Corporate Welfare And What It Is Costing You

by Chuck McGlawn 2002

Editor's note. The research for this article took place in 2002, I am sure things have gotten worse.

Whenever the Federal Government moves into an area, offering financial assistance to some segment of our national life, it fosters in that segment a dependency. The recipient often times abandons traditional sources of income in favor of the easier government acquired money. Once established, breaking these dependencies can be very disruptive. Imagine what would happen to a family that looks to the government's “Aid To Families with Dependent Children” (AFDC) if the subsidies were suddenly eliminated. It would turn the lives of this family upside down. The normally generous American willingly goes along with this type of assistance. No one wants to even think about children going unfed, unclothed and unsheltered. But there are some other groups showing up with their hands out for a government hand out, not social welfare, but Corporate Welfare.

 Corporate welfare is not new, but it is growing. It has been around long enough we could begin calling it “Aid to Corporations with Dependent Employees”. (ACDE) President George W. Bush has proposed the following subsidies: To IBM $1.4 billion, to General Motors $833 million and to General Electric: $671 million. This is just a partial listing.

What exactly is corporate welfare? Corporate welfare is: (1) government grants and cash payments by the government to businesses, (2) government providing products and/or services, such as loans and insurance, to businesses at below-market prices,  (3) laws—and changes in laws—that help business’ bottom lines.(4) and government purchases of goods and services from businesses at above-market prices. (though laws are supposed to prevent this) In actuality, Corporate Welfare is a way for politicians to enrich their wealthy friends and corporate supporters -- at your expense.

Tax breaks and/or business tax credits do not constitute "Corporate Welfare ". Corporate tax breaks can be, and probably are, unfairly distributed by politicians to gain favor. However, allowing companies to keep more of their own money is very different from seizing money from taxpayers to dole out to corporations.

 The cost of corporate welfare is staggering. All told, there are more than 100 corporate welfare programs on the books. These programs are costing taxpayers, depending to whom you listen to, a whopping $167 billion annually according to “Foreign Policy In Focus” (www.fpif.org/papers/cw/). (Can you say, "Hobin Rood—that is stealing from the poor to give to the rich") According to the Cato Institute (cato.org), if corporate handouts were eliminated, the federal government could provide U.S. taxpayers with an annual tax cut four times as large as the “early” tax rebate checks mailed out in 2001.

 Leaders of the left, and leaders of the right and Libertarians are opposed to Corporate Welfare. However, the proponents of Market Access Program (MAP) that is a program that uses tax dollars to advertise US products abroad, contend that these subsidies generate $16 in export revenue for every $1 in taxpayer costs. Yet, U.S. General Accounting Office studies could not document any increase in exports due to MAP expenditures. Similarly, the Congressional Research Service could not confirm the job creation claims of OPIC beneficiaries. And sadly the tax loop hole that allows U.S. corporations to defer payments of more than $1.3 billion annually in U.S. taxes on foreign earnings until remitted actually encourages U.S. companies to invest overseas. On whose side is our government on anyway?

 

Defense Industry Subsidies account for over $8 billion annually. Some of the most egregious examples re: Government Support for Arms Export Promotion. These programs use the departments of State and  Commerce and the U.S. military to promote arms sales. Yearly costs $440 million. Military Export Sales Subsidies Prices. This program assesses foreign purchasers of U.S. weapons, a price that does not cover government research and development costs. This program costs $500 million annually.

 

Excess Defense Articles/Emergency Drawdowns. This program has us giving away or selling at steep discounts Defense articles that we bought to many of, at no discount, I might add. This near give away program has 'em standing in line, costing you $750 million yearly.

 Foreign Military Financing. You are going to love this one. It provides grants and subsidized loans to foreign countries for the purchase of military goods and materials. The price tag for this program is $3 Billion annually.

 Economic Support Funds Bolstering Arms Exports. It just keeps getting better. Provide cash payments to foreign importers to repay debts incurred to buy U.S. weapons. The price tag on this one is over $2 Billion.

 Forgiven/Bad Loans for Arms Exports. This program pays for the U.S. government-guaranteed loans—to foreign importers of U.S. arms—who just couldn't pay or had their debts forgiven. This program cost the now beleaguered taxpayer $1 billion yearly.

 Now let's do a recap of this finely tuned selling machine. First, we provide *free* the equipment for trade shows to sell military equipment. Then we use government and military staff to actually sell the equipment. Then we sell equipment at prices that do not recoup the research and development cost. Then when we offer the buyers subsidized low-interest loans. Then we guarantee those loans. Then when we do not sell enough equipment, the surplus is given away or offered at “fire sale” prices. Then when the buyers don't pay we forgive them their debt.