“Welcome to Illinois, the cookie crumb state!”
“If we’re lucky, we’re the spillover state!”
“Illinois, where we survive on economic scraps!”
“Shrewder states, send us your leftovers!”
Ugh. We’re trying out unsatisfying slogans now that Foxconn, the Taiwanese tech giant, has picked Southeast Wisconsin as home for a $10 billion investment. Foxconn’s new LCD panel plant eventually may employ 13,000 people. President Donald Trump says the company’s U.S. investment could hit $30 billion.
Foxconn considered Illinois and elsewhere before settling on a site just up the road and across the state line.
The alleged saving grace for dysfunctional and anti-employer Illinois is that this state will get ancillary benefits from its proximity to Wisconsin: Some Foxconn jobs may go to Illinois commuters, while some Illinois businesses should pick up work as suppliers and contractors. “There would absolutely be great spillover opportunities,” Kevin Considine, president and CEO of Lake County Partners, a nonprofit economic development organization, told the Tribune. “A plant like that will have lots of multiplier effects. It will bring supply chain companies with it, so other companies will set up near it and around it, similar to what happens in automotive.”
True enough. Yet not nearly good enough for struggling Illinois, which has squandered its reputation as a great place to do business and hire workers. Chicago is vibrant, but the statewide economy is severely hobbled in its ability to attract new investment. Among the reasons: Illinois’ calamitous fiscal condition, anti-business regulations and rapacious tax policies.
The beauty contest Foxconn ran to pick a location isn’t a death knell for Illinois. We don’t know all the factors that went into the company’s decision. Wisconsin is offering a treasure trove of financial incentives worth $3 billion that Illinois may not have been able or willing to provide. We’ve always felt state and local governments are too quick to give up tax revenue and other benefits to woo jobs, though there are circumstances that justify providing perks — especially infrastructure.
The point of focusing on Foxconn is to warn that as other Midwest states move their economies forward, Illinois falls further behind, hobbled by bad fundamentals: State government admits to $130 billion in unfunded pension obligations (Moody’s Investors Service says the true total is nearly double that); a bond rating just above junk status; and a stalemate between Republican Gov. Bruce Rauner and the Democrat-controlled Legislature over Rauner’s proposals to make the state more employer-friendly.
And legislators just raised the individual income tax rate by 32 percent over Rauner’s veto, which says a lot about the Democrats’ priorities. If you’re running a business, do you run to Illinois so you can pay reparations for these decades of mismanagement? Or do you run away?
The worst of it is that Illinois should be booming. This state, an agriculture and manufacturing center, has a crossroads location and is home to a great metropolis, excellent universities and a highly trained workforce. Yet Illinois is an economic laggard. From 2006-2016, as the nation generated a 1.3 percent average annual growth rate, Illinois’ growth was an even shabbier 0.4 percent, according to James Broughel of the Mercatus Center at George Mason University. The growth rate in Wisconsin was 0.7 percent and in Indiana 0.9 percent. Even those small differences translate into jobs.
Why the miserable Illinois performance? Here’s one reason Broughel and his colleagues cite: Illinois saddles businesses and individuals with an onerous level of regulations — in some cases twice as demanding as those of similar states. The researchers used software to analyze legal text and identify words and phrases such as “shall,” “may not” and “prohibited,” which signify obligations and requirements. Broughel tells us Illinois has about 260,000 regulatory restrictions in its code, compared to a preliminary count of 160,000 for Wisconsin.
That’s 100,000 reasons for Foxconn and every other employer to conclude that Wisconsin has a friendlier business climate than Illinois’.
Is that why Foxconn Chairman Terry Gou selected Wisconsin over Illinois? Or was it the pension debt here? The lousy credit rating’s impact on government costs (and taxes)? The Springfield opposition that thwarts this governor’s efforts to improve the business climate? The gridlocked major fixes to Illinois’ workers’ compensation system? We don’t know.
What we do know is that Wisconsin won the kind of fight Illinois used to win. And no matter what this state’s apologists want to pretend: No, Illinois can’t survive on other states’ crumbs.