Corpork: The Other Welfare
Say "welfare" or "AFDC" and you're likely to hear a chorus of loud voices, many of them politicians, decrying the waste, the dependency and the ruined lives fostered by the federal programs which have pumped roughly $145 billion annually into the U.S. attempt to end poverty. This story is not about that. It is about corporate welfare or Aid to Federally Dependent Corporations, as many have come to call it. The waste, dependency and ruin it engenders occurs on a far greater scale, both financially and in the number of lives it touches.It is hard to get a handle on a program that almost defies description. What exactly is corporate welfare? The most conservative of views holds that corporate subsidies alone comprise the heart of corporate welfare or corpork. According to the Cato Institute, this country annually spends $75 billion dollars Ð- that is billions with a "B" and annually as in every year! And that is the conservative estimate. Add in tax cuts, incentives, bail-outs, and government research conducted for the benefit of private business and that figures rises to a high of $167 billion annually, according to calculations by Ralph Nader's Center for the Study of Responsive Law.Such numbers boggle the mind, so to get some perspective compare a median figure Ð- $120 billion figure -Ð with the following numbers:* The total amount of federal money spent on Aid to Families with Dependent Children, food stamps and Medicaid together comes to about $85 billion annually.* The annual budget deficit is $130 billion.A breakdown of what some of the costs taxpayers fund is also illuminating. In addition to the $75 billion the government simply gives away to business each year, another $70 billion is lost to U.S. coffers through corporate tax breaks. Some companies pay no taxes at all. Nearly 60 percent of U.S. controlled corporations and 74 percent of foreign firms doing business here paid zip in 1991, the last year for which such figures are available. That's the legal stuff. If you calculate the illegal accounting maneuvers used to shift profits to low-tax nations, the U.S. is out as much as another $40 billion.QUE SERA, SERA?Some tax laws add insult to injury -Ð literally. C. R. Bard Inc. was fined $61 million dollars for testing faulty medical products on unwitting patients and got to take half the fine as a tax deduction! Another particularly odious tax break available to corporations is known as the "runaway plant loophole." Put simply it says that U.S. corporations doing business overseas do not have to pay taxes on their profits unless they bring those profits home, to give to shareholders, reinvest in stateside plants or to diversify. Any money earned outside the country and kept there, invested in overseas plants or foreign banks, for instance, is U.S. tax-free! It is a disincentive to building and investing in domestic plants -- exactly the opposite of the highly touted purpose of tax breaks, which is to "create jobs." Under this loophole, any jobs created are not in this country! Another $1.5 billion a year is lost to corporations which use the tax rules to sell, if only on paper, through a foreign sales corporation. Originally meant to encourage exports, this tax break has merely encouraged creative accounting. Another $3.6 billion a year is lost to companies which claim sales made in the U.S. were actually made on foreign soil. This enables companies who have accumulated foreign tax credits to use them to shield their U.S. sales.So, maybe you think tax breaks are good business; perhaps they don't reward the right behavior but they do help struggling companies to grow, right? Look at these companies and what they've received and what they've received it for:* McDonald's Corp. got $2 million in tax breaks to sell Chicken McNuggets overseas.* Stratus, Quantum, Digital Equipment Corp. and others have moved jobs overseas and profited under the "runaway plant loophole."* Caremark International, Inc. deducted $110 million in civil penalties that were assessed to them in a health-care fraud case.* Kodak claimed $37 million in export tax credits last year.* IBM paid no taxes on $11 billion in profits it earned overseas.* Walt Disney Corp. got a $300,000 subsidy for fireworks.* Lockheed Martin deducted $20,000 for golf balls off their tax bill.* Ocean Spray got $700,000 in a direct subsidy to promote juice.* Gallo got $4 million in direct subsidies to promote wine.* Citicorp gets $9.6 million worth of free technical assistance from federal laboratories, despite having $250 billion in assets and $3.4 billion in profits last year.* Technopork programs run into the $6 billion figure. Who benefits? 3M, Caterpillar, IBM, Xerox and Texas Instruments, among others.* Martin Marietta spent some of your money this way: $263,000 for a Smokey Robinson concert, $20,000 on golf balls and $7,500 on a Christmas party.* Logging companies have had you pay for the roads they needed ($140 million) to harvest the timber in national forests, timber they turned a good profit on.Hello? This is good business? Far from helping to create jobs, such practices actually put the federal government in the position of favoring one set of businesses over another -Ð and who is favored can be traced back to how much money those industries poured into the coffers of the politicians doing the voting on these issues. Doubt it? Rick Finley, who has researched this aspect of the issue for The Written Word says that of 400 classified farm commodities, about two dozen receive 90 percent of the available funds. The Federal Election Commission shows that eight Fortune 500 firms were multi-million dollar award winners -- and also large Democratic campaign contributors.In 1995 The Philadelphia Inquirer's series on corporate welfare looked at GM, IBM, AT&T, GE, Amoco, DuPont, Motorola and Citicorp to see if the amount of federal money they got (up to $110 million) increased jobs during 1990-1994. Only Motorola actually added jobs. The rest had layoffs from 1,000 to over 100,000.Often left out of the federal money give-away completely are the small firms which actually account for nearly two-thirds of all new jobs created in America. William K. Scheirer, an economist for the U. S. Small Business Administration, said that in 1995 small companies got less than 4 percent of the $73 billion in federal research funds.WHAT HAS BEEN CUTThe 104th Congress cut just $2.8 billion from direct subsidies in 1996 according to the Cato Institute.A FEW THINGS WERE ALSO ADDEDThe Center for Responsive Politics points out that campaign contributions do more than simply make legislators aware of what industry wants. Consider what was added in the 104th Congress.* Remember the minimum wage bill? Attached to it was a new tax credit for restaurants and pizza delivery companies. Their Political Action Committee (PAC) donated $2.5 million in the 1996 cycle.* According to the Congressional Budget Office, taxpayers will wind up paying $590 over the next ten years for the phase-out of the automobile luxury tax ($4.2 million in PAC funds contributed, 1996) and a reversal of a tax on corporations' overseas earnings, lobbied by pharmaceutical and computer companies who together put up $9.8 million in PAC money.* Nuclear utilities spent $3 million in PAC and soft money in the 1996 elections to get Congress to allow the transport of spent nuclear fuel over the nation's highways to the temporary storage space at Yucca Mountain, Nevada. The House failed to act last year and faces the problem again this year.* A group of seven airlines, United, American, USAir, Northwest, Continental, Delta, and TWA distributed $1.5 million in PAC and soft money contributions to lobby for a shifting of $600 million in costs the government now assessed these airlines to discount airlines. This would raise fares if the 105th Congress goes for it.WHO'S TO BLAME?Politicians love to hate corpork but the facts tell a different story. Partisan politics make little difference here, at least according to what the Cato Institute has found. President Bill Clinton's 1996 budget actually asked for a slight increase in such spending and The White House has resisted cuts in grants for high-technology industries, agriculture price supports and energy research programs. It has also resisted shut-down of the Department of Commerce, what Cato calls "the nerve center of the corporate welfare state." The Institute also faulted Congress, saying the cuts made were "minimal." Randolph T. Holhut, the author of The Real Welfare Cheats: Corporate America, writes, "The 104th Congress has been the most corporate-friendly in history."SO, WHAT CAN BE DONE?A problem so massive, so entrenched, so pervasive as corpork is not easily tackled. It will take a coalition of diverse interests to keep the pressure on and to keep from being discredited. Until recently, such a coalition did not exist, but now one does. The Stop Corporate Welfare Coalition includes such disparate groups as Citizens Against Government Waste, U.S. Public Interest Research Group, Americans for Tax Reform, Public Citizen, National Taxpayers Union, Friends of the Earth, Citizens for a Sound Economy, Taxpayers for Common Sense, Corporate Welfare Project and the Cato Institute. This group has put out a "dirty dozen" list of programs, with a price tag of more than $10 billion, they will target for elimination. All contain direct government payments where the government does not receive a good or a service in return.The 12 programs include the following:* The Overseas Private Investment Corp., which provides loans, loan guarantees and risk insurance to U.S. companies which invest in developing nations;* The Market Access Program, which helps offset the costs of advertising for companies such as Sunkist, Dole and Ocean Spray;* Rural Utilities Service, a hold-over from the Depression, which provides loans to electric cooperatives;* Animas La Plata, a public works project in southwest Colorado which has a costs-to-benefits ratio of 3-to-1 and is considered environmentally risky;* Pyroprocessing Program, a continuation of a key technology developed for the breeder reactor program that was terminated in 1994;* Appalachian Regional Commission Roads Program, which duplicates activities funded by other agencies;* Fossil Energy Research and Development, a program clearly being done better in private industry;* Timber Roads in National Forests, which subsidizes timber sales;* Clean Coal Technology, which uses technology to retrofit coal-burning electricity generating plants and benefits electric utilities and large industrial users of coal;* International Monetary Fund, GAB division, which loans money to developing countries outside of public scrutiny;* IMF Enhanced Structural Adjustment Facility, another division of the above, which lends low interest money to the poorest countries;* Highway Demonstration Projects, which builds roads at a congressman's request, often in conflict with transportation priorities.The real welfare queens have turned out to be industrial society dames who dance with congressmen with their fingers in the pockets of the U.S. Treasury. While the poor and former welfare recipients scramble to learn job skills and find affordable child care and transportation, corporations just spend a little more lobbying to maintain their benefits.