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Corporate Welfare Versus Social Welfare

by David Wildman


As the U.S. Congress debated welfare policy, the media spotlight focused on the need to cut spending to the poorest people in the nation. At the same time, there was no or minimal coverage of policies that send billions of government dollars to corporate interests from oil companies to agribusiness to firms producing arms.

Looking across the breadth of the U.S. budget and policies, a key question arises: Whose welfare is the government serving -- the people’s or corporations’?

It’s not a new question. Upon leaving the U.S. presidency in the late 1800s, Rutherford B. Hayes wrote in his diary:

"The real difficulty is with the vast wealth and power in the hands of the few....It is a government of the people, by the people, and for the people no longer. It is a government of corporations, by corporations, and for corporations."

U.S. presidents since have shared Mr. Hayes’ concern. For example, President Dwight D. Eisenhower warned of the dangerous power of the military-industrial complex in his farewell address. In his last weeks in office, President Bill Clinton stopped further subsidies to logging, mining and oil companies by preserving millions of acres of public lands.

Too often those in power only find courage and wisdom to address injustice of the powerful as they themselves leave power.

Today a rising number of voices -- environmentalists, workers, faith communities, family farmers, indigenous peoples and some public officials -- are calling for an end to corporate subsidies and privilege they label corporate welfare. Like forces that called for an end to social welfare "as we know

it" in the early 1990s, these forces are calling for an end to corporate welfare "as we know it."

These groups refuse to be silent in the face of corporate efforts to transform government into a shareholders’ meeting where only those with money vote and earn dividends.

Defining corporate welfare

Welfare refers to financial or other forms of public -- government -- assistance to people in need. Welfare also means health, happiness, well-being. For many years, welfare programs grew out of a belief that government has a responsibility to meet the needs of the least of these in our society -- needs that the private sector was unwilling or unable to meet adequately.

Matthew 25:31-46 offers a framework for the kinds of social welfare enacted in the United States and many other nations -- food to the hungry, health care to the sick, water to the thirsty, welcome to the stranger, clothing to the naked, presence with the imprisoned, shelter to the homeless.

Corporate welfare describes financial or other form of government assistance to a corporation provided free or at a below-market rate. Unlike social welfare, it is rarely need-based. Much of U.S. corporate-welfare policy is embedded in the tax code, which supports certain corporate actions over others through tax expenditures, deductions and credits. Unlike budget items, tax expenditures are not approved each year but continue until Congress votes to end them.

The largest corporate-welfare payments go to the wealthiest corporations. These corporations are often among the biggest campaign donors to candidates of both major political parties.

Corporations easily outspend critics in media and lobbying to convince Congress that programs they support have public benefit. While some argue that public benefits justify corporate subsidies, questions arise:

Answering these questions means looking at specific subsidies to specific corporations. For example, oil corporations argue that drilling on Alaska's public land will lower oil costs to consumers so the government should allow them access to drill. But public subsidies for drilling oil discourage businesses engaged in developing renewable energy sources.

Welfare to oil corporations does not promote conservation, expand mass transit or encourage pollution reduction. Drilling has profound and lasting environmental costs and consequences. The perceived benefit of lower fuel prices is borrowed from our future.

Corporate-welfare kings

For to all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away (Matthew 25:29).

The biblical parable of the talents depicts the effects of U.S. welfare policies -- social and corporate. Poor welfare recipients, who are predominately women and children, face time limits, workfare requirements and sanctions. At the same time, large corporations -- with directors and executives who are predominately wealthy white men -- receive billions each year in corporate welfare through subsidies, tax breaks and giveaways with little accountability, public scrutiny or time limits.

Is this God's economic distribution plan?

The parable of the talents asks us as a society to consider how we use our talents -- our public funds and resources. Are we to help those in need or are we to heap profits into the hands of a few?

Giveaways of land, resources

Giveaway of public lands is one of the oldest forms of corporate welfare. The National Mineral Act of 1866 gave millions of acres to mining companies free. Railroad corporations received more than 100 million acres and millions in federal subsidies for rail construction. Yet the promise to freed Blacks of 40 acres and a mule remains unrealized to this day.

The 1872 Mining Act still gives companies the right to extract resources on public lands at $5 per acre with no royalty fees. Mining companies gave congressional candidates $17 million from 1987-1994 to ensure Congress did not repeal the act. During that time, they extracted $26 billion in minerals from public land paying no royalty fees.

An 8 percent royalty, comparable to what many nations charge, would generate $200 million a year in public revenues. This could contribute to the costs of cleaning up half a million abandoned mines on public lands, which the Mineral Policy Center estimates at $30-$70 billion. Imagine a small business insisting its cleaning costs be paid by the government.

Like the mining companies, logging companies have benefitted from resource giveaways and government subsidy in the form of construction and maintenance of logging roads. The U.S. Forest Service has built and maintained 340,000 miles of forest roads -- enough to circle the planet nearly 15 times -- used almost exclusively by logging companies to reach public forests. Those companies log at a below market rate of $5 per tree. Estimates put U.S. subsidies to the logging industry at $111 million annually. That does not include the environmental cost of logging and road construction in remote areas.

Resistance to logging subsidies is mounting. In 1998, following advocacy by the Green Scissors Coalition, Congress repealed a program under which the U.S. Forest Service gave corporations public trees as payment for roads the corporations built exclusively to log the trees at an estimated $50 million-a- year cost to taxpayers. In January, President Clinton stopped forest road construction by executive order as he prepared to leave office.

National forests are a public resource held in trust for all people. It is yet to be seen if the Bush Administration and Congress will preserve public lands and resources entrusted to their care or use public funds and lands to serve corporate interests. While campaigning, President George W. Bush said opening additional oilfields in Alaska should be considered.

Funding research & development

Research and development is a major cost in many industries, yet much of such costs for new drugs, new weapons systems and nuclear power are paid for by the federal government. For example, Taxol, an anti-cancer drug developed by the National Cancer Institute, was licensed to Bristol-Myers Squibb. While the company contributed virtually nothing to Taxol's testing and development, it now markets it wholesale at 20 times its manufacturing price generating billions in profits including more than $100 million a year in Medicare payments.

Taxpayers, through Pentagon-run arms bazaars, pay the advertising budget of arms manufacturers, then provide foreign aid to customers like Colombia, Israel and Saudi Arabia on condition they buy U.S.-made weapons. Such arms proliferation then is used to justify future government research-and-development expenses for more sophisticated weaponry.

Does welfare to exporters of weapons enhance the common good? Why not insist that corporations pay market rate for what they receive from the government?

Corporate bailouts,socialized risk

The savings-and-loan scandal of the late 1980s amounted to a $500 billion corporate-welfare bailout of failed savings and loans, which had engaged in risky, speculative, even criminal business activities. To encourage overseas investments in high-risk nations, corporations are able to purchase federally-backed insurance at below market rates. Tobacco companies and others seek to cap corporate liability costs related to harmful products, yet they continue to seek government subsidies to export the same products.

Such measures amount to a socialization of risk even as corporate profits stay privatized. If corporations were forced to pay back bailouts, buy insurance at market rates and accept full liability for their products, they might change their risky and destructive practices.

Crop subsidies

Ah, you...who add field to field, until there is room for no one but you (Isaiah 5:8).

In the first three years under the 1996 Freedom to Farm Act, the Environmental Working Group an advocacy organization based in Wash., D.C., and San Francisco, Calif., found half of all subsidies in Iowa -- $1 billion -- went to 12 percent of farm operators. Nationwide 26.8 percent of all farm subsidies went to the top 2 percent of recipients.

When you drink clear water, must you foul the rest with your feet (Ezekiel 34:18)?

The top 1 percent of sugar producers received 40 percent of all subsidies leading them to overproduce and divert water from the Everglades. As a result, Congress allocated $200 million to restore the very areas destroyed by years of welfare to sugar producers.

Property tax credits

But do not do as they do, for they do not practice what they teach. They tie up heavy burdens, hard to bear, and lay them on the shoulders of others; but they themselves are unwilling to lift a finger....inside they are full of greed and self-indulgence (Matthew 23:3-4,25).

From 1957 to 1987, the corporate share of property-tax revenues fell from 45 percent to 16 percent. Large corporations often threaten to relocate their business to other counties or countries if they do not receive adequate concessions from government.

For example, the Marriott Corporation announced in 1997 it was considering moving its Maryland headquarters. Move talks stopped only after the company exacted more than $30 million in tax subsidies. These public funds created no new jobs and bought no guarantee Marriott would stay in the future. Maryland residents and small businesses were left to bear the shifted tax burden.

Big corporations force municipalities into competition over who will give the most welfare to build their bottom line of profit. Many corporations, after winning huge welfare subsidies, move or close anyway.

For example, Chrysler receive major tax breaks from the City of Toledo, Ohio, to build a Jeep plant there with the promise of jobs. The city also condemned a neighborhood, forcing people and businesses to move, despite their protests, so Chrysler would have room for landscaping around the plant. Last month, the automaker announced massive layoffs at the plant.

By enacting clawback  provisions, local governments can insist tax subsidies be paid back if a corporation breaks its promise. Congress could require such local corporate-welfare subsidies be counted as taxable income.

Funds for stadiums, casinos,

Since 1990, more than 30 cities have authorized millions in public money to build new stadiums and sports arenas even as infrastructures -- schools, water lines, sewers -- desperately need repair.

In Cleveland, Ohio, one day after approving $300 million in stadium financing, the school board announced it had to eliminate school athletic programs because it lacked money for equipment and coaches’ salaries.

Detroit, Mich., recently gave $50 million in public funding and prime land to corporate casinos to open gambling in the city. The payoff to the city? At best, a handful of low- to moderate-paying service-sector jobs, anticipated increased crime requiring additional funding for the police, and the likelihood that locally-owned restaurants and hotels will be forced out of business as has happened in cities, such as Atlantic City, N.J., that bet on casinos for unrealized economic development that benefits city residents.

Promoting the general's welfare

In the early 1990s, the Pentagon started a merger subsidy program to cover the costs of consolidating the arms industry. After Lockheed and Martin Marietta merged and downsized their workforce, taxpayers paid $30 million to cover bonuses paid to company executives.

Public outcry soon ended this program of corporate welfare, which Rep. Bernard Sanders (I-Vermont) called "payoffs for layoffs." Now Lockheed-Martin is bidding to run various state for-profit welfare-to-work programs as the company continues to find ways to stay on the government dole.

Ending corporate welfare

For more than 30 years, Ralph Nader's Public Citizen, along with many environmental and consumer advocate groups, have publicized and challenged the abuses of corporate welfare. Friends of the Earth each year recommends ways to cut wasteful subsidies in its Green Scissors Report. In the past five years, that coalition’s efforts have led to elimination of $24 billion in corporate welfare.

Community groups, like Kensington Welfare Rights Union in Philadelphia, Pa., expose the hypocrisy of public officials who promote the welfare of corporations, which are often big campaign donors, while denying the economic rights of poor and working people.

Working together, people can take government back from corporations and ensure that government fulfills its constitutional duty to promote the general welfare.

"Let us start building!" So they committed themselves to the common good (Nehemiah 2:18).


David Wildman is a seminar designer at the Church Center for the United Nations, a program of the Women’s Division.