Friday, July 28, 2017

America and the Foxconn Dream


America and the Foxconn Dream


Tim Culpan

July 27, 2017, 12:35 AM CDT

This package could buy an iPhone for everybody in the state.

Andrew Harrer/Bloomberg

Wisconsin is about to shell out as much as $3 billion for the privilege of luring Foxconn Technology Group. At $519 per citizen, it would have been cheaper to buy an iPhone for every man, woman and child in the midwestern state. 1

Let's be clear: The big winner isn't the taxpayer. It's Foxconn and its billionaire chairman Terry Gou. As I predicted several times, Foxconn would only come to the U.S. if and when his demands were met.

Meet them is exactly what Wisconsin did, with an offering of tax credits, training grants and infrastructure improvements. In return, Foxconn said it will invest $10 billion and create 3,000 jobs.

Let's take a look at those figures: Wisconsin is paying as much as $1 million per job, which will carry an average salary of $54,000. The state's economic development corporation is selling the project to taxpayers with a claim that it will create 10,000 construction jobs for building the facility and another 6,000 indirect positions. It's expecting $3.3 million of investment per employee from the Taiwanese company.

Politicians, lobbyists and Foxconn can make the figures work by being generous with the facts. For example, if every one of those jobs came to fruition, they can claim 29,000 positions for $3 billion, or $103,000 per job. But that's not going to happen.

Foxconn has factories in China and another dozen countries globally, yet that stated $10 billion investment is more than the group's publicly traded flagship -- Hon Hai Precision Industry Co. -- has devoted to capital expenditure over the past five years combined.

There is potential for the payroll to climb to 13,000 in the future -- a figure crucial to Wisconsin justifying the expense -- but I wouldn't bet your 401(k) on it. That's because if Gou really does dish out $10 billion on this facility, the only way to make it viable is by keeping staffing low and leaning on automation to boost productivity. This LCD factory will be either labor intensive or highly automated. It can't be both.

Foxconn's plans for U.S. manufacturing take cues from Tesla Inc.'s Fremont, California facility, a highly automated factory that Gou has visited more than once. There, Elon Musk is reported to have more than 160 specialist robots to supplement the labor force. Expect Foxconn to be even more automated, because it will be making displays -- a standardized product -- whereas Tesla custom-builds its vehicles with a lot more human intervention.

It's important to keep in mind that investment pledges dished up in press releases don't always equate to the final reality.

Three years ago, Gou signed a deal with the government of Jakarta, Indonesia's capital and its biggest city, to invest $1 billion and employ local workers to make electronics. That never happened. Neither did a $30 million high-tech factory in Pennyslvania that was announced a year earlier.

Just this past year, Foxconn is reported to have pledged investments of $5 billion in India; $3.65 billion in Kunshan, China; and $8.8 billion in Guangzhou. It's too early to know if those sums will ever be spent, but including Wisconsin, the tally now stands at $27.5 billion of commitments. That's more than Hon Hai has spent in the last 23 years.

Terry Gou didn't get where he is today by blithely spending money on huge factories. Instead, he's learned to entice leaders into thinking big, and then letting them pay.

Wisconsin shows that Foxconn isn't building the American Dream -- America is building the Foxconn machine.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Boone County Food Pantry




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Sunday, July 23, 2017

What Trump can do to cripple ObamaCare


By Nathaniel Weixel - 07/23/17 08:16 PM EDT 217


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What Trump can do to cripple ObamaCare

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If Congress isn’t able to repeal ObamaCare, it’s likely that the Trump administration will follow through on the president's vow to let the law fail.
President Trump regularly asserts that ObamaCare is dead or dying, and the administration has already taken steps to undermine the law while congressional Republicans struggle to enact healthcare legislation.

The administration has broad authority over the implementation of ObamaCare, giving officials the power to limit the law's effectiveness even without congressional involvement.
Here are four ways Trump could cripple the law.
Stop the cost-sharing subsidies.
The biggest thing the Trump administration can do to hurt ObamaCare would be to stop making key subsidy payments to insurers, known as cost-sharing reductions (CSR).
Should the subsidies stop, the insurance markets would likely be thrown into chaos, which could bolster claims from Senate Republicans and the White House that ObamaCare is failing.
Trump has publicly waffled on whether he will continue the payments. At times he’s threatened to withhold them, let the ObamaCare markets collapse and then blame Democrats. At other times, he’s acknowledged the political risks and said the payments would continue.
“We pay hundreds of millions of dollars a month in subsidy that the courts don't even want us to pay,” Trump said during a lunch with Republican senators Wednesday. “And when those payments stop, it stops immediately. It doesn't take two years, three years, one year — it stops immediately.”
The White House made the payments for July, but has not made a commitment beyond this month. Insurers have called the payments critical, saying that without them, they would have to massively increase premiums for 2018 or exit the individual market.
Many insurers blamed uncertainty surrounding the payments for proposed double-digit rate increases for 2018. 
Stop enforcing the individual mandate.
ObamaCare requires everyone in the country to have health insurance, or pay a penalty. Trump can’t unilaterally abolish the mandate, but he can instruct the IRS to stop enforcing it.
Trump hinted at such a move on the first day he took office, issuing a vaguely worded executive order instructing federal agencies to waive or defer any part of ObamaCare that imposed a “fiscal burden” on states.
But despite the threats, the mandate is still the law and people are still supposed to pay a penalty for lacking coverage.
Insurers are worried that if the Trump administration eases up on the mandate or creates more exemptions to it, it would create a “death spiral” in the ObamaCare markets.
The mandate helps bring in healthy enrollees to balance out the sick ones, with the goal of preventing premiums from spiking. If the healthy people don’t buy insurance, only the sickest will, and premiums will skyrocket.
The mixed signals from the administration about the mandate are spooking insurers. They don’t know what to plan for, and that’s showing in their filings.  

“With open enrollment for 2018 only three months away, our members and all Americans need the certainty and security of knowing coverage will be available and affordable for them," the BlueCross BlueShield Association said in a statement.

Pennsylvania’s five insurers, for example, filed premium increase requests averaging nearly 9 percent. But that increase could be hiked up to 36 percent without the individual mandate and the cost-sharing reduction payments.

Stop advertising and outreach.

The Obama administration used each open enrollment period to heavily promote exchange signups. Administration officials would appear in ads online and on TV.
The Trump administration has taken the opposite approach.
Shortly after Trump took office, the Department of Health and Human Services said it withdrew about $5 million of advertising that was intended to encourage people to sign up for insurance through ObamaCare.
HHS has also shortened the annual open enrollment period from three months to six weeks, and the agency churns out anti-ObamaCare charts, studies and graphics on a regular basis.
HHS Secretary Tom Price has also been producing swaths of ads showcasing “victims” of ObamaCare to promote the law’s repeal.
According to an AP report, the administration recently cancelled contracts with two companies that helped facilitate ObamaCare signups in 18 cities.
Advocates worry that without outreach from the government, Americans who need insurance won’t know they can sign up. Lower signups generally mean higher prices, which has been one of the most consistent Republican critiques of the law.
There’s also no indication that the administration is doing anything to convince insurers to stay in any of the “bare” counties across the country without an ObamaCare plan to buy.

The Centers for Medicare and Medicaid Services under Obama played an active role in enticing insurers back into the markets, but the Trump administration has taken a more hands-off approach.
Use administrative flexibility.
HHS Secretary Tom Price has enormous flexibility within the law to redefine some of its parameters. The powers given to the HHS secretary were meant to help implement ObamaCare, but Price has indicated he’ll use them to dismantle the law.

"Fourteen hundred and forty-two times the ACA said 'the secretary shall' or 'the secretary may,' " Price said during his confirmation hearing in March.
Congressional Republicans have urged Price to use every regulatory lever possible.
“There are a lot of things that can be done with regulations, that people don’t see happening on a daily basis,” Sen. John Barrasso (R-Wyo.) told The Hill recently.

For example, Price could change the rules requiring how much insurers would have to cover under the category of essential benefits. While the administration can’t repeal the requirement completely, they can change the definition.
Many congressional Republicans would like to either eliminate the essential health benefit requirement, or at the very least, let states and insurers opt out, so long as they also offer plans that comply with the rules.

If ObamaCare repeal fails in Congress, Republicans will be looking for Price to do the next best thing.

Tags John Barrasso

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Belvidere leaders hope business registration will control crime


Posted: Thu 6:47 PM, Jul 20, 2017  |

Updated: Thu 6:49 PM, Jul 20, 2017

BELVIDERE, Ill. (WIFR) -- The city of Belvidere is keeping a closer eye on local businesses after four massage parlors are shut down for illegal activity.

So much so he opened Vintage 815 last year.

However, he feels some city ordinances are halting the freedom of businesses like his.

"I think it's important for the police and the fire department and the city to know who owns a particular business just for emergency reasons,” says William Hajdys.

After September’s shut down of four Belvidere massage parlors, including the Executive Relaxation Spa, the city is now cracking down on all businesses in the area.

Requiring them to register annually and consent to being shut down for 30 days during a hearing if the city suspects any illegal activity.
"I just have too many questions that aren't answered," says Belvidere Alderman Wendy Frank.

She says she supports punishing businesses for illegal activity, but she thinks requiring business to register with the city may be ineffective.

"On one hand I’m for that, but I don't think this is the right way. I don't think that we have a lot of power in that piece of paper," says Frank.

Hadjys and Frank both say they believe criminals should be stopped, but this is not the way to go.

"It’s almost like he's penalizing people to just take care of 1 or 2 small businesses, and everyone's paying for it," says Hajdys.

Those in support of the ordinance say it will give the city a chance to know what every business is doing and keep better tabs on activities. The ordinance passed City Council 5-4 and should go into affect in 9 days.

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Sunday, July 9, 2017

What, exactly, was the point of all this, Governor?



What, exactly, was the point of all this, Governor?

By Crain's Editorial Board

You want to breathe a sigh of relief, you know you do. Go ahead. After two years of pain, Illinois, you're entitled. Your elected leaders finally have done what responsible adults should have done all along—namely, negotiate a spending plan for the state and pass it into law. The $36 billion fiscal 2018 budget—passed with bipartisan support despite every effort by Gov. Bruce Rauner to kill it—reduces spending from the previous year, raises income taxes a lot and starts paying down $15 billion in overdue bills that piled up while the state spent years being a willful deadbeat.

What a shame legislators weren't willing to compromise until they had to stare down the business end of a junk rating from the nation's credit agencies. Still, the deal got done, though it won't pass any partisan's purity test. It doesn't relieve Illinois residents' property tax burdens. It cuts more deeply into higher education spending than many would like. And on and on.

But the upside is that the budget contains the new revenue that all sides—including Rauner, despite his campaign rhetoric—eventually acknowledged was needed. The individual income tax rate will climb from 3.75 percent to 4.95 percent, the same level it was under Gov. Pat Quinn, and the corporate rate from 5.25 percent to 7 percent. The hikes combined are expected to raise about $5 billion a year. In the end, even business groups like the Civic Committee of the Commercial Club of Chicago advocated for plans much like the one that finally passed, reasoning that stability was preferable to mutually assured destruction.

So Illinois spent two years setting itself on fire in order to do . . . what, exactly? Income tax rates now stand at 2014 levels. Pensions are still underfunded. The major "Turnaround Agenda" ideas the governor ran on—"right to work," workers' comp reform and term limits—were kicked to the curb over time like so much roadkill. The state, meanwhile, has been the customer from hell to social service agencies and small businesses alike, demanding services and refusing to pay for them, racking up millions in unnecessary interest charges and forcing private-sector layoffs along the way.

Rauner presided over all of this—and, at key moments in the spectacle, could have prevented it. Not a good look for a man who ran as a business-minded pragmatist, a dealmaker who would put the needs of regular Illinoisans first and reject petty partisan politics.

In the end, Rauner's stance on the budget compromise revealed how political this supposed "non-politician" has actually become. Despite knowing the damage that further ratings downgrades would do to the state, despite understanding the real damage being done to universities, businesses and municipalities by the ongoing standoff, despite recognizing that there is no way cuts and reforms alone will dig Illinois out of its financial hole without new revenue, the governor vetoed the budget legislation when it came to his desk. He did this knowing the chances were very, very good that his veto would be overridden.

There were plenty of political benefits for the governor in this irresponsible move: The guy who said he wasn't a career politician gets to appease his base, which is howling to the point of threatening violence against lawmakers who voted yes on the budget. He also gets a workable budget that will hold the wolves of Wall Street at bay at least for a time. And as an added sweetener, he also gets plenty of partisan fuel for a re-election campaign he once told us he'd be happy to skip if it meant he could get the job done in Springfield for the people of Illinois.

What a waste.

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Thursday, July 6, 2017