It wasn’t long ago that Wisconsin Republicans professed to be a new breed of Republican, one less focused on divisive social issues and dedicated to free-market and smaller-government reforms that would spur job creation and economic growth.
The party enjoyed the substantial backing of the Charles and David Koch network of donors and organization, which was deployed in an effort to paint this once progressive-leaning blue state red.
First Scott Walker was elected governor. He won a solid legislative majority. His stature improved when he survived an attempted recall in 2012 and then won re-election in 2014.
Meanwhile, Rep. Paul Ryan of Janesville rose up through the ranks in the House as Budget Committee chair, then vice presidential nominee, and finally Speaker of the House.
Reince Priebus, closely affiliated with both Walker and Ryan, went from state GOP chair to national party chairman to White House chief of staff.
Though far from being social liberals or even moderates, these troika of “new breed” Republicans deliberately downplayed issues like gay marriage and immigration. While it wasn’t full-blown classical liberalism, it was marketed as a deliberate step in that direction.
Indeed, with the support of Koch-affiliated groups like Americans for Prosperity, controversial new limits on public-sector unions were passed.
Free-market crony capitalism?
In the rush of perceived victory for free-marketeers, however, something has gone awry in Janesville. Measures like abolishing the state income tax or even capping property taxes were quietly shelved or watered-down.
Instead, Walker and the Wisconsin GOP decided to hit upon the buzzword of “economic development.” A new state-owned corporation was created with the governor at its head.
What had previously been the state’s Department of Commerce, became the “Wisconsin Economic Development Corporation.” Granted to this quasi-governmental agency was the power to negotiate and grant massive targeted tax breaks to lure new jobs and manufacturing to the Badger State.
Indeed, this flipped free-market principles and tax relief, turning them into unrestrained cronyism. WEDC quickly became a state-run venture capital fund. Using a mix of targeted tax breaks and outright subsidies, WEDC’s most recent prized announcement was the decision of Taiwanese electronics manufacturer Foxconn – known as a contract manufacturer for Apple and others – to locate a new plant in Ryan’s Southeast Wisconsin district.
The total price tag? Almost $3 billion in special tax breaks and state-built infrastructure.
A wedge between the Wisconsin GOP and free-market groups
Americans for Prosperity was not pleased. For the first time, it put out a statement directly criticizing Gov. Walker. Koch groups like AFP have long tried to draw a line between market-friendly reforms and outright cronyism. The Foxconn deal is well over the line.
Instead of lowering taxes and cutting regulations across the board for everybody, it puts the government in the business of picking winners and losers. In other words, it creates an industrial policy-style battle between states outbidding each other with taxpayer largess.
It is indisputable that political incentives and not market forces have been the dominant factor in Foxconn’s decision to build in Wisconsin. The company has even admitted it. Instead of providing a level playing field, the state is putting its thumb on the scale in favor of the large and politically-connected. For a relatively tiny handful of new jobs, Gov. Walker and Speaker Ryan have mortgaged the state’s tax base.
Walker and Ryan lured Foxconn to Wisconsin by pledging that the taxpayers cover almost all of the company’s labor costs. They use the fig leaf that arbitrary refundable tax credits are different from direct subsidies.
It’s a sad denouement for the once-promising “WisGOP” project. It has and it will create a clear rift between Walker, Ryan, and their more free market-minded patrons.
Liberty advocates and conservatives alike should be extremely skeptical of “tax relief” that is selectively targeted at certain companies, instead of providing a universal or at least a broad-based tax cut to all similarly-situated entities.
(Photo of Terry Gou, second from left, chairman of Apple supplier Foxconn, shakes hands with Wisconsin Gov. Scott Walker as House Speaker Paul Ryan looks on at news conference held by President Donald Trump at the White House on July 26, touting a decision by Foxconn to invest $10 billion to build a factory in Wisconsin that produces LCD panels. Foxconn said the project would create 3,000 jobs, with the “potential” to generate 13,000 new jobs, according to published reports. By Mark Wilson/Getty Images.)