Propping Up Corporate America

August 27, 2012 06:52

Why isn’t there more outrage against corporate welfare?  Well for one thing, corporate welfare is often hidden.


By Ken Connor


Conservatives are quick to criticize public welfare for the poor, pointing out that it often undermines natural consequences and the incentives that flow therefrom.  Such criticism is often well founded—poverty frequently becomes multi-generational when “solved” by simply throwing money at the poor.  But conservatives should no less vehement in their opposition to corporate welfare, a form of welfare that is running rampant while the taxpayers of our country are dying a slow death of a thousand payouts.

The numbers are astounding.  The Cato Institute recently released its overview of the federal budget, which shows that the national government will dole out nearly $100 billion in corporate welfare this year.

How can this be?  Why isn’t there more outrage against corporate welfare?  Well for one thing, corporate welfare is often hidden.  The money often passes through many, many hands.  A variety of federal agencies, including the Energy Department, Commerce Department, Housing and Urban Development Department, and Agriculture Department, funnel money to businesses.  Each of these departments has a variety of ways in which it passes along subsidies to businesses under its jurisdiction.

In reality, it’s a form of legalized money laundering.  Subsidies often go undetected—after all, what’s a few million dollars when you’re spending over $3 Trillion per year?  The spending is carried on the books, but without a few huge single payouts, it’s hard to get a good headline.

Additionally, our elected representatives are greatly influenced by special interests.  Upon arriving on Capitol Hill, members of Congress are inundated by hordes of lobbyists peddling their industry’s agenda.  Some politicians sell their votes for campaign contributions from these groups, but even the ones who resist that temptation are often influenced by the biased “data” that gets shoved in their face again and again.

Herein lies the problem: The average voter isn’t exercised about corporate welfare because thousands of subsidies are small enough to fly under the budgetary radar, so the voters don’t put enough pressure on their representatives to stop corporate welfare.  Meanwhile, special interests—the benefactors of political incumbents—are constantly cajoling politicians for more money.  The result?  Spend, spend, spend!  And pretty soon we have a $15 trillion dollar deficit.

Corporate welfare is exactly the same kind of impermissible government redistribution of wealth as the much-criticized welfare payouts for the poor.  It is crony capitalism pure and simple: powerful interests enriched by hard-earned taxpayer dollars.

Maybe there’s hope.  The spending has gotten so bad recently that the gifts are starting to provoke headlines.  The epic crash of solar-cell startup Solyndra after the fed guaranteed over $500 million in loan support got people talking, and the critical fallout from the first round of stimulus spending continues to this day (though that hasn’t stopped the Obama administration from rumbling about yet another stimulus package).

The bailout of the auto industry was notoriously unpopular among Americans, and the financial sector bailout was even worse.  We’ve disbursed over $600 billion to too-big-to-fail companies and enterprises, including Fannie Mae, Freddie Mac, AIG, GM, Bank of America, Citigroup, Chrysler, JPMorgan Chase, Goldman Sachs, Morgan Stanley—the list goes on and on.

The next boondoggle under consideration: a renewed farm bill.  Our government’s intimate relationship with farming has led to so many layers of subsidies one can’t help but wonder if the laws of supply and demand even have any direct impact on farming today.

What’s the common thread in all these giveaways?  Big money given to big businesses to keep market forces from having their way with them.  Why?  Because these businesses invest in political campaigns and their representatives in the lobbying community pressure our leaders to provide a return on that investment in the form of subsidies, tax breaks, and other preferences.  Ironically, in a down economy, we are taking tax dollars from struggling citizens and giving them to the largest businesses in our country to keep those businesses from experiencing the natural consequences of market mechanisms that would penalize them for their profligacy, inefficiency, and mistakes in judgment.

We simply cannot afford to keep government’s bloated corporate welfare programs.  Government should not be picking winners and losers in the market place.  If we stop the giveaways, taxpayers will have more money in their pockets and can determine the winners and losers in a free market.  Under ordinary circumstances, a corporation in need of a handout is a corporation that the market is likely to dispense with.  So be it.  Let more efficient companies thrive in the wake of their demise.  Citizens and the media both have a responsibility here to shine a critical light on all government handouts.  Let the market work its will and winnow out those businesses that are bloated, inefficient, and unable to sustain themselves, and pretty soon we will be on the road to economic recovery.


Ken Connor is an attorney and co-author of “Sinful Silence: When Christians Neglect Their Civic Duty”  He is also Chairman of the Center for a Just Society.

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