Democracy:

Corporate Welfare

Corporate welfare -- the enormous and myriad subsidies, bailouts, giveaways, tax loopholes, debt revocations, loan guarantees, discounted insurance and other benefits conferred by government on business -- siphons funds from appropriate public investments, subsidizes companies ripping minerals from federal lands, enables pharmaceutical companies to gouge consumers, perpetuates anti-competitive oligopolistic markets, injures our national security, and weakens our democracy.

At a time when the national GDP is soaring but one in five children live in deep poverty, one might expect that a public effort to curtail welfare would focus on big handouts for rich corporations, not small supports for poor individuals. But somehow the invocations of the need for stand-on-your-own-two-feet responsibility do not apply to large corporations.

At a time when even growing federal budget surpluses do not persuade our nation's political leaders to devote public resources to repairing and enhancing the built elements of our commonwealth -- such as the nation's schools, bridges, clinics, roads, drinking water systems, courthouses, public transportation systems and waste water treatment facilities -- somehow the cramped federal budget always has room for another corporate welfare program.

It is raw political power that creates and perpetuates most corporate welfare programs.

There is no serious public policy argument for why television broadcasters should be given control of the digital television spectrum -- a $70 billion asset -- for free. The broadcasters obtained their bounty because of the political influence of the National Association of Broadcasters (NAB head Eddie Fritts is Senate Majority Leader Trent Lott's college friend), and because Members of Congress are afraid of antagonizing the local news broadcasting companies.

The endless tax loopholes that riddle the tax code -- such as an accelerated depreciation schedule that's worth billions to oil companies -- cannot be explained by any exotic theory of fair taxation, just by political influence and lobbying.

Local taxpayers rather than billionaire team owners pay for the new sports stadiums and arenas that dot the American landscape because of the political leverage that sports teams and their allies gain through corporate cash and the threat to move elsewhere.

The 1872 Mining Act -- a nearly 130-year-old relic of efforts to settle the West allows mining companies to claim federal lands for $5 an acre or less and then take billions of dollars of gold, silver, copper or other hard-rock minerals with no royalty payments to the public treasury -- survives thanks to the legislative maneuverings of senators from western states. These senators are standing up not for their states' best economic interests -- these giveaway mines create few jobs and massive environmental problems with high economic costs in foregone tourist and recreational revenues and uses -- but for the mining companies, which pour millions in campaign contributions into the Congress.

Consider the Partnership for a New Generation of Vehicles (PNGV). PNGV is a federal government subsidy program ostensibly designed to speed auto industry of more fuel efficient cars. Its real-world effect, however, has been to forestall any toughening of federal fuel efficiency standards. It has also vectored research investments to a dirty technology, diesel, and permitted the major U.S. automakers (now including DaimlerChrysler) to collude on do-nothing "research" -- suppressing the competition that might result in genuine innovation and, most importantly, deployment of new technologies.

It is now past time to End Corporate Welfare As We Know It.

The first step is to eliminate the corporate tax loopholes - which drain more than $76 billion from the federal treasury in fiscal year 1999, according to conservative estimates by the Office of Management and Budget. Any meritorious corporate tax exemptions can be reenacted by Congress.

Second, all corporate welfare programs should be periodically sunsetted. If they deserve to continue, they can be reauthorized. But giveaways like the 1872 Mining Act should not be permanently enshrined in the law.

Third, where the government decides to give welfare benefits to corporations, it must exact reciprocal obligations -- agreements, as appropriate, to abide by high environmental standards, pay workers a living wage, charge consumers a fair price for products invented with government help (such as pharmaceuticals), enable consumers to band together through invitations included in billing envelopes or to otherwise advance broad public purposes.

Finally, we need a new framework for analyzing corporate welfare. We need to ask whether a corporate welfare program advances genuine public interests, whether the government has a proper role in a particular subsidizing sphere, whether there are democratic procedures in place for public participation, whether the government should charge market rates for services or assets it is providing corporations, whether the government is exacting appropriate reciprocal commitments from corporate welfare beneficiaries, whether the program or subsidy exceeds the authority of an implementing agency, and whether there are clear criteria for delineating subsidies' successes and failures.