“Corporate Welfare” by Phyllis Hunsinger

“Corporate Welfare”  by Phyllis Hunsinger                          

This article first appeared in March, 2024 in The Business Times of Grand Junction, CO

The difference between small businesses and large businesses or corporations seems self-evident in the name.  The organizational structure, funding, quantity of production, and sphere of influence are much different in a large corporation as compared to a small business. Large corporations appear to have more clout. During the COVID shutdown most small businesses were declared “non-essential,” demonstrating obvious bias favoring larger corporations.

Government’s preferential treatment toward large corporations and industry is nothing new. Many industries receive government assistance in the form of a subsidy, which is an incentive the government provides to businesses through financial aid or support. Special groups lobby for benefits from the government at the expense of the general public. Members of Congress are targets for the lobbyists. Not only do the members of Congress receive campaign support to influence the voting Congressmen, but post-congressional careers with industry can result.

Members of Congress may think they are doing the right thing for the American people or the climate when they pass exemptions, specials rulings, or subsidies for certain industries. Unintended consequences arise and the notion of supply and demand is ignored. Economic distortions occur in the market. Competition in the marketplace is thwarted. The tax burden to provide the exemptions, grants, and subsidies is spread among all the taxpayers. Government subsidies are a zero-sum economic scheme because one sector of the economy is supported by all taxpayers.

Writing in May 1999 Lawrence Reed, president emeritus of the Foundation for Economic Education, said, “Taking from A to give to B doesn’t stimulate anything but B’s spending at A’s expense.”

The list of companies receiving significant sums of taxpayer money is too lengthy to enumerate. Three business sectors that receive major subsidies are energy, agriculture, and transportation. Chris Edwards, an economist with the Cato Institute, in 2022 wrote “Special Interests and Corporate Welfare,” in which he identified 125 programs that subsidize private businesses costing at least $80 billion each per year. Every major cabinet department, including the Defense Department, has become a conduit for government funding of private industry.

Corporate welfare is a term coined to describe government favoritism shown to certain corporations and industries. Mr. Edwards described the billions of dollars the federal government spends each year helping favored companies export their products. Fifteen percent of the largest farm businesses receive about 85 percent of total farm subsidies. The federal government has bailed out failing financial companies, car companies, airlines, and other businesses experiencing financial difficulties. In banking the “too big to fail” policy favors larger banks over smaller banks. The federal government spends billions of dollars a year subsidizing fossil fuel, nuclear, and renewable energy research when the industries should be paying this cost. Electric vehicles are primarily funded by government subsidies.

Examples of corporate welfare are legion. Corporate welfare aids some businesses while harming others. Federal regulations and trade barriers protect favored producers, limiting competition. Corruption is fostered by corporate welfare. Businesses seeking favors from the government are willing to vote and to lobby for big government programs. Corporate welfare can diminish the productivity and competency of companies. A government safety net makes companies complacent, weaker, less efficient, and more interested in keeping the company in favored status than in serving their customers. Taxpayer dollars are used to fund corporate welfare which in turn depresses economic activity. When the government picks winners, taxpayers lose.

The sentiment that “the system is rigged” against middle America and small business is demonstrated by the lack of trust among the populace. According to the Pew Research Center on September 19, 2023 “currently fewer than 2 in 10 Americans say they trust the government in Washington DC to do the right thing.” This represents the lowest trust measure in almost seven decades.

Robert Lawson, an economist, and coauthor of the Economic Freedom of the World annual reports said, “An economic system based on private property and free markets defines economic freedom. Governments can promote economic freedom by providing a legal structure and a law-enforcement system that protects the property rights of owners and enforces contracts in an even-handed manner.” The danger, he said, “as government grows it inevitably infringes on people’s economic freedom to engage in trade and enjoy the fruits of their labor.”

An example of government infringement of people’s economic freedom is corporate welfare.

 

 

 

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