The Multinational Monitor

OCTOBER 1997 · VOLUME 18 · NUMBER 10

E D I T O R I A L


Corporate Welfare Strategies


THE LAST TWO YEARS have seen the U.S. campaign against corporate welfare gain momentum. The term "corporate welfare" now enlivens mainstream political discourse. Representative John Kasich, R-Ohio, the chair of the House of Representatives Budget Committee, has forged a conservative-liberal coalition against corporate welfare. In the shadow of Kasich's effort, a number of other congressional initiatives have been launched, by the Progressive Caucus and others.
But for all the gains of the campaign against corporate welfare, it has achieved almost no concrete victories, save a defeat of a proposal to build more B-2 bombers.

The reason for the legislative frustration of the campaign is simple: the constituency for any particular corporate welfare program has a stronger vested interest in preserving it than corporate welfare opponents have in terminating it. That is why pure corporate subsidy programs -- such as various overseas marketing support programs -- have survived long-time ridicule (for example, federal government promotion of McDonald's McNuggets). And it is why corporate welfare programs that clearly do harm -- such as the Forest Service's timber roads program, which facilitates the below-cost cutting of national forests -- persist in the face of environmentalist challenges.

The Kasich forces' tactical response to this dilemma has been to put together packages of corporate welfare programs, and to ask members of Congress to agree to oppose funding for the entire package. A similar approach enervates various proposals to create a corporate welfare commission, which would issue across-the-board recommendations; the "commission" framework was used to overcome the political difficulty of closing military bases after the Cold War.

So far, however, the corporate welfare "bundling" approach has not succeeded. What is called for now is not tactical maneuvering, but a broader strategic assessment of the corporate welfare issue and appropriate responses.

So far, the campaign against corporate welfare has largely been fueled by the striking contrast between the draconian restrictions imposed on welfare for poor people by last year's welfare "deform" versus the ongoing immunity of virtually every corporate welfare program. Highlighting the double standard is useful, but it will not be sufficient to overcome the special interest obstacles to corporate welfare reform. Mobilizing a constituency powerful enough to bring about the end corporate welfare as we know it will require a widening of vistas.

In part, this means expanding "lists" of corporate welfare programs, to include tax breaks, high-tech defense spending (irrespective of whether it qualifies for "boondoggle" status) and other programs -- such as National Institutes of Health spending on pharmaceutical research and development -- that are rarely considered corporate welfare.

More importantly, it means expanding the analysis of corporate welfare to consider the broad issue of government intervention in the economy: Where it is appropriate? For whose benefit? On what terms? According to what process?

This broader approach should impose a series of inquisitive screens on government programs, including:

  1. Is a particular program, subsidy or loophole corporate welfare? Does the government give more to private companies than it receives in goods and services in exchange?

  2. Does the program serve some broad public purpose that suggests it has merits beyond the benefits it confers on particular companies? If not, the program should be cancelled.

  3. If it does serve some public interest, can the government achieve the same ends or more important public goals by retaining an interest in the asset being given away or doing a service in-house? For example, do the jobs created by arms export subsidies offset the human carnage caused by arms exports? If not, the subsidies should be abolished.

  4. If the government is going to distribute assets or contracts or tax breaks to public parties, can and should it do so in a non-exclusive way? For example, the government could continued to invest in biomedical research and development, but make the fruits of the investment available non-exclusively -- licensing patents or drugs to any interested manufacturer, so as to facilitate price competition.

  5. If the government is going to provide corporations with services, or give away its assets, is there any reason it should not charge, or should charge below-market rates? Why should mineral resources on public lands be given away for $5.00 or $10.00 an acre, with no royalties charged (as now mandated under the 1872 Mining Act)?

  6. Are there non-price reciprocal obligations that should be demanded of special interests that receive government benefits? Should government contractors be required to adhere to higher labor and environmental standards, for example?

  7. Where corporate welfare programs are deemed in the public interest, they should be reviewed periodically. Many tax breaks are inserted at the last minute in tax bills, and never revisited, for example. Corporate welfare provisions should all contain sunset provisions, so that they require reauthorization.

The successful promotion of this sort of framework for assessing corporate welfare programs would force each particular program to be subjected to an intensive scrutiny that would force each to be justified on broad public interest grounds. Once entrenched, this type of framework would pull the debate over each particular corporate welfare program into its rubric, diminishing the ability of corporate interests to win welfare benefits through the exertion of raw political power.

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