Tag Archives: corporate welfare

Food for Thought

Yesterday, I shared the story of a woman who cleans houses for a living, a hardworking woman whose financial situation is so precarious (and options so limited) that she felt she had no choice but to return to work just days after she’d had a heart attack.

Today, I want to share some data from an article from In These Times by Michael Winship. The contrast is quite illuminating:

Open the Books, a new nonprofit working for greater transparency in government spending, reports that between 2000 and 2012, Fortune magazine’s top 100 companies received $1.2 trillion from the feds. And, Aaron Cantú writes at AlterNet, “That doesn’t include all the billions of dollars doled out to housing, auto and banking enterprises in 2008-2009, nor does it include ethanol subsidies to agribusiness or tax breaks for wind turbine makers.”

Richard Rubin at Bloomberg News recently found that, “The largest US-based companies added $206 billion to their stockpiles of offshore profits last year, parking earnings in low-tax countries until Congress gives them a reason not to. The multinational companies have accumulated $1.95 trillion outside the US, up 11.8 percent from a year earlier.”

Alan Pyke at the website ThinkProgress adds:

While precise estimates of lost revenue are difficult to make, previous inquiries into profit offshoring found that it cost the US between $30 billion and $90 billion each year during the early and middle 2000s, when the pile of untaxed corporate profits was much smaller.

States and localities also lose out on tens of billions of dollars in tax revenue each year to similar offshoring strategies. A recent study found that by closing just one small loophole in state business tax laws, states could bring in a billion dollars in new revenue almost overnight.

Think of the highways, bridges and housing that money could build or repair, and the jobs that could be created, the teachers and tuitions it could provide, the mouths it could feed. Then throw in corporate malfeasance without punishment, gross mismanagement and exorbitant executive salaries—for example, Henrique de Castro, the failed #2 at Yahoo, who’s getting $109 million for his 15 disastrous months there, or about $244,000 per day (h/t to R.J. Eskow).

So let me see if I understand this. A social safety net that would allow my housekeeper a couple of weeks to recuperate from her heart attack is “charity” that would promote “an unhealthy dependency.” But the transfer of trillions of taxpayer dollars to businesses that hoard their profits, don’t hire new workers, and use every trick in the book to evade paying their fair share of taxes is common-sense encouragement of entrepreneurship.

Excuse me while I throw up.



Hard to Argue with This

You can hardly pick up a newspaper or magazine, or log onto a website these days without encountering an article that advises the Republicans party on ways to address the party’s current dilemma. Some are well-reasoned and thoughtful, many are nothing more than thinly-disguised apologetics. Commentary magazine has recently published one of the better analyses. Among their prescriptions: an admonition to be intellectually honest.

The article made clear that the author agreed with conservative economic approaches. But as it noted, the likelihood of anyone listening to the GOP on these issues “requires changing an image that the GOP is engaged in class warfare on behalf of the upper class. Republicans could begin by becoming visible and persistent critics of corporate welfare: the vast network of subsidies and tax breaks extended by Democratic and Republican administrations alike to wealthy and well-connected corporations. Such benefits undermine free markets and undercut the public’s confidence in American capitalism. They also increase federal spending. The conservative case against this high-level form of the dole is obvious, and so is the appropriate agenda: cutting off the patent cronyism that infects federal policy toward energy, health care, and the automobile and financial-services industries, resulting in a pernicious and corrupting system of interdependency. “Ending corporate welfare as we know it”: For a pro-market party, this should be a rich vein to mine.”

No kidding. The hypocrisy on this issue–defending corporatism while marginalizing the poor and opposing any effort to help them–has been widely mocked. This preference for corporate welfare has made the general public view all GOP economic prescriptions with suspicion.

Perhaps the most penetrating observation in the article, however, was this one:

Republicans need to express and demonstrate a commitment to the common good, a powerful and deeply conservative concept. There is an impression—exaggerated but not wholly without merit—that the GOP is hyper-individualistic. During the Republican convention, for example, we repeatedly heard about the virtues of individual liberty but almost nothing about the importance of community or social solidarity, and of the obligations and attachments we have to each other. Even Republican figures who espouse relatively moderate policy prescriptions often sound like libertarians run amok.

This may be the area where current Republican rhetoric is most out of sync with the culture. America is experiencing a still-nascent but growing return to balance, to a renewed recognition of the importance of community and the common good. “I’ve got mine” is an unattractive motto for a political party at any time, but it is extremely off-putting to people looking for ways to forge a caring polity.

The article makes several other points worth pondering, not the least of which is that the country desperately needs two mature, responsible political parties. And right now, we don’t have them.


Pretty Please with Sugar on It….

The other day on Facebook, a friend posted one of those perennial whines about hard-working Americans who resent watching their tax money being wasted on support for slutty welfare moms and assorted lazy bums. This one was attributed to Bill Cosby, despite the fact he has repeatedly denied authorship, but it doesn’t really matter how many times Snopes.com “debunks” this and similar aggrieved diatribes–the myth that we are working to support legions of welfare queens persists.

I’m sure there are poor people who take advantage of “the system,” but they can’t hold a candle to the big boys–the sophisticated corporate welfare recipients who’ve been milking the taxpayers for years. For every single mom making minimum wage who depends upon our diminishing social safety net to feed her children, there’s a well-connected industry costing taxpayers and consumers billions.

Before you dismiss that assertion because it came from a “bleeding heart liberal,” it might be enlightening to hear what noted liberals Richard Lugar and Pat Toomey recently had to say about one of the most egregious offenders: big sugar.

In a blog post published by The Hill, Lugar, Pennsylvania’s Toomey, and New Hampshire’s Jeanne Shaheen  wrote of their support for reforming “an extravagant sugar price-support program that costs consumers and businesses an estimated $3.5 billion and 20,000 jobs each year.”

Sugar is the most tightly controlled–read “subsidized”–agricultural commodity in the country. The favorable policies that operate to keep sugar prices artificially high benefit approximately five thousand wealthy farmers at the expense of the rest of us. These aren’t family farmers, either–they are large corporate farmers like Archer Daniels Midland and United Sugars Corporation. In 2000, we taxpayers forked out more than a billion dollars to keep the price of sugar high enough to protect their profit margins.

Sugar subsidies artificially inflate the price of candy, breakfast cereals and other foods that use sugar, ensuring a price for sugar that is about three times as much as its price on the world market.  Americans’ bodies may be getting fat from sugary foods and beverages, but our wallets are getting much, much thinner; the General Accounting Office reports that thanks to sugar subsidies, U.S. consumers pay in excess of two billion dollars per year too much for our sugary foods.

We’re not only paying extra–we’re depressing job growth. A 2006 study by the Commerce Department found that for each job the program saved in the sugar industry, it cost three jobs in food manufacturing.

The Agriculture Department guarantees sugar growers a set price, and protects domestic sugar interests from competition through the imposition of import barriers and domestic production control. If that isn’t welfare, what is? (It’s sure as hell not market capitalism!)

If the financial costs of this welfare program aren’t outrageous enough, sugar subsidies are also causing environmental degradation–large areas of the Florida Everglades have been converted to cane sugar production as a direct result of the sugar protection racket, causing damage fro drainage, runoff of chemical fertilizers and destruction of the natural habitat.

The next time someone complains about the “culture of dependency” and the costs of welfare, ask them about sugar.

A Different Kind of Economic “Bubble”

In my Media and Public Policy class last week we were discussing the ways in which the Internet has given us the ability to live in “reality bubbles” of our own choosing, when an older student made a perceptive observation. She pointed out that when she grew up in Martinsville, she’d been surrounded by a “bubble” of bigotry–she’d lived in a small community of homogeneous people who all thought alike. In her case, the Internet had provided an escape from the bubble.

We all live in bubbles of one kind or another, and that ability to isolate ourselves from those with whom we do not share geography, religion, common interests and experiences can stunt our human empathy. When our distance from each other becomes too great, civility and self-government suffer.

Joseph Stiglitz is a Nobel-winning economist, and he has just written a book called The Price of Inequality, examining the effects of  the currently huge divide between the rich and everyone else on our ability to sustain a democratic government.

He isn’t sanguine.

According to Stiglitz, the vaunted American market is broken. It has been overwhelmed by politically engineered market advantages—special deals that economists call “rent-seeking.” The term refers to politically-achieved “exemptions” from the market that allow certain individuals to reap economic returns above normal market levels– profits derived from favorable political treatment rather than competitive success.

In The Price of Inequality, Stiglitz chronicles these blatant tax and spending giveaways–the special deals and corporate welfare enjoyed by big agriculture, big energy, and many, many others.

Stiglitz also argues that much of the rent-seeking that plagues our economy takes a more subtle form. In many cases, the production of a product produces what economists call “negative externalities.” These are costs that are incurred during the manufacturing or development process that end up being imposed on society rather than paid for by the producer and included in the price of the goods or services involved. The most commonly cited example would be a manufacturer who discharges his waste into a nearby waterway rather than properly disposing of it, shifting the costs of cleanup and disposal to others. Society pays for the pollution, and that cost is not included in the market price of the manufactured goods.

The bottom line is that markets don’t operate properly when some participants are in a position to game the system, and societies don’t operate properly when markets are rigged.

As he points out, one of the consequences to society is that when those at the top–the 1%–enjoy the best health care, education, and other benefits that come with greater wealth, they fail to realize that “their fate is bound up with how the other 99 percent live.”

They live in a bubble.

Welfare Dependent

Since the Romney campaign is making welfare recipients a central focus of their advertising barrage, maybe it’s time to take a closer look at the identity of those who are–pardon the vulgarity–“sucking at the public tit.”

Common Dreams has published a list of entitlements, and who gets what. According to their analysis, social welfare programs cost taxpayers some 59 billion dollars a year. Corporate welfare, on the other hand, costs us much more.

What do they count as corporate welfare? Well, fossil fuel industries get more than $70 billion dollars annually in subsidies–most of which goes to the oil and gas sector. Another $58 billion a year is lost to the Treasury by reason of tax “deferrals” for off-shore profits. Taxing capital gains at 15% rather than at the rates imposed on wage and salary income costs another $59 billion, while hedge fund managers are able to avoid some $2.1 billion in taxes each year due to something called “carried interest.” (I have absolutely no idea what that is, but then, I’ve never been a hedge fund manager, never represented one when I was a practicing lawyer, and never even played one on TV.)

And those are just a few of the garden-variety, built-into-the-system subsidies. The bank bailout cost us $700 billion. And while most of that was apparently paid back–and we really did have to avert a global meltdown–the terms of those “loans” could have been less favorable to the banksters and more protective of the rest of us.

When I read these numbers, I was dubious about their accuracy. Everyone seems to be playing fast and loose with the facts these days, and Common Dreams is a liberal-leaning organization. So I did some research, and  found verification in an unlikely place–Forbes Magazine. Here’s a quote from a Forbes article on the deficit:

Among the most outrageous expenditures is corporate welfare. Desperate businesses now overrun Washington, begging for alms. Believing that profits should be theirs while losses should be everyone else’s, corporations have convinced policymakers to underwrite virtually every industry: agriculture, education, energy, housing, manufacturing, medicine, transportation, and much more.

My Cato Institute colleague Tad DeHaven has published a new study, “Corporate Welfare in the Federal Budget,” on business subsidies, which he figures to cost about $100 billion a year. Slashing corporate welfare obviously won’t balance the budget—which is why middle class and defense welfare also have to go on the chopping block. However, cutting business subsidies would be a good start to balancing the budget. Moreover, going after corporate welfare is essential to create a budget package that the public will see as fair.

Not every subsidy is bad policy, of course. There are sound reasons for encouraging some new enterprises, or saving endangered ones. (I’d argue that rescuing the American automobile industry averted catastrophic economic losses.) But those reasons need to be publicly vetted, debated and justified. Right now, we have ample reason to believe that most corporate welfare is the result of cozy dealings between  campaign donors, lobbyists and legislators. There’s a reason it’s called “crony capitalism.”

Before we nod approvingly at the self-righteous candidates who are beating up on those “shiftless” poor folks, maybe we should take a closer look at the other end of the income spectrum. Maybe we should look at the well-fed and prosperous folks who are so un-self-aware that they don’t even recognize that they are just as dependent on welfare as the people they like to diminish and scorn.