Take the Rich Off Welfare
by Mark Zepezauer and Arthur Naiman
Wealthfare-the money we hand out to corporations and wealthy
individuals- costs us at least $448 billion a year. Wealthfare
for the rich costs us about 3.5 times as much as the $130 billion
we spend each year in welfare for the poor-an amount the 1996
welfare "reform" bill will reduce significantly.
If anything, the $448 billion figure is an underestimate.
Even within categories we cite figures for, there are often additional
wealthfare expenses we haven't been able to nail down. Still,
with the federal deficit now running about $107 billion a year
(1996 figures), it would be possible to wipe out the entire US
deficit simply by cutting wealthfare by less than 24 percent.
We're not saying there's anything wrong with being rich, in
and of itself. All this book says is that it's not fair for people
to get rich -and stay rich-by defrauding people who are poorer
than they are. Stealing from the poor-actually from anyone who
isn't rich-has become standard operating procedure in this country.
The US government today functions mostly as a huge Robin Hood-in-reverse.
Military Waste and Fraud
When it comes to wasting money, the Pentagon has no peer.
For fiscal 1996, the Pentagon budget was $265 billion ($7 billion
more than it requested). That's 5 percent of the country's gross
national product-a larger percentage than virtually any other
Our military budget is bigger than the next nine largest military
budgets combined and 16 times larger than the combined military
budgets of all our "regional adversaries"-Cuba, Syria,
Iran, Iraq, North Korea and Libya. While the US accounts for 22
percent of the total world economy, our "defense" spending
accounts for 37 percent of all military spending on the planet.
As enormous as the Pentagon's budget is, there's more military
spending buried elsewhere-in the Department of Energy's production
of fuel for nuclear weapons, in the military portion of the NASA
budget, in the VA (formerly the Veterans Administration), etc.
The DC-based Center for Defense Information (CDI) concluded that
we spend $329 billion a year on the military. The War Resisters
League has independently arrived at a total of $329 billion.
But that doesn't include what we have to pay for past Pentagon
budgets. Going back to l941, the CDI figured that interest on
past military spending cost $167 million in fiscal 1996. Adding
this interest, total military spending-past and present-comes
to $494 billion a year ($9.5 billion per week; $1.3 billion each
But just the scale of the Pentagon's budget alone can't explain
its prodigious ability to waste money. Another quality is required
According to one US Senate investigation, $13 billion the
Pentagon handed out to weapons contractors between 1985 and 1995
was simply "lost" while another $15 billion remains
unaccounted for. That's $28 billion -right off the top-that has
simply disappeared. (This is one of those places where we can
hardly believe what we're writing. But it's true.)
The New York Times described the amount of Pentagon waste
as "literally incalculable" after the director of the
Department of Defense's accounting service was unable to produce
auditable books for Senate investigators.
According to the Government Accounting Office (GAO), 80 percent
of the Navy's purchase orders are inaccurate. In 1992 alone, the
Army Corps of Engineers "lost" $1.3 billion worth of
equipment. But where the Pentagon really wastes money is by overpaying
contractors. Our reference on that subject is The Pentagon Catalog
by Christopher Cerf and Henry Beard. This book was the greatest
bargain in history. To quote from its cover copy: "Buy this
catalog for only $4.95 and get this $2,043 nut for free."
Attached to each book was a small metal nut, the kind that costs
a few cents at the hardware store-and that McDonnell Douglas sold
to the Navy for $2,043 each.
For every $640 toilet seat the Pentagon buys, there's some
unctuous predator selling it for $640. Actually, "unctuous
predator" is far too kind. Most military suppliers are-plain
and simple-criminals. Between 1980 and 1992, everyone of the top
ten US weapons contractors was convicted of or admitted to defrauding
Grumman paid a $20 million fine for coercing subcontractors
into making political contributions. Lockheed was convicted of
paying millions in bribes to obtain classified planning documents.
Northrop was fined $17 million for falsifying test data on cruise
missiles and fighter jets. Rockwell was fined $5.5 million for
committing criminal fraud against the Air Force. Boeing, Grumman,
Hughes, Raytheon and RCA paid $15 million after pleading guilty
to trafficking in classified documents.
But General Electric was the champ. The Project on Government
Oversight lists 14 instances of fraud, waste and abuse committed
by GE in the 4.5-year period between October 1989 and February
Tax Avoidance by Transnationals
A transnational-or multinational-corporation is simply one
that has operations in more than one country. Richer than many
nations, more powerful than most, transnationals lumber about,
settling where taxes are lowest and labor is cheapest and most
intimidated. But many are still head quartered in the US and virtually
all of them have significant operations here.
Both US- and foreign-based transnationals have lots of tricks
for avoiding US taxes. For the most part, the IRS simply takes
a transnational's word for how much taxable income it earns in
this country. Corporations feel free to shift profits out of,
and expenses into, the US-thus minimizing on paper, the profitability
of their US-based operations. This is called "transfer pricing."
There's an easy way to cut through the trickery of transfer
pricing. Called the "unitary method," it calculates
taxes based simply on how much of the company's sales, assets
and payroll are in the US (or any other country). The unitary
method is more accurate and easier to enforce, and makes it far
more difficult for companies to hide their profits in off-shore
tax shelters. That's why it's so fiercely opposed by transnational
corporations and their congressional hirelings.
Of the US-based transnationals with assets over $100 million,
37 percent paid no US federal taxes at all in 1991, and the average
tax rate for those that did pay was just 1 percent of gross receipts!
(We'd tell you what it was as a percentage of profits, but nobody
knows. They avoid paying tax by concealing precisely how much
profit they make.) Foreign-based transnationals did even better.
Some 71 percent of them paid no US income tax on their US operations.
The average rate for those that did pay was a mere six-tenths
of 1 percent of gross receipts.
As Noam Chomsky points out, most successful US industries
wouldn't be competitive globally if the government hadn't developed
their basic technology with your tax dollars, then given it away
to private companies. Computers, biotech and commercial aviation
are examples, and so- preeminently-is nuclear power.
The federal government provides the industry with most of
its fuel and waste disposal and much of its research. Between
1948-1995, the government spent more than $61 billion (in l995
dollars) on nuclear power research-almost two-thirds of all federal
support for energy research and development. The 1996 figure was
Until 1993, the Department of Energy (DOE) was responsible
for all domestic production of enriched uranium fuel of nuclear
power plants. Since then, it's been the job of a government corporation
called the US Enrichment Corporation (USEC).The USEC has been
a financial disaster: It's now more than $10 billion in the hole.
Having made a fine mess of things, the government now plans
to privatize the USEC. The DOE will accept responsibility for
disposing of the radioactive wastes from the privatized USEC.
The total cost to tax payers to privatize the USEC could fall
between $1.7 and $2.9 billion.
Nobody wants nuclear waste stored in their state, so Congress
picked a place in Nevada (a state with little congressional clout)
called Yucca Mountain. With 33 known earthquake faults, Yucca
Mountain is the least stable of the sites considered. It is costing
taxpayers $320 million a year just to study the situation. If
the facility were activated it could cost between $33-50 billion
to transport radioactive waste from all over the country and to
seal it into thousands of containers for burial deep inside Yucca
With Yucca Mountain's opening pushed back from 1998 to 2015,
the nuclear industry is lobbying hard for an inadequate short
term storage facility above ground there. The Public Interest
Research Group warns that this boondoggle has the potential to
turn into "the S&L bailout of the Nineties."
What federal agency is responsible for the most miles of road
in the US? The Department of Transportation? Nope, it's the US
Forest Service (USFS) with 360,000 miles of logging roads-eight
times more than the entire Interstate Highway System. The USFS
pays to build thousands of miles of new logging roads each year
at a cost of $95 million.
The USFS pays for logging companies to construct the roads
by letting them cut down a certain number of trees. Until recently,
the prices of trees were decided at secret meetings between USFS
officials and timber industry executives. Although the Clinton
administration did away with the secret meetings, the USFS is
still stocked with big timber's cronies and it continues to shamelessly
undervalue our trees. Recently, it came up with a value of $2.85-the
price of a cheeseburger-for 1,000 board feet of lumber (about
1 percent of the normal commercial rate).
The USFS claims that logging roads "add to the capital
value of the forest." Actually, logging contributes to soil
erosion and water pollution, and to the loss of wildlife habitat
and recreational value.
In 1993, the USFS lost $309 million. Between 1985-94, the
USFS has lost more than $5.6 billion. In terms of assets, the
USFS would rank in the top five of the Fortune 500 list of corporations.
In terms of operating revenues, however, it would rank 290. In
terms of net income, it would be bankrupt.
The Tongass National Forest in Alaska is the nation's largest
forest and the largest remaining temperate rain forest on Earth.
A subsidiary of Louisiana-Pacific has a 50 year monopoly on logging
the Tongass at noncompetitive prices.
Recently, the value of the trees cut down has fallen below
the cost of the logging roads that have been built. So we've been
paying the loggers millions of dollars a year -actually giving
them checks-to cut down our trees!
Alaska's Republican Senators Ted Stevens and Frank Murkowski
cosponsored a bill to increase logging in the Tongass by 48 per
cent. That bill failed but a new bill would extend LP's lease
to 2019 and guarantee that the company will make a profit for
the entire period!
What You Can Do About All This
There is hope. Wealthfare can't stand the light of day; once
it's seen for what it is, there's enormous pressure to eliminate
That's why the infamous oil-depletion allowance, which used
to be unlimited, is now capped at 65 percent. The deduction for
business meals and entertainment has been cut in half. The capital
gains tax for corporations is still lower than the rate for ordinary
income, but the gap is smaller than it has been for most of the
last 75 years. (Still, 97 percent of the benefit from the 1993
capital gains tax cut went to the richest 1 percent of the population.)
The deductible on the nuclear industry's catastrophe insurance
has been raised from $560 million to $7 billion. (For comparison,
the cost of the Chernobyl reactor accident is estimated at around
$358 billion-not counting the 125,000 deaths the Ukrainian government
There are four approaches to the problem:
1) Take politicians off the auction block.
2) Make taxes fairer.
3) Give the media back to the people.
4)Stop letting the military scare us.
excerpted in Earth Island Journal, Spring 1997
from the book
Take the Rich Off Welfare
by Mark Zepezauer and Arthur Naiman
Odonian Press, Box 32375, Tucson AZ 85751
800-REAL STORY or 520-296-4056, fax: 520-296-0936.