Corporate Welfare

When the government takes the income of one person (who earned it) to give it to another (who did not), we call that welfare, but what about when government takes from those who work and gives that money to big businesses?  That’s welfare too, and it’s even worse for the country than is welfare given to people.

There are things government should buy.  We may not always agree on how big of a military we should have, or where it should be used, but the vast majority of us believe we should have a military.  We may not always agree on what should be illegal, or on how, specifically, the police should be armed, but the vast majority of us believe we should have police and fire protection.  The vast majority of us want roads, and some form of education system.  There are a number of things virtually all Americans believe require government spending, and legitimate government spending on legitimate government activities is not welfare.

There are also a great many things government should not spend money on.  The import/export bank loans foreign governments money to buy American products, largely from Boeing.  This is a direct handout to those large American companies.  Elon Musk is worth $21.3 billion, in spite of the fact that none of his businesses have, nor will, ever see a profit.  His wealth comes from government handouts (http://www.dailymail.co.uk/news/article-3104655/How-South-African-entrepreneur-funded-massive-business-empire-4-9-billion-government-subsidies-leaving-U-S-taxpayer-shoulder-cost.html), and when the handouts end (if they end), Tesla Motors will fall into the dustbin of history, but Elon Musk will have already pocketed his billions.  Tesla can’t even make money with tax breaks that place a $7,500 burden on the tax payer for every car he sells (http://www.fueleconomy.gov/feg/taxevb.shtml), and with taxes in California on competitor cars, given directly to Tesla (https://www.lewrockwell.com/political-theatre/california-enabled-tesla-forcing-competitors-subsidize/).  Elon Musk is the poster boy of corporate welfare.

We have some of the highest corporate tax rates in the developed world (https://taxfoundation.org/us-has-highest-corporate-income-tax-rate-oecd),  and yet large corporations pay very little in taxes (http://www.nytimes.com/2013/07/02/business/big-companies-paid-a-fraction-of-corporate-tax-rate.html).  How is that, you ask?  Simple.  We tax businesses at ridiculously high rates to ensure that small companies are throttled right out of the gate, while giving massive tax write offs to large corporations.  Our corporate tax system is designed to shield large, established corporations from the emergence of new competitors.  We burn small businesses at the altar of multinational elites, making our business environment a rigged system, and a rich person’s game.  That’s corporate welfare.

In the late 70s and early 80s, the Marine Corps was shown a new, lightweight, amphibious, air-droppable combat bulldozer called the M9 Armored Combat Earthmover (ACE).  The M9 ACE got stuck on level ground on the way to the demonstration, and the Marine Corps turned it down.  Undaunted, the companies building the M9 ACE turned to Congress, and in 1986, the Army began to buy the M9 ACE.  When I was in the Marine Corps, I operated the D7G, and in the Army, I operated the M9 ACE.  The D7G was a workhorse.  The M9 ACE was a poorly designed, worthless piece of junk, that blew hydraulic lines constantly.  In field maneuvers, it was not uncommon for more than half of our M9 ACEs to break down.  Today, the M9 ACE is the only combat bulldozer in our military’s arsenal.  Even the Marine Corps was eventually forced to take it.  Why?  Corporate welfare.

In the mid to late 1990s the Army was getting rid of the Combat Engineer Vehicle (CEV), which was a modified M-60 tank with a bulldozer blade, a recovery winch, and a 120 mm main gun that fired a 60 lbs bricks of c4, to demo bridges, bunkers, and other hard targets, from a distance.  My unit at the time took all the gear we could still use off of our CEVs and sent these vehicles off to be decommissioned.

Three months later we found out that there was a government contract to spend about $20 million dollars per vehicle upgrading the CEV.  We retook possession of our CEVs, spent millions on each one to get them back up to combat condition, and then took them in to be upgraded.  As soon as they were upgraded, we stripped them back down again and turned them in as scrap metal.  Writing a contract to upgrade a vehicle already slated to be decommissioned is corporate welfare.

I could pick on Lockheed Martin’s F-35, which may be the largest piece of corporate welfare in military history (as well as the biggest case of waste and fraud), but I decided to pick on smaller examples to show just how common this problem is.  It happens all the time – there is nothing government does where it cannot find a way to give corporate welfare.

The amount of corporate welfare at the state and local levels is even worse.  You do not want to now how much of what is spent on roads amounts to handouts to road companies.

I could list examples of corporate welfare all day long, and we could debate some of the specifics, but we all agree that corporate welfare exists, and it is one of the big reasons the United States has fallen all the way down to 17th place on the Heritage Foundation’s Economic Freedom Index (http://www.heritage.org/index/ranking).  We were in sixth place just ten years ago.

Free markets are driven by profit and loss.  Corporate welfare is an attempt to privatize profit while subsidizing loss, and when the tax payer picks up the tab for corporate losses, there is no end to the cost.  Corporate welfare also uses regulatory oversight to benefit specific businesses, such as a recent law that says all new cars must have backup cameras.  Who benefits more from that law: the consumer, or the corporations that make backup cameras?  How many of the regulations that go into making a house or a car actually make the public safer?  Some do – certainly.  But many regulations are designed to benefit specific corporations that make products which would otherwise not be purchased, or would not be purchased in the same quantities.

Corporate welfare transfers money directly from the taxpayer to those corporations who receive the welfare.  This not only costs the taxpayer a lot of money, but also shields the favored corporations from competition, allowing them to survive, while selling inferior products to consumers.  Corporate welfare makes us less competitive than we would otherwise be, as well as more poor.  It harms every fiber of the social fabric, and though everyone agrees – libertarians and liberals alike – that it should be eliminated, the situation only gets worse, with more corporate welfare going out every year.

Corporate welfare is a much larger problem than are other kinds of welfare.  It is time for us to demand action to eliminate it.