While much of the public is familiar with social welfare, especially after this past year of "welfare reform" debate, much less are even aware of the existence of Corporate Welfare. Whereas social welfare is concerned with the needs of children, the elderly, and those in society who cannot fully care for themselves, corporate welfare cares for businesses and industries that are often not only developed, but actually stable and quite self-sufficient. Some believe that incentives and subsidies are necessary for companies if that support helps them achieve a competitive edge. However, an increasing number of organizations, including conservative think tanks and taxpayer groups, believe present support to industry resembles government handouts. They say it exhibits favoritism to those corporations who have the most political influence, and actually lessons healthy competition.
While Corporate Welfare has many aspects and comes in many different forms, two major forms are subsidies and tax breaks. Recent reports document subsidies costing taxpayers up to $570.8 billion over a five year period. Tax breaks to corporations lessen government revenues, prompting government to burden the middle and working class to make up for the lost revenue or cut needed social programs. And "federal aid to dependent corporations is a major contributor to the federal budget deficit" According to the Cato Institute. While our economy may benefit from successful business ventures, in the long run, companies operating primarily for profit, without regard for their roles in environmental degradation or sustained economic vitality, burden both the economy and the average taxpayer.
During the last Congress's budget attacks on social programs, Congressperson Maxine Waters said that "when the American people hear about cuts in food stamps, cuts in school lunches, cuts in housing and individual assistance, they believe Congress goes after the weak and the vulnerable, but shies away from offending the rich and powerful." A key role of our government is to be selective with which programs it supports utilizing taxpayer money. Congress needs to discern between what is necessary welfare and what is not. Since it is our money, we should be aware of their priorities and check them against ours. If they are out of sync as Congressperson Waters charges, we need to demand a reordering of priorities.
Corporate welfare in the form of subsidies cost taxpayers billions of dollars. Some economic theorists feel subsidies are necessary because they give recipient industries a step up in the competitive marketplace. However subsidies are often given to established corporations with long-standing records of high profit margins. For example, the energy, natural resources, aerospace and high-tech industries all receive government subsidies.
The Strategic Petroleum Reserves were established decades ago when the U.S. felt a need to guard against a fuel shortage in the event of war. This federal energy subsidy mandates the government to purchase petroleum for the reserves even though the military need no longer exists. According to Congressperson Bernie Sanders (I- VT), "the federal purchases have had the effect of creating an extra, artificial demand for oil, and thus increasing the prices paid by consumers." Consumers end up paying more for oil while their taxes fund the unneeded energy subsidy.
Some of the agricultural subsidies were originally intended for the family farm. The family farmer has been pushed out by agribusiness corporations and the subsidies now primarily benefit corporations. One subsidy that benefits these large corporations is the Market Promotion Program. This program "dispenses about $100 million a year to help American Companies market their products overseas." For example, the Market Promotion Program funds Dole Corporation for advertising its products in Japan. U.S. taxpayers gain nothing and lose much.
Natural resources subsidies are prevalent in governmental appropriations' agenda. They exhibit too clearly the value Congress places on our public lands. Grazing regulations and fees represent one of the most egregious demonstrations of Congress's selling out our natural resources to industry. Grazing fees are charged separately by the Bureau of Land Management and the Forest Service, yet the charge per "animal unit month" is roughly $1.98, far below the market value of $9.26. Revenue yields $52 million less than the government's cost to run the program. The land is being overgrazed, sub-leased at a deficit to government, and the environment is being damaged.
The "Granddaddy of all Giveaways," is the corporate welfare provided to the mining industry under a 125 year old law. The mandates of the 1872 Mining Act allows the mining industry to claim and excavate hardrock minerals on public land at rockbottom rates. There is also a patenting provision that gives away the land itself for $2.50 to $5.00 per acre. No royalties are required on the minerals extracted. Congress's reluctance to reform the Mining Law has resulted in billions of dollars worth of public lands and valuable resources being given away. And the taxpayer foots the bill for the cleanup. According to the U.S. Bureau of Mines, 12,000 miles of rivers have been polluted by mining damage. There are also more than 550,000 abandoned hardrock mines. The costs of reclaiming these sites would fall on taxpayers because no funds, e.g. royalty payments, are required to reclaim the sites.
Unfortunately, subsidies are not the only give-aways that Congress maintains. Tax breaks to corporations decrease government revenues. According to the Progressive Caucus' report on corporate welfare, foreign-controlled corporations pay only a small proportion of their receipts in taxes than U.S. controlled corporations. These foreign-controlled corporations in 1991 paid approximately .54 percent in taxes of their receipts whereas U.S. controlled corporations paid approximately 1% of their total receipts in taxes. Since these corporations all profit and operate in the U.S., all should pay the same proportion of receipts in taxes. Reform of this transfer-pricing tax loophole is needed.
Many of the industries benefiting from corporate welfare are polluters of the environment. Giving them tax breaks and subsidy benefits has further been destructive by taking away needed monies from social programs while increasing the deficit. However, corporate welfare is increasingly becoming part of a new national policy debate. To this end, taxpayers - the financial backers of many of these programs - need to be informed about corporate welfare issues and involved in debates regarding corporate welfare.
Citizen groups are becoming more informed and vocal in their opposition to corporate welfare. The annual Green Scissors Report lists specific corporate welfare subsidy programs to cut. Its companion, "Dirty Little Secrets", targets the many tax breaks industry receives from the U.S. government. The Cato Institute, a conservative think tank, has also issued a report discussing corporate welfare. It points out not only how continued government hand-outs affect our economy and rob the taxpayers, but how they also interfere with capitalism.
The Green Scissors campaign includes more than 20 groups interested in ending corporate welfare. They have targeted specific government programs/subsidies that are detrimental to the environment and at the same time waste taxpayer money. Members include Friends of the Earth, Taxpayers for Common Sense and the U.S. Public Interest Research Group. The Green Scissors report prioritizes 10 corporate welfare give-aways that campaign members feel Congress should cut or reform. These "Choice Cuts" include the 1872 Mining Act, the Forest Service's building of timber roads, the Clean Coal program, the National Ignition Facility, GT- MHR Gas Reactor, the National Parks Concession contracts, I-69 Highway Extension in Indiana, the USDA Marketing Promotion Program, the Animas-LaPlata Dam in Nepal, and the Arun II Dam also in Nepal. If these Choice Cuts were implemented, government would save tens of billions of dollars and cease activities that are economically and environmentally unjustifiable.
"Dirty Little Secrets" is a report written by Friends of the Earth with support from Citizens for Tax Justice, Natural Resources Defense Council, the U.S. Public Interest Research Group and The Wilderness Society. This report hopes to promote economic reform and protect the environment. According to the report, "...some taxpayers are paying less than their fair share. Through powerful lobbying, polluters have carved out special treatment in the tax code. What they do is not illegal, but it is unfair. It is also a disaster for the environment and human health." We should all be concerned, for we are also taxpayers and have a right to expect that everyone, individuals and corporations alike, should be equitably taxed.
An example of an inequitable tax code that hurts everyone and the environment is Section 486 of the Internal Revenue Code. This Section permits reclamation and closing costs to be deducted immediately when mining begins, even though the eventual closing and reclamation of the mine site will not occur for some time. Past experience shows that many closed mines have not been reclaimed. Waste from these unclaimed mines seeps into underground water reserves, polluting our water supply and detracting from the natural beauty of the surrounding environment. With the costs being deducted at the initial stage of a mining operation, there exists the risk of default and claims by creditors in the event of a bankruptcy. This leaves the burden to close and reclaim the mine on the general public while the corporations received the tax benefits. According to "Dirty Little Secrets", this provision alone costs the treasury $200 million over a five year period. Not even included in this figure however is the high cost of clean-up of many of these superfund sites.
The Cato Institute's report also lists corporate subsidy programs that are unwarranted and wasteful. According to Cato's report, "...corporate pork is pervasive." Congress funds more than 125 programs that subsidize private businesses. These business subsidy programs cost federal taxpayers roughly $85 billion annually and the dollar amount has been growing substantially in recent years.
There are many problems with corporate welfare. One major problem is that corporate welfare is a huge drain on the federal treasury for very little economic benefit. Also "...federal aid to dependent corporations is a major contributor to the federal budget deficit." It creates an uneven playing field for corporations and fosters an "incestuous relationship between business and government." Corporate welfare is anti-consumer and anti-capitalist, states Cato's report, by raising costs to consumers and transforming the businessman from entrepreneur to lobbyist. The Cato report's conclusion states that "because they intermingle government dollars with corporate political clout, business subsidies have a corrupting influence on both America's system of democratic government and our system of entrepreneurial capitalism [not to mention attempts to protect the environment]. Despite the conventional orthodoxy in Washington that the United States needs an even closer partnership between business and politics, the truth is that both government and the marketplace would work better if they kept a healthy distance from each other."
A wide range of public groups have documented the negative impacts of corporate welfare and called for its end. This past Congress, many Congresspersons joined in promoting corporate welfare on the national agenda. They presented budget amendments and corporate welfare legislation intent on ending the waste of taxpayer money and environmental degradation.
While many in Congress still support business as usual, some are speaking out strongly against corporate welfare. Until recently, the problems related to corporate welfare (e.g., environmental degradation, increasing tax burden on the average citizen and problems with balancing the federal budget) have been relatively ignored in relation to budget debates. According to the Progressive Policy Institute (PPI), "...decades of free handouts from Uncle Sam to wealthy corporations should be ended because a) the money would be more productive if it were invested in retraining the workforce, and b) free handouts to corporations shield them from competition in the global market, ultimately weakening them."
PPI also claims in its report that most of the subsidies and trade protections stem not from economic logic, but from political influence. Political influence in the form of corporate welfare is costing taxpayers billions of dollars while at the same time benefiting the general public little. At the other end, political influence was also pushing Uncle Sam this past Congress to cut social welfare programs for individuals, including assistance for drug and alcohol treatment, help for the handicapped and elderly, care for the mentally retarded, childrens' vaccination and immunization programs, food stamps and last but not least, environmental clean-up and protection. Some members of Congress became increasingly concerned. They translated this concern into action primarily in the budget arena. Intent on stemming corporate welfare, some Congresspersons took up several of the cuts recommended by Green Scissors and other reports.
Each year Congress and the president must prepare a budget for the following year. This process attempts to balance the budget while reducing the federal deficit and appropriating funds to the various federal programs and departments for operations in the next fiscal year. With corporate welfare and contributing lobbyists prevalent in Washington, the budgeting process becomes "difficult". Congress looks at funding for vital social programs and environmental protection while at the same time needing to fulfill its promises to lobbyists and industries. Industry's wants usually win, leaving little revenue for the management of social and environmental programs, sometimes resulting in deep cuts to essential programs. The budget process can be volatile, like this past Congress when the government shut down three times. Differing priorities make it difficult for the House, the Senate, and the President to reach agreement.
Specific bills presented to Congress to address Corporate Welfare include the Public Resources Deficit Reduction Act and the Corporate Responsibility Act. The Corporate Responsibility Act was geared toward favoring family farms, small businesses, domestic investment, consumer's health and safety and sustainable economic development. It also sought to amend the Internal Revenue Code of 1986 concerning treatment of corporations. The bill attempted to redirect multinational corporations' investments in foreign ventures to domestic industries, hoping to increase employment and growth in the U.S. The bill would have revised and eliminated certain tax breaks and credits, like the transfer pricing tax loophole for foreign controlled corporations. Revenues to fund social programs and protect the environment would have increased. If enacted, the bill would have reduced the federal deficit by $252 billion in five years. The bill died in committee.
The Public Resources Deficit Reduction Act was introduced to Congress by Representative George Miller (D-CA) and a bi-partisan group of lawmakers. It proposed to cut federal subsidies to resource extraction industries like mining and to end logging and grazing on public lands. The bill would have assisted in curtailing devastation of the environment while protecting our natural resources. The general provision states, "prohibits any timber, minerals, forage, or other natural resources owned by the United States, any federally owned water, or hydroelectric energy of a Federal facility from being sold, leased, or otherwise disposed of by any Federal entity for less than fair market value." Charge fair market value for our natural resources would have provided a chance for the government to at least break even in costs of running particular programs. John F. Fitzgerald, Executive Director of the Western Ancient Forest Campaign, feels "this legislation will move the Western U.S. closer to a diversified and sustainable economy, and by allowing a portion of the savings to be appropriated to restore devastated fisheries, forests, and grasslands..." and create jobs. This bill also died in committee.
Congressperson Maxine Waters said, "cuts such as these [listed in the legislations above] can be made in the whole range of corporate welfare programs. What America needs is a fair budget deficit reduction program, not deficit reduction that targets poor and working people while letting the wealthy and corporations off the hook." Now that corporate welfare is moving into the spotlight, we need to look to the 105th Congress and push for specific actions toward reducing these destructive government handouts.
Because the end result of many of corporate welfare subsidies is environmental degradation, we need to identify specific issues we want to have Congress pass. If we know which issues Congress will be addressing, we can concentrate on campaigning for or against that particular bill. We can also work toward ending corporate welfare programs by educating each other and pushing Congress to take more and more action.
One subsidy that may be headed toward elimination this Congress is the Forest Service's road building program. The Forest Service builds roads into our National Forests so that timber companies may access prime trees to cut. The logic for this program is questionable. The general public is already losing millions of dollars in downed trees by the timber industry with forest habitat destruction everywhere. Through this program, the public also funds road construction for the timber industry to access ever more tree stands for further destruction. This program definitely needs to end. It just missed passing last Congress and Western Ancient Forest Campaign expects it to pass this budget round.
Another corporate welfare program that has Momentum is also gathering to end another Corporate Welfare program, the Market Promotion Program. This program costs the Treasury approximately $100 million a year. Companies like Dole Corporation, Sunkist, McDonalds do not need assistance with marketing and advertising abroad. This waste of taxpayer money must end.
Contact your Representatives and Senators and let them know that you do not agree with corporate welfare. Tell them what your priorities are. Make corporate welfare a major part of your Representatives' and Senators' agenda this Congress. Your input is vital. Ask them to vote for budget amendments to cut National Forest Road Building and Market Promotion Programs. Ask them if they are familiar with Green Scissors and other wasteful, destructive Corporate Welfare programs. If so, ask them to cut those programs. If not, send them a Green Scissors Report.
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* * * * January 24, 1997 * * * *
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