America’s Love Affair with Corporate Welfare

This article was originally published on The Well-Read Man, on July 18, 2017.

You love tax breaks

If you ask Americans their opinions about corporate welfare, the responses are universally negative. Those on the right hate it because it is a blatant example of a bloated federal government wasting taxpayer dollars. For those on the left, the focus is on the evil corporations who have their greed and egos emboldened by government funds that could be better used for education. The Occupy Wall Street movement from back in 2011, a left-leaning event that sought to expose the power and influence of corporations, included public denunciations of corporate tax breaks, subsidies, and other public sponsorships of business. On the right, organizations that have no love for the Occupy protesters are nonetheless holding hands with them on the topic of corporate welfare, with national think tanks like The Heritage Foundation and The Cato Institute issuing policy papers on the evils of that government practice.

Despite the clamor against corporate welfare, we love it. We demand it in various manifestations from all levels of government, and we feel a certain excitement when our preferred business support program plays out. The popularity of such programs is partly a reflection of how much Americans want them to exist. One online subsidy tracking tool documents more than half a million corporate welfare events, including direct grants, loan guarantees, tax breaks, and reimbursements for expenses. And while some of these incidents are certainly money grabs by greedy corporations who care for nothing more than the bottom line, many of these subsidies are tied to programs and actions applauded by even the staunchest Occupy protester.

Don’t believe me? Consider some of the ways that government funds or perks benefit corporations, and see if any of them bring a smile to your face.

• Large municipalities build sports stadiums and event arenas, ostensibly to bring in tax revenue through ticket sales and concession sales. But these capital projects typically benefit one corporate entity—a sports team—more than all others, an entity that will sometimes bully cities with the threat of departure as a way of getting the project started.
• Enterprise zones and similar programs designed to encourage job creation in impoverished or disaster-impacted areas represent one of the most common uses of corporate welfare. If a company promises to move into an economically needy region, governments at various jurisdiction levels will provide tax breaks, loan guarantees, and even direct payments, all for the purpose of lowering the unemployment rate in those areas and encouraging natural economic growth.
• The Federal Deposit Insurance Corporation (FDIC) is the government entity that guarantees the funds your personal checking and savings accounts in the event of a bank failure. While this is not a direct subsidy to a business, it has a parallel impact, that of allowing a corporation (the bank) to reduce its own insurance expenses and employ riskier though lower-cost money management processes, knowing that the federal government will be there to clean up the mess should anything go wrong.
• Buying a new refrigerator? Make sure to get one that is energy efficient so that you can get a rebate check from your local utility or government. And don’t forget that this is yet another form of corporate welfare. Such individual rebates lower the perceived price of major appliances in the eyes of the consumer, allowing manufacturers to sell more, higher-priced units than they normally would, all promoted by government-sponsored energy efficiency programs. This does not even include the $16 billion in direct subsidies and tax breaks (2013 numbers) that energy companies and similar corporations receive for offering “green” energy and other improvements in energy technologies.
• “That’s a very nice home you have there, Mr. Jones,” says your state senator. “It would be a shame if anything were to happen to it.” Good thing they passed a law mandating that every dwelling have a specific number of smoke alarms and carbon monoxide detectors. That such laws provide a direct benefit to specific device manufacturers and industries is often overlooked in the wake of the elation over safer homes and protected children.
• Government licensing of certain job categories—doctors, electricians, cosmetologists, and so on—provides an indirect support for companies hiring in those categories, since the specific regulations enabling people to work those jobs also restrict other types of jobs and business that might provide similar, though not licensable, products and services. If you come up with a new hair-cutting technique that does not fall under the umbrella of the licensing requirements enacted in many states, you will not be setting up shop or providing a competitive threat to existing beauty shops and salons. This reduction in potential competition increases profits for licensed businesses.
• Student loans provide those at the lower end of the economic scale—and, it turns out, those at the higher end as well—with extra money to use on a college education. This enables lenders to provide government-guaranteed products to a population normally considered too risky for standard loans, thereby expanding the bottom line of those banks without all of the worry over defaults. But it also allows public and private educational institutions to increase their tuition rates, knowing that higher fees will be met with the increased resources made available to students through these loans.
• Government grants for medical and engineering research reduce the financial burden on pharmaceutical and other biotech companies, allowing them to have the government in effect contribute to a part of their research and development budgets.
• Although it is more controversial than other examples in this list, government support for the family planning services offered by providers like Planned Parenthood represents one of the clearest examples of subsidies that directly benefit a corporation or industry.

The examples above go beyond the traditional understanding of corporate welfare. And yet, they all have a similar impact on specific companies or sectors of the economy. Some of these programs are viewed positively by a large segment of the American population. Who doesn’t like the FDIC-supplied insurance on their bank accounts? It has given Americans a higher level of confidence in the banking system. Yet it, along with other programs that supported the “too big to fail” mentality, helped construct the 2008 recession.

Some corporate welfare programs are just plain awful, existing primarily to enrich some politician’s favorite business or industry. But others are a mix of despised and welcomed impacts, and it is hard to call for their immediate elimination. You might hate corporate welfare programs, and that’s great. But don’t forget to examine your own beloved government programs to see if you might be part of the reason corporate welfare exists.

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