Subsidies or welfare – for US corporations it's all the same, and it is abundant

In the past few years the government has spent over 900 billion dollars on the visible welfare state – and as much as 500 billion dollars on tax expenditures via corporate welfare and military-supporting private sector welfare . . .

Note: Wimberley financial investment manager Rocky Boschert gives us all something to think about as the president and Congress finally seem to be getting down to the nut crunching of job creation, deficit cutting and federal tax reform that will help keep jobs (and American corporations) in America. How novel and patriotic is that? Learn more about corporate welfare and take a corporate welfare awareness quiz at this link: http://www.progress.org/banneker/cw.html

Send your comments and news tips to roundup.editor@gmail.com, to Rocky at arrowbiz@texasorp.com or click on the "comments" at the bottom of the story

By Rocky Boschert
Financial Editor

I would like to pose this question as an economic exercise. Is someone who honestly and actively loathes corporate welfare – and all of its destructive economic effects on the American middle class – a fiscal conservative or a fiscal liberal? To answer that question, we need to first look at the political and historical definition of what corporate welfare is, and how it differs from people welfare.

According to Wikipedia, corporate welfare is a term describing a government's bestowal of money grants, tax breaks, or other special favorable treatment on corporations, or selected corporations. The term often compares corporate subsidies and welfare payments to seniors, children and the poor (people welfare, aka entitlements), implying that corporations are much less needy of such government economic welfare than the general entitlement population.

In fact, in a historical capitalist system framework, corporate welfare would be considered anathema to a true free markets economy, since a free markets economy is designed to filter out success from failure in the form of consumer demand and competent business management. This would be especially true when any form of temporary government subsidy comes with no guidelines or “return on investment.” Permanent corporate welfare would be considered socialism.

Yet permanent corporate welfare (although they never call it as such) is a common practice of both Republican Party and Democratic Party policy and actions. In fact, much of the Republican Party legislation is written by the oil sector (for subsidies), the insurance and health care sector (for tort reform and Medicare), and the natural resources sector (for pollution deregulation). On the other side, Democratic Party legislation is written by the Wall Street banks/brokers (for financial deregulation) and big corporate media (for restrictive airwaves and telephone, cellular and cable contracts that only benefit the companies).

Most corporate subsidies are often excessive, unwarranted, wasteful, unfair, inefficient and clearly bought by lobby money. For example, Ron Paul and the two other honest libertarian Presidential candidates from New Mexico and Louisiana are advocates of getting rid of tax funded corporate welfare in the defense and aerospace sector – a position Paul uses to effectively criticize the disguised imperialism of the Iraq and Afghanistan wars.

Yet to the general public, the label of corporate welfare is often falsely promoted by our politicians as benefiting the general welfare. But in stark contradiction to reality, a disproportionate amount of public funds are spent on large corporations, not on small corporations and local businesses often in uncompetitive or anti-competitive ways.

For instance, in the United States, agricultural subsidies are usually portrayed as helping honest, hardworking independent farmers stay afloat. However, the majority of income gained from commodity support programs actually goes to large agribusiness corporations such as Archer Daniels Midland and ConAgra, as they own a considerably larger percentage of production.

Today, the United States government pays around $20 billion per year to “farmers” in direct subsidies as "farm income stabilization" via outdated U.S. farm bills signed into law as long ago as 1922, 1929, and 1933. Yet current agricultural subsidies are simply disguised forms of large corporation welfare legislation.

A recent Canadian report claimed that for every dollar U.S. farmers earn (remember, a majority of which now goes to large agribusiness corporations), 62 cents comes from some form of government subsidy, with total aid in 2009 from all levels of government adding up to $180.8 billion.

And over in the manufacturing sector, the Cato Institute, a well-known and often credible conservative think tank, shows the U.S. federal government spent $92 billion on corporate welfare during fiscal year 2006. The very needy welfare recipients included the starving executives and upper management of Boeing, Xerox, IBM, Motorola, Dow Chemical, and General Electric.

Additionally, Cato Institute’s Alan Peters and Peter Fisher have estimated that state and local governments provide an added $40-$50 billion annually in economic development incentives, which many critics – both conservative and progressive - characterize as corporate welfare. Hello Rick Perry!

Many conservative and liberal economists also consider the recent bank bailouts in the United States under the Bush and Obama administrations to be corporate welfare. Some U.S. politicians – mostly democrat and libertarian, have also contended that zero-interest loans from the Federal Reserve to financial institutions during the global financial crisis were a hidden, backdoor form of corporate welfare. You think?

And then there is the “hidden welfare state,” as opposed to “visible” welfare such as social security, Medicare, Medicaid, food stamps and AFDC payments. In the past few years the government has spent over 900 billion dollars on the visible welfare state – and as much as 500 billion dollars on tax expenditures via corporate welfare and military-supporting private sector welfare, including private contractors, private security forces, and the American businesses now engaged in the Iraq and Afghanistan wars.

In fact, the hidden welfare state provides goods and services to corporations directly comparable to those provided in the visible welfare state of direct spending. There are hundreds of billions of dollars of tax expenditures spent annually on corporations, military contractors, Wall Street, income security, health, employment and training, housing, education, and specific social services for private sector business infrastructure.

In the end, are citizens being asked to make a choice over who gets the most benefit from the two different and distinct forms of welfare – and whose recipients deserve it the most? Who would you choose:

1) Seniors, children, the unemployed, and the poor – who are losing ground daily to energy, utility, wage, and food inflation?

or 2) the large corporations earning record profits sitting on billions of dollars of cash waiting for some bought and sold group of politicians to make it safe (i.e. guaranteed profitability) for these huge solvent entities to start investing their money and hire maybe one hundred thousand out-of-work Americans at debt-inducing wages with meager benefits?

If the duopoly party politicians were really genuine about their concern for the real economic problem facing America – declining aggregate consumer demand – they would have the courage to do their job as competent public representatives. But we know they won’t.

On the other hand, as citizens we need to stop acting like victims and take matters into our own hands. We can start by making smart consumer and investment choices that shun the political lies and the fake representation our politicians insult us with – gilded politicians who will NEVER have to live on the social security & Medicare wages and benefits which they so cavalierly want to decimate under the bogus concept of fiscally conservative austerity, while they continue to support unlimited and unnecessary corporate welfare.