In Washington, D.C., the talk is once again about welfare reform.
This time, however, the target of debate isn’t the poor and disadvantaged. This time the debate centers on some of the wealthiest corporations in the United States.
In hearings before the House budget committee, legislators have been hearing bipartisan testimony about the amount of funds the government spends each year on corporate subsidies, also known as corporate welfare.
The topic isn’t new; it’s been repeatedly discussed by lawmakers since at least 1996. Yet during the same period the federal government instituted reform to reduce social welfare costs, the amount of corporate welfare has continued to grow.
Just how much tax money is spent each year to subsidize business with tax breaks and direct monetary grants is difficult to determine. The Progressive Policy Institute estimates it at $23 billion. The U.S. Labor Department says $45 billion. Corporate welfare reform advocate Rep. Ed Royce, R-Fullerton, places it at about $65 billion. The nonpartisan Cato Institute puts it at $100 billion.
Few say government subsidies to business aren’t needed. The European Community, after all, subsidizes the hell out of its industries. On the other hand, European CEOs aren’t paid the kind of egregious salary and bonus packages U.S. chief executives are. And those CEOs are the ones who seem to be making the most of corporate welfare.
According to the Cato Institute, most of the subsidies are going to Fortune 500 companies. In 1997, those companies had record earnings of $325 billion, yet that same year they were the recipients of nearly $75 billion in government subsidies.
In 1996, General Electric received more than $20 million in government grants, according to Cato. Rockwell International received more than $25 million and Westinghouse Electric Corp. more than $26 million. Each of these companies also had profits of at least half a billion dollars that year.
Much of the subsidies cover the cost of basic research into promising technologies. Despite its up-by-your-own-bootstrap rhetoric, it seems American industry is not willing to invest its own money in researching potential new profit centers.
Many of the corporate welfare programs add insult to injury by biting Americans not only at tax time but also at the checkout counter. Many farm subsidies are designed to maintain artificially elevated prices. In Washington, many lawmakers are demanding to know why Americans are forced to pay so much for pharmaceuticals that were developed with the help of taxpayer-supported research grants.
