese tech giant. Foxconn picked Wisconsin over struggling Illinois and other states for the proposed site of a $10 billion LCD panel factory that will employ up to 13,000 people. These mega-projects don’t happen every day, so Foxconn’s decision hurts because job growth is the only way to solve Illinois’ fiscal crisis: More jobs means more tax revenue.

What really stings, though, is how the winning site is just across the state line in southeast Wisconsin. It’s as if Foxconn settled on the Midwest as a location and then decided: We want to be as near as possible to Illinois without actually being there.

Foxconn Chairman Terry Gou gave an interview to Steve Jagler, the business editor of the Milwaukee Journal Sentinel. Gou gave Jagler eight reasons why Foxconn chose Wisconsin. Two of them were — literally — proximity to Illinois: First, Wisconsin is conveniently located in the central U.S., “close to Chicago, a global hub,” the Journal Sentinel reported. Second, Wisconsin has the transportation and logistics to accommodate Foxconn’s growth, and is … near O’Hare International Airport. Feel free to smack your forehead.

Now play along as we study more of Foxconn’s list of Wisconsin attributes to see how many also match Illinois. A manufacturing mecca? Yes, that’s Illinois, too. Strong university and technical college systems? Yes. Energy reliability? Yes. Proximity to Lake Michigan water supply? Well, duh. Foxconn also likes Wisconsin because it’s home to allied companies such as Rockwell Automation, but Illinois is just a quick drive south.

The final reason Foxconn picked Wisconsin over Illinois is the difference-maker: government cooperation and competence. The Journal Sentinel wrote that Gou believed “the responsiveness of the public and private partners in Wisconsin far exceeded those of other states.” Gou singled out the cooperation of Gov. Scott Walker, U.S. House Speaker Paul Ryan, R-Wis., and local business groups: “These key people pushed very hard.”

In other words, Foxconn liked everything about Illinois, but Wisconsin officials convinced Gou they made the best business partners. How could that be? Wisconsin will provide $3 billion in tax benefits over 15 years, but incentives are the norm and Illinois, one of seven finalists, was willing to offer some. National politics could have been a factor, given that Foxconn would benefit from pleasing President Donald Trump, who hopes to win Wisconsin again in 2020. But companies don’t make huge investment decisions just to make a president smile.

Here’s the takeaway: Foxconn chose the state that has stable government, healthy finances and pro-growth policies for employers. Illinois has none of the above.

This state is deep in debt and badly run. A 10-ton anvil dangles overhead in the form of at least $130 billion in unfunded pension obligations. Taxes are too high, yet Illinois still can’t pay its bills on time. Republican Gov. Bruce Rauner recognizes that Illinois isn’t competitive. He wants to cut onerous regulations and make other reforms to attract business investment, but he’s been stymied by House Speaker Mike Madigan, Senate President John Cullerton and their Democrat-controlled General Assembly.

None of this is secret. Business leaders looking to invest see Illinois, with its worst-in-the-nation credit rating and embarrassing Springfield stand-off that left the state without a budget for two years, and they cross Illinois off their lists. They don’t trust Illinois government and don’t want to be paying taxes here when the day of reckoning comes for the pension crisis.

Larry Gigerich of Indiana-based Ginovus, a site-selection firm, tells us Illinois will continue to miss opportunities until it stabilizes its public finances. Political leaders also will need to convince investors that tax increases and other necessary pain will be temporary, lest they scare off business permanently — and residents, too, we’d add.

But to accomplish anything, Gigerich notes, Illinois officials can’t continue to undercut each other. “It looks like the legislature and leadership are just trying to run the clock out until the next election,” he said. “People don’t think that is the right way, or a sophisticated way, of running government. And that has really hurt with chief executives looking at Illinois, saying, ‘There is no adult in the room’.”

Nevertheless, Wisconsin liberals persist in opposing Foxconn. To them, Facebook Friend Tim Nerenz writes:

If someone cannot grasp the difference between allowing a person or a firm to keep what they have earned (the tax credit) and taxing more from one person to give money to another (the way she describes it), they should not be allowed to display such ignorance as a feature columnist in a prominent paper. If Foxconn goes forward or if it is struck down by a Dane County judge it will not cost Emily a penny or save her a penny respectively. What it will do is provide up to 13,000 people who do not write ignorant columns for the MJS with the opportunity to earn an average of $54k and bring additional international investor attention to Wisconsin and add many billions in new tax revenues – even after the credits have been applied. What is troubling to Wisconsin’s progressives is that something good is being done in spite of them, and with private capital over which they have no control and which was not confiscated from rich Republicans in the suburbs.

Nerenz recalls the incentive package given to the Italian owner of Marinette Marine:

… former Governor Jim Doyle … gave Italian shipbuilder Fincianterri Marine (Marinette) $50 million in refundable tax credits for a $100 million investment in 2010 and here is how it was reported : “The company would receive the state tax credits only as it makes its own plant and personnel investments, which could reach $100 million, Doyle said. ‘Nobody’s handing over $50 million in cash.’ Doyle credits 50% of a foreign investment – good. Walker credits 30% of a foreign investment – bad.

 

Why Wisconsin needs more billionaires

The New York Times writes about Beloit’s Diane Hendricks:

When Diane Hendricks sees something she doesn’t like here, she buys it.

A bankrupt country club. A half-empty mall. Abandoned buildings. The rusting foundry down by the river.

Beloit used to be a town that made papermaking machines and diesel engines. Ms. Hendricks thinks it can be a place where start-ups create the next billion-dollar idea, and she is remaking the town to fit her vision. She can do so because she is the second-richest self-made woman in the United States, behind only Marian Ilitch of Little Caesars Pizza, according to Forbes magazine.

“I see old buildings, and I see an opportunity for putting things in them,” says Ms. Hendricks, 70, who got her start fixing up houses here as a single mother and made her billions selling roofing felt, copper gutters and cement with her late husband, Ken.

Now Ms. Hendricks is fixing up Beloit.

She took the library from its historic location downtown and resurrected it inside a failing mall at the edge of town, replacing the original with a performing arts center where dance and music students from Beloit College can study and perform each year. Then she scooped up nearly every building on a downtown block and knocked each one down, making way for a sushi restaurant, a high-quality burger joint and modern apartments with marble countertops and exposed-brick walls.

She called the complex the Phoenix. “It looks like we’re beautifying the city, but we’re really beautifying the economy,” she says, casting her piercing blue eyes out of the window of her office in Ironworks, the old foundry complex she converted into a commercial space.

She has wooed several start-ups, persuading them to set up shop in the old foundry building — one with the help of Wisconsin’s governor, Scott Walker, who personally called the co-founders on her behalf.

Ms. Hendricks, a major Republican donor, was briefly thrust into the national spotlight a few years ago when she was recorded asking Mr. Walker to break up the labor unions. He then introduced a bill limiting the ability of public workers to bargain over wages. In response, protesters occupied the halls of the Capitol for weeks.

Not long ago, Beloit’s economy was ugly. Like many American cities — Detroit, Youngstown, Gary — it had fallen victim to the damage that is wrought when one major industry vanishes from town, reversing local fortunes.

Beloit is different today. That’s because this town of nearly 37,000 has a billionaire who has gone to great lengths to help it turn a corner.

In a nation with countless struggling towns and small cities, Beloit is not a model for economic revival that is easily replicated, although a few others have tried.

In Kalamazoo, Mich., a group of well-to-do town “elders” pay for every public school student in town to go to college. And Columbus, Ind., has become an architectural mecca thanks to the support of J. Irwin Miller, whose family made its riches manufacturing engines.

Ms. Hendricks’s project has not been cheap.

Buying and fixing up the foundry alone has cost Ms. Hendricks around $40 million, according to Rob Gerbitz, the president and chief executive of Hendricks Commercial Properties. The Phoenix complex has cost $7 million (with a $1 million assist from the city).

And, of course, money doesn’t solve everything. Ms. Hendricks’s overhaul faces challenges big and small, including skepticism. Early on, some residents joked about giving the city a new name: Hendricksville. Unemployment remains stubbornly high, as does poverty.

Her activities on Beloit’s behalf are complicated by the fact that not everyone agrees with Ms. Hendricks’s political views. She was an early supporter of Donald J. Trump’s presidential campaign here in Wisconsin, a state with a history of progressive politics, and that has pitted her against some current and former students at Beloit College, a liberal arts school and one of Beloit’s other big employers. (Ms. Hendricks sits on the college’s board of trustees.)

“Diane Hendricks is the most powerful woman in Wisconsin,” says Charlie Sykes, a former talk-show host in Milwaukee.

In Beloit, she’s so influential that some worry about what would happen if someday she walks away. “Will the kids take over?” asks Rod Gottfredsen, a local barber, referring to her seven adult children.

Mr. Gottfredsen has had a front-row seat to Beloit’s travails for nearly 40 years. He’s been cutting hair and trimming beards since 1978, when he took over Austin’s Barbershop on one of Beloit’s main streets downtown.

On a clear June day, one of Ms. Hendricks’s sons, Brent Fox, is in his white Ford Super Duty truck driving through the lush tree-lined streets around Beloit College. This is the neighborhood where Ms. Hendricks and her husband got their start a half-century ago, buying and fixing up homes, in the 1960s.

“Mom wanted me to show you these,” Mr. Fox says as he stops outside two Craftsman-style homes where trucks marked CCI, a Hendricks-owned construction company, are parked. “One of the biggest problems we find is suitable housing stock, so we decided to buy old, stately houses,” says Mr. Fox, who is also the chief executive of Hendricks Holding Company.

“As long as we can break even or make a dollar, we’ll keep doing it,” he adds.

Mr. Fox drives north, past Beloit’s industrial sites, through the town’s history. The red roof of ABC Supply comes into view, overlooking Beloit from a slight hill. When the Hendrickses bought the property in the 1990s, it was an abandoned factory that had once made diesel backup engines for military submarines.

We pass the Eclipse Center, which in its heyday in the 1960s was the biggest mall in Rock County. By the 1980s, it had become better known for a notorious double murder at the Radio Shack. The place was half empty when the Hendrickses stepped in.

He stops at the Beloit Club, a beleaguered country club near the Rock River, which cuts through the town. Ms. Hendricks bought it several years ago, possibly saving the club from an ignominious fate as a gravel pit.

“From a business perspective, it was a horrible decision,” he says of the purchase. But if Beloit was to be reimagined as a modern city, the thinking went, it needed a club for golf.

Beloit’s Hendricks-fueled revival happened largely by chance.

Ms. Hendricks grew up 200 miles away from Beloit, on a dairy farm, with eight sisters. As a child, she yearned to work outdoors on the farm, but her father forbade it. A surprise pregnancy at 17 and her short marriage to Mr. Fox’s father brought her to Janesville, to work briefly in the Parker Pen factory, where women assembled fountain pens.

Soon she divorced. She had to find a way to support herself on her own, as a single mother. She switched to selling real estate, and had gotten her broker’s license by the time she turned 21.

Before long, she had found a business partner, a roofing contractor who had dropped out of high school, named Ken Hendricks. Together the two bought old houses in Beloit, fixed them up and rented them out. They married in 1975 and moved on to buying industrial spaces at around the same time. They found a rundown sugar beet plant in Janesville, 20 miles up the road from Beloit.

When Mr. Hendricks went to a Janesville bank to finance the purchase of the plant, he was turned away. “The banker said, ‘We don’t do business with entrepreneurs, and we don’t want your business,’” Ms. Hendricks recalls.

It was a turning point. The couple turned their backs on Janesville, focusing instead on Beloit.

They would move from renting local apartments to starting ABC Supply in 1982, buying up distributors nationwide.

Beloit at the time was on the cusp of a steep decline after successive economic blows, among them the grinding to a halt of Fairbanks Morse, a diesel engine maker and a onetime major employer.

Like struggling cities and towns across the country, Beloit went through a period of Band-Aid-like efforts. By the 1980s, local businesses were petitioning the city to change its image by cleaning up the riverfront, where vacant stores sat along the banks of the river, and by reviving the withering downtown. The initiatives barely made a dent.

Into the 1990s, at least, the town still had its foundry, Beloit Corporation, by that time owned by a Milwaukee company, Harnishfeger Corporation. At its height, Beloit Corporation had employed more than 7,000 people building papermaking machines. Late into the night, the flickering light from the welding in the foundry would light up the Rock River.

In 1999, the foundry went bankrupt, leaving behind an empty, sprawling complex the size of 15 football fields. Beloit’s downtown became a bleak landscape of “decayed, bombed-out buildings,” recalled Jeff Adams, who moved to Beloit to teach economics at Beloit College in the early 1980s and was involved in early initiatives to try to fix the town.

But if Beloit was sinking, the Hendrickses were riding high. Their business was booming, and they saw opportunity in the desolation.

One day, a few years after Beloit Corporation went bust, the two were riding their Harley-Davidsons past the abandoned factory and noticed someone wandering around the property. They stopped to ask what he was doing. The man, Samuel Popa, turned out to be looking for a place to put his aluminum business.

On a whim, the Hendricks decided to buy the 800,000-square-foot building. They knew it had the potential to one day become commercial space, perhaps residential, too. They ended up becoming a partner in Mr. Popa’s company, American Aluminum Extrusion.

Next, they bought the old mall on the edge of town, which they planned on turning into “a community and civic center,” Ms. Hendricks says.

Around the same time, Ron Nief, the director of public affairs at Beloit College, and two of his friends had an idea that in almost any other dying industrial town would not have gotten out of the starting blocks: Let’s start an international film festival.

They approached Beloit’s billionaire benefactors about the idea, and in 2006, the festival opened on a frigid Wisconsin weekday in January.

Despite the fact that its debut occurred the same week as the much more famous Sundance Film Festival, it has thrived. Jon Voight, Melissa Gilbert and David Zucker, the director of “Airplane!,” have attended

Mr. Nief recalls a conversation with Mr. Hendricks, who had told him to aim high with the film festival idea. Mr. Nief said to him, “It needs to be special, but it doesn’t need to be, say, the Toronto Film Festival,” referring to the giant on the festival circuit.

“Ken said: ‘Why not? Why don’t you want to be the biggest and the best in the world?’” Mr. Nief said.

But tragedy struck one evening, just days before Christmas in 2007. Mr. Hendricks fell through the roof of his home after inspecting some renovations; he died from the injuries.

Mr. Hendricks’s death led residents in Beloit to worry that Ms. Hendricks would sell ABC and abandon the couple’s efforts to revive the town.

Then came the 2008 economic crisis. Housing and construction, the very businesses on which the Hendrickses’ fortune had been built, suffered through one of the worst downturns in decades.

ABC pulled through, and grew in part by buying its biggest rival, Bradco. Today ABC is a private company and the largest wholesale distributor of roofing, windows, siding and gutter materials. It has 715 stores across the United States and employs 656 people in Beloit alone.

Ms. Hendricks also began putting to use the industrial buildings that she and her husband had bought over the years. She turned the foundry into a commercial space with high ceilings, dubbing it Ironworks, and turned to a political ally, Mr. Walker, to help attract at least one tenant.

The move worked.

“I had 17 employees at that moment, and the governor of Wisconsin told me my business mattered to him,” recalled Kerry Frank, the co-founder with her husband, Dude Frank, of Comply365, which makes software used by airline pilots to complete their flight paperwork. Started in the Franks’ basement, the company is now housed in Ironworks and counts Southwest Airlines among its biggest clients.

In 2011, after Illinois created a new law to collect sales tax from online shoppers, the Rockton online coupon company FatWallet needed to find a Wisconsin town for its headquarters. Ms. Hendricks worked with the city to make Beloit, just over the state border, FatWallet’s first choice. The company is now based in Ironworks.

“The advantage here in Beloit is that the same type of engineer that you hire in Silicon Valley can have a large house,” says Ryan Washatka, general manager in Beloit for Ebates, FatWallet’s parent company.

Still, few people in the start-up world outside of Wisconsin know much about Beloit. It certainly was not on the radar of Chris Olsen, a former executive at Sequoia Capital, the Silicon Valley venture capital firm, whose Ohio venture capital firm Drive Capital is now one of Comply365’s biggest investors.

After several airlines told him to look at Comply365, Mr. Olson found himself looking at a map. “I didn’t even know where Beloit was,” he jokes.

In part to address problems like that, Ms. Hendricks has sent members of her property company, Hendricks Commercial Properties, to Madison to talk to venture capitalists. “Candidly, I wasn’t looking at Beloit,” said Joe Kirgues, a co-founder of Gener8tor, a tech incubator, who one day found himself at a table with Ms. Hendricks’s team.

He said the pitch to him had boiled down to: “Tell us what resources you need.” Today, Gener8tor has an office in Ironworks and is working with several local start-ups.

Mr. Bierman credits Ms. Hendricks for providing a vision of how things can be. Still, he says, “I worry a lot.”

While he does see signs that what Ms. Hendricks has built can be sustainable, “We’ll know a lot more once we get through the next recession,” he said.

For now, around 1,000 people currently work out of Ironworks, according to Mr. Gerbitz of Hendricks Commercial Properties. “Our goal is to get to 5,000, which was what was lost when Beloit Corporation went away,” he said.

Ironworks today is a far cry from its foundry origins. At AccuLynx, the software firm, there is a giant slide running down from the second floor to the first, a video-game console and a giant gold bell that is rung when sales are made.

AccuLynx’s founder, Rich Spanton, described the day his grandfather, who had worked at the foundry as a superintendent for nearly a half-century, visited the building, where he had spent a career assembling steel parts for paper machines. He was astonished at what he saw.

“He walked in,” Mr. Spanton recalls, “and he said, ‘Jeez, we couldn’t have gotten any work done if this had been our office.’”

The Foxconntrot

Matt Kittle sat through the entirety of the Assembly committee hearing on the proposed Foxconn incentive package so you didn’t have to:

We’re ready.

That was the unified message of dozens of public and private-sector officials – from Kenosha to Wausau – in testimony Thursday before the Assembly committee leading legislation on a $3 billion state incentives package for the “once-in-a-century” Foxconn Technology Group economic development proposal.

“Ladies and gentlemen, close this deal. Make it happen,” urged Tom Christensen, administrator of the Racine County village of Caledonia, which could directly benefit from Foxconn’s plan to build a $10 billion liquid crystal display manufacturing campus in southeast Wisconsin.

Waves of supporters testified before the Assembly Committee on Jobs and the Economy during an all-day hearing that spanned deep into Thursday night.

There were critics to be sure, including the Wisconsin League of Conservation Voters and a “cannabis activist” who urged the committee to ditch Foxconn and subsidize the pot industry instead.

But the vast majority of those who testified laid out myriad reasons why they believe Foxconn would transform Wisconsin’s economy and why the state must act quickly to make it happen.

“The time to worry about Foxconn leaving is now,” said Tom Still, president of the Wisconsin Technology Council. “If this process takes too long, now is when they will leave. They will not leave after they’ve invested $10 billion.”

Still has forgotten more about business in this state than most people know, including most of the people whose comments you are about to read.

The economic impact figures command attention.

Secretary of Administration Scott Neitzel testified about the 10,000 construction workers who would be employed over the next four years, with an estimated $5.7 billion spent on construction over the period and an annual $1.4 billion spent in the supply chain. Neitzel also talked about the intangible human factors – personal connections formed during the negotiation process – that helped make the deal possible.

Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, noted the estimated $15 billion in payroll over 15 years that Foxconn could bring to Wisconsin.

“I think that’s a pretty good return on investment,” Sheehy told committee members, noting the $1.5 billion the state would offer in job creation-based tax credits.

Wisconsin’s higher education community testified to what has been described as the “brain gain” the Foxconn project would foster.

“Foxconn would help keep these highly educated graduates in Wisconsin,” University of Wisconsin System President Ray Cross testified.

Foxconn Chairman Terry Gou and Gov. Scott Walker have said Wisconsin universities and tech schools and the “talent pipeline” they create are a strong selling point for Foxconn’s decision to build its first high-tech manufacturing plant in North America.

While gushing at the potential, higher ed leaders took the opportunity to remind lawmakers that colleges and tech schools are going to require more money to create the programs and facilities needed to turn out the engineers and skilled technicians necessary to feed a massive workforce.

Asked if the university system would need more funding in this budget, Cross said now’s the time to make investments that will pay off in a few years.

“It takes us a while to turn a big aircraft carrier,” he said of the UW System.

Local government officials in Kenosha and Racine counties were unified in their support for an unprecedented economic development project expected to be located in their backyard. But they, too, urged the state to come up with the funding they’ll need to get Foxconn off the ground.

Kenosha County and city officials said the local governments involved should be included in any “clawback” provisions to recoup costs should the deal go bad. And they asked for changes to the tax incremental finance laws to include public buildings, such as fire and police stations. Foxconn isn’t merely building a plant; it’s constructing a city unto itself, to be situated on some 20 million square feet and populated by thousands of employees.

The bill puts state taxpayers on the hook for local development costs under a “Moral Obligation Pledge.” The Legislature would, if called upon to do so, pay up to 40 percent of the principal and interest of a local government’s obligations.

The deal, as written, would include $1.5 billion in tax credits, in return for creating 13,000 jobs. Payroll tax credits would be distributed on full-time jobs paying between $30,000 and $100,000 per year. Another $1.35 billion in tax credits would help ease the company’s capital costs. And $150 million in sales and use tax credits could be drawn on purchases of building materials, supplies and equipment used in the construction of the complex.

Neitzel and others who helped craft the incentives package assert it’s a “pay-as-you-grow” proposal, meaning Foxconn wouldn’t be able to collect on the tax benefits until they invest in capital – human and structural.

But critics insist there are better things Wisconsin could spend $3 billion on.

Robert Kraig, executive director of the left-wing Citizen Action Wisconsin, asserts that health care, education, or clean energy would create significantly more jobs than Foxconn’s development plan. Of course, no other Fortune 500 company (Foxconn is #27) offered to transform Wisconsin’s economy.

Kraig, in his usual bombastic way, hammered the Wisconsin Economic Development Corp., the agency charged with administering much of the economic development package. WEDC does indeed have a troubled past, particularly in tracking incentives and holding wayward firms accountable. Kraig said putting WEDC in charge of the incentives package is a “scandal waiting to happen.”

Citizens Action is a big advocate of expanded welfare benefits and other liberal causes.

“We often hear that we don’t have the resources to invest in health care and higher education, but when a multi-national company comes knocking we find $3 billion for them,” Kraig said.

Proponents of the bill say that kind of thinking is disingenuous at best. The return on investment, they say, is even more significant than the billions of dollars Foxconn would bring to Wisconsin.

“We could go from flyover to destination state pretty quickly because of this,” Still, of the technology council said.

Here’s the thing Kraig and other critics fail to grasp. There is no money available for tax incentives of any sort if Foxconn isn’t coming here. The only reason those tax incentives are worth doing is if Foxconn comes to this state. No Foxconn, no Foxconn tax incentives, and therefore no, at minimum, $170 million of annual payroll, for beginners.

Opponents testified that they fear the process is moving too fast. The Assembly introduced the bill Tuesday, scheduled a hearing two days later, and the Jobs and Economy Committee could vote on whether to move the bill along by early next week. There are, however, several more steps in the legislative process, not the least of which is action from the traditionally more deliberative Senate.

Mark Hogan, secretary and CEO of WEDC, said it’s important to secure passage by the end of September in order to meet Foxconn’s aggressive construction and production schedule.

“Foxconn is ready to go,” he said. “They would like to be hiring for some operations without even having construction in place.”

Environmentalists spoke in opposition to the bill’s provisions exempting some regulatory requirements from the project. The project loosens permit requirements involving wetlands and environmental impact statements, although the Department of Natural Resources testified that the bill only streamlines the regulatory process and limits duplication. The federal environmental requirements would be as rigorous as always, according to state agents.

But Jennifer Giegerich, of the Wisconsin League of Conservation voters, testified that her organization is concerned about the removal of wetlands, even though Foxconn would be required to replace 2 acres of wetlands for every acre it disrupts.

“We want to make sure our economy is as healthy as our air and our streams,” Giegerich said.

Madison resident Tammy Wood voiced a number of misgivings about the bill. Principally, Wood told the committee the state should be investing in a higher calling.

She said Wisconsin should put its money on pot, not Foxconn. Wood, vice chairwoman of the Progressive Caucus of the Democratic Party of Wisconsin, pointed to places like Colorado and the booming legal marijuana market.

“The cannabis industry is set to employ more people by 2020 than manufacturing,” Wood said, adding that many of the jobs are so easy kindergarten kids could work in the cannabis industry – although she says she doesn’t believe in child labor.

“I know you’re passionate, but if we could stick to the bill and not the cannabis industry,” state Rep. Adam Neylon (R-Pewaukee), chairman of the Jobs and Economy Committee, urged Wood.

Reefer madness aside, supporters of the incentives package insist the time is now to positively affect Wisconsin’s economic future for generations to come.

The Foxconn deal “will provide significant dividends to the state of Wisconsin for years to come,” Neitzel said.

Even those who are supporters of legalization or at least decriminalization should turn a highly skeptical eye on promises of waves of legal marijuana money. There is, you may note, no Democratic legislative leader, let alone Republican legislator, willing to take on the cause of legal pot.

As I wrote last week, a few Democrats, but not very many, have not engaged in knee-jerk condemnation. Another has sort of modified his stance, as James Wigderson reports:

Madison Mayor Paul Soglin, a possible candidate for governor, is walking the tightrope on the Foxconn development. On the one hand, Soglin is making it clear he’s opposed to the deal by calling it “over the top.”

“I’m fearful if that becomes the standard for job creation in Wisconsin, the whole state will suffer,” Soglin said according to the Wisconsin State Journal. Soglin said an incentive package of $600 million to $1.2 billion would be “more in line with national standards.”

On Facebook, Soglin has been more vocal against the deal, posting seven articles opposed to the Foxconn deal with misleading information. Our favorite is the one that says in a quote highlighted by Soglin, “This isn’t even cost-effective socialism.” Like Soglin’s favorite country, Cuba?

Commenting on one article, Soglin wrote:

Imagine 100’s of millions of dollars going to public schools, the UW, infrastructure like high speed internet. Imagine all the people with all the great jobs in a great state. Not tax cuts for the rich; and ordinary people left to pay for this. We are about to see what a rigged economy does to all the people when more is given away than is created.

In his next Facebook post, Soglin tapped his inner John Lennon:

Imagine all the people with access to great public schools, great colleges and universities, high speed internet, great roads and transit, great healthy food, great health care, great jobs….imagine all the people….

Imagine if we were spared that awful song.

Imagine Madison without state government and the UW System. Imagine Soglin actually having to work to bring in business, if Comrade Soglin would even lower himself to do that.

But now Soglin also has to deal with the possibility that Foxconn is looking to build facilities in Madison or Fitchburg. He would like Foxconn to consider the recently-closed Oscar Meyer plant as a possible location. However, Soglin said, “we are not at all interested in participating in a race to the bottom in regards to competing with financial incentives that are not viable for this community.”

What Soglin is not addressing is that Foxconn would not even be looking in the Madison area for a location if it wasn’t for the state’s offer of nearly $3 billion in incentives for Foxconn to locate a $10 billion facility in southeastern Wisconsin. Soglin is acting like the two developments are separate when in reality its all a part of one huge economic development.

What Soglin should say, if he’s really opposed to the bill currently being considered by the legislature, that he’s opposed to Foxconn locating anything in his city. Soglin would rather have a shuttered Oscar Meyer plant as a monument to his opposition to capitalism than any Foxconn offices or factory in his city. Because that’s the real message of his opposition to the Foxconn deal. Ironically, Soglin may get the economic development he claims he wants despite his best efforts and the efforts of the Madison Democrats in the legislature to oppose it.

At the ribbon cutting ceremony, Soglin can thank Governor Scott Walker.

Soglin also won’t tell you about Madison’s experience with Democrats’ favorite non-governmental employer, Epic Systems of Verona. Epic Systems started in Madison, grew substantially, then moved to Verona because of Soglin’s refusal to “race to the bottom in regards to competing with financial incentives that are not viable for this community.” It could be said that Madison’s loss is Verona’s gain, except that a substantial number of Epic’s employees still live in Madison while using (and not paying for) Verona’s government services.

As it is, Madison (and Milwaukee) talker Vicki McKenna adds:

This isn’t serious. First, he wasn’t actually contacted by Foxconn or anyone else. A site selector sent out letters saying “hey, if you have undeveloped parcels of land, let us know….” So what does Soglin do? He stunts a presser about Oscar Mayer (the company left on his watch, he was caught with his pants down, never even realizing they were thinking of leaving), and wants to capture a little bit of the Foxconn enthusiasm that Walker is generating–bcause he thinks he can beat Walker in the next gov’s race.

If he were actually serious, he wouldn’t be holding a press conference. He would get a team of good Econ-Dev people to work with WEDC and really try to make the Oscar Mayer property attractive. Saying “we may consider TIF, but we’re not going to give it away” is the tell that all of this is bullsh*t. No one wants that property. You just may HAVE to give it away. As for TIF, if you don’t say “of COURSE we’ll bring some TIF proposals to the table”, then forget about even being on the list at all, let alone the short list.

Which brought this response about the Oscar Meyer facility:

Heinz moved it to a new plant because it was inefficient for them, so please Foxconn fix this? Hilarious.

Then there’s this …

… which prompted this Facebook question:

Ummmmm. If “average wages” (stated to be $53k annually) won’t pay the bills, how will $15/hr ($31.2k per annum)?