Corporate Welfare: Pork for All

by Abby Sher

Dollars and Sense magazine, May / June 2000


Have you ever wondered why the United States has the biggest military budget in the world? Defense Secretary William Cohen had an answer at a press briefing in February: "We are putting more money into procurement, and that will help the defense industries."

Washington, D.C. has turned into a town almost wholly governed by the philosophy "You scratch my back and I'll scratch yours." Donations from corporations flood to politicians who then turn around and support subsidies and tax breaks buried in appropriation bills. These hidden forms of corporate welfare cost U.S. taxpayers more than $ 125 billion a year-and that's only at the federal level. As investigative journalists Donald L. Barlett and James B. Steele discovered during an 18-month investigation for Time magazine, states and localities often do not document their subsidies, resulting in a cover-up of more unknown billions in corporate welfare.

Sometimes the subsidies are not so hidden-like the $ 12 billion increase in spending President Clinton requested for the military in his 2001 budget, up from the $293 billion dedicated to the military in the year 2000.

Military contractors didn't have to spend a lot for this election year bonus either. For instance, Lockheed Martin contributed only $377,878 to federal candidates in the 1999-2000 campaign season and another $156,000 in "soft" money that went direct to the major political parties, according to the Center for Responsive Politics. In return, the feds gave the corporation $ 16.6 billion in military contracts (the company's total outlays amount to only $26 billion), says Dan Koslofsky, a policy analyst with Council for a Livable World. This included the purchase of such admitted boondoggles as Lockheed Martin's C130J cargo planes to the tune of $250 million. Even Secretary Cohen said, "There is not an existing requirement right now for the number of C- 130Js. "

Research and development grants are another favored form of corporate welfare, says Steve Weissman of CongressWatch. General Electric, Xerox and Caterpillar are only three of the big names pocketing a total of $ 1 billion in federal R&D money annually. Another $ 1 billion in federal subsidies goes to the pharmaceutical industry for the development of drugs - which together earned $22 billion in profits and probably didn't need any help from the government. Plus these corporations get to hold on to all patent rights-and all of the profits generated from these subsidies.

The federal government also hands over public resources to make mining companies rich-under an old law dating to 1872, mining companies need not pay for the $2 billion worth of minerals they extract from public lands, a loss to taxpayers of $2 million in royalties a year. "Land itself can be acquired by mining companies at $5 an acre and taxpayers pay for the cleanup," says Weissman. Oil companies reap their own $66 million giveaway since the feds undercharge them by about $2 a barrel for the oil they extract from public property.

"There are 77 programs that could be cut and save taxpayers $55 billion over five years," says Lexi Shultz, staff attorney with the U.S. Public Interest Research Group. USPIRG has joined with Friends of the Earth and Taxpayers for Common Sense in a coalition called Green Scissors which targets subsidies like those to mining companies that damage the environment. These subsidies are worse than giveaways-they "distort the economy" by encouraging corporations to act in ways that are environmentally destructive. For instance, agribusiness is more likely to plant on flood plains that shouldn't be cultivated because the U.S. Department of Agriculture subsidizes crop insurance even on marginal land to the tune of $1.5 billion a year.

If the Green Scissors coalition opposes pork from the left, the Cato Institute, a think-tank promoting free enterprise and individual liberty, opposes it from the right. Occasionally they meet in the center, and join with members of the House and Senate who also oppose pork-usually to no avail. Perhaps to prepare for his presidential bid, in 1997 Senator John McCain, the Arizona Republican, proposed creating a federal panel beyond the reach of Congress that would cut pork in much the same way that a commission shut military bases once considered untouchable because politicians fought to keep them in their districts. McCain's proposal died despite support from Democrats like Edward Kennedy, a well-known pork-procurer for his home state of Massachusetts.

Public investment has fallen by more than a third since the late 1970s. Parts of the government are indeed shrinking, and since 1996 true welfare- aid to families with children-is no longer guaranteed to all in need. With corporate taxes going down, and corporate subsidies growing, the government is fast becoming a shell through which citizens pay out to big business, and receive little security in return. Meanwhile, big business-champions of the free market in theory-ensure with their donations that their profits never face the risk of the "free market."

Corporate watch