Corporate welfare

Corporate welfare is often used to describe a government's bestowal of money grants, tax breaks, or
other special favorable treatment for corporations. It highlights how wealthy corporations are less in need
of such treatment than the poor.[1]

The definition of corporate welfare is sometimes restricted to direct government subsidies of major
corporations, excluding tax loopholes and all manner of regulatory and trade decisions, which in practice
could be worth much more than any direct subsidies.

Contents
Origin of term
Alternative adages
"Socialism for the rich, capitalism for the poor"
"Privatizing profits and socializing losses"
United States
Background
Comprehensive analyses
Cato Institute
Independent
United Kingdom
Political discussion
Canada
India
See also
References
Further reading
External links

Origin of term
The term "corporate welfare" was reportedly invented in 1956 by Ralph Nader.[2][3]

Alternative adages

"Socialism for the rich, capitalism for the poor"

Believed to have been first popularised by Michael Harrington's 1962 book The Other America[4][5] in
which Harrington cited Charles Abrams,[6] a noted authority on housing.
Variations on this adage have been used in criticisms of the United States' economic policy by Joe
Biden,[7] Martin Luther King, Jr.,[8][9] Gore Vidal,[10][11][12] Joseph P. Kennedy II,[13] Robert F.
Kennedy, Jr.,[14] Dean Baker,[15] Noam Chomsky,[16] Robert Reich,[17] John Pilger,[18] and Bernie
Sanders.[19]

"Privatizing profits and socializing losses"

"Privatizing profits and socializing losses" refers to the idea that corporations want to reserve financial
gains for themselves and pass along losses to the rest of society, potentially through lobbying the
government for assistance. This practice was criticized in the Wall Street bailout of 2008.[20]

United States

Background
Subsidies considered excessive, unwarranted, wasteful, unfair, inefficient, or bought by lobbying are
often called corporate welfare.[1] The label of corporate welfare is often used to decry projects advertised
as benefiting the general welfare that spend a disproportionate amount of funds on large corporations,
and often in uncompetitive, or anti-competitive ways. For instance, in the United States, agricultural
subsidies are usually portrayed as helping independent farmers stay afloat. However, the majority of
income gained from commodity support programs actually goes to large agribusiness corporations such
as Archer Daniels Midland, as they own a considerably larger percentage of production.[21]

Alan Peters and Peter Fisher, Associate Professors at the University of Iowa,[22] have estimated that state
and local governments provide $40–50 billion annually in economic development incentives,[23] which
critics characterize as corporate welfare.[24]

Some economists consider the 2008 bank bailouts in the United States to be corporate welfare.[25][26]
U.S. politicians have also contended that zero-interest loans from the Federal Reserve System to financial
institutions during the global financial crisis were a hidden, backdoor form of corporate welfare.[27] The
term gained increased prominence in 2018 when Senator Bernie Sanders introduced a bill, singling out
Amazon and Walmart in particular, to require a company with 500 or more employees to pay the full cost
of welfare benefits received by its workers.[28][29][30][31]

Comprehensive analyses

Cato Institute
Policy analysis conducted by the Cato Institute, an American libertarian think tank, argued that United
States fiscal policy allocated approximately US$92 billion in the 2006 federal budget toward programs
that the authors considered to be corporate welfare.[32][33] Subsequent analysis by the institute estimated
that number to be US$100 billion in the 2012 federal budget.[34][35][36]

Independent
Daniel D. Huff, professor emeritus of social work at Boise State University, published a comprehensive
analysis of corporate welfare in 1993.[37] Huff reasoned that a very conservative estimate of corporate
welfare expenditures in the United States would have been at least US$170 billion in 1990.[37] Huff
compared this number with social welfare:

In 1990 the federal government spent 4.7 billion dollars on all forms of international aid.
Pollution control programs received 4.8 billion dollars of federal assistance while both
secondary and elementary education were allotted only 8.4 billion dollars. More to the point,
while more than 170 billion dollars is expended on assorted varieties of corporate welfare
the federal government spends 11 billion dollars on Aid for Dependent Children. The most
expensive means tested welfare program, Medicaid, costs the federal government 30 billion
dollars a year or about half of the amount corporations receive each year through assorted
tax breaks. S.S.I., the federal program for the disabled, receives 13 billion dollars while
American businesses are given 17 billion in direct federal aid.[37]

Huff argued that deliberate obfuscation was a complicating factor.[37]

United Kingdom
In 2015, Kevin Farnsworth, a senior lecturer in Social Policy at the University of York published a paper
in which he claimed that the government was providing corporate subsidies of £93 billion.[38][39] This
amount includes the role of the government in increasing trade, tax relief for businesses that invest in
new plants and machinery (estimated by Farnsworth at £20 billion), not charging fuel duty on fuel used
by railways or airlines, green energy subsidies, a lower corporation tax rate for small companies, regional
development grants and government procurement for businesses (which Farnsworth suggests often
favours British businesses even when these are not the best value option available).[38] However, The
Register wrote that Farnsworth's figure for tax relief for investment was incorrect and that he had made
mistakes in his calculations, noting that he was not an accountant. It also stated that not charging
businesses taxes under certain circumstances (when the reliefs applied) was not the same as giving them
a subsidy.[40] Fuel duty is not charged on airlines due to the Convention on International Civil
Aviation[41] (a UN agency) which specifies that aeroplanes should be exempt from fuel duties.[42]

Political discussion
In 2015, Labour Party leader Jeremy Corbyn said he would “strip out” the £93bn of “corporate tax relief
and subsidies” Farnsworth referred to and use the proceeds for public investment.[43] Corbyn did not say
which specific policies he would change. The Guardian wrote the policy "sounds wonderful, but careful
scrutiny of 'corporate welfare' shows that it includes capital allowances designed to persuade companies
to invest, regional aid to boost growth in rundown parts of the UK, and subsidies to keep bus and rail
routes open – none of which Corbyn would presumably like to see stopped."[44]

Canada
The New Democratic Party in Canada picked up the term as a major theme in its 1972 federal election
campaign. Its leader, David Lewis, used the term in the title of his 1972 book, Louder Voices: The
Corporate Welfare Bums.[45]
The Reform Party and its successor the Canadian Alliance were known for opposing mostly business
subsidies. However, after their merger with the Progressive Conservative party, they dropped their
opposition to it.[46]

India
It was observed by The Wire that the Effective tax rate was low for the larger corporations which meant
companies making smaller profits are competing in an unequal environment against bigger companies
with substantial taxation benefits, with the gap in effective tax rates widening over the years.[47] India's
Union government's prime minister criticised this practice and said

"Why is it that subsidies going to the well-off are portrayed in a positive manner? Let me
give you an example. The total revenue loss from incentives to corporate tax payers was
over Rs 62,000 crore... I must confess I am surprised by the way words are used by experts
on this matter. When a benefit is given to farmers or to the poor, experts and government
officers normally call it a subsidy. However, I find that if a benefit is given to industry or
commerce, it is usually an 'incentive' or a 'subvention'."[48]

See also
Crony capitalism
Concentrated benefits and diffuse costs
Corporatocracy
Fossil fuel subsidies
Kleptocracy
Political corruption
Pork barrel
Public choice theory
Regulatory capture

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Further reading
Johnston, David Cay. Free Lunch (The Penguin Group, New York, 2007.)
Jansson, Bruce S. The $16 trillion mistake: How the U.S. bungled its national priorities from
the New Deal to the present (Columbia University Press (https://web.archive.org/web/20041
026024023/http://www.columbia.edu/cu/cup/catalog/data/023111/023111432X.HTM), 2001)
Mandell, Nikki. The corporation as family : the gendering of corporate welfare, 1890-1930
(University of North Carolina Press (https://web.archive.org/web/20070219074858/http://unc
press.unc.edu:80/books/T-5286.html), 2002).
Glasberg, Davita Silfen. Corporate welfare policy and the welfare state: Bank deregulation
and the savings and loan bailout (Aldine de Gruyter, NY, 1997).
Whitfield, Dexter. Public services or corporate welfare: Rethinking the nation state in the
global economy (Pluto Press, Sterling, Va., 2001.)
Folsom Jr, Burton W. The Myth of the Robber Barons (Young America)
Rothbard, Murray N. Making Economic Sense (http://www.mises.org/econsense/econsense.
asp), Chapter 51: Making Government-Business Partnerships (https://web.archive.org/web/
 20030317210705/http://www.mises.org:80/econsense/ch51.asp?printFriendly=Yes&)
ISBN 0-945466-18-8 (1995)

External links
Anti-subsidy Congressional testimony (http://www.cato.org/testimony/ct-sm063099.html)
Articles & sources from an anti-subsidy perspective (http://reclaimdemocracy.org/corporate_
welfare/)
Anti-subsidy information from NewRules.org (https://web.archive.org/web/20001216074600/
http://www.newrules.org/retail/veto.html)
A corporate welfare example from N.Y. (https://web.archive.org/web/20010415010329/htt
p://www.goodjobsny.org/deals_company.htm)
A pro-subsidy perspective (http://www.bizjournals.com/sanantonio/stories/1996/09/09/editori
al3.html)
Interview with Samuel Edward Konkin III - 3 types of capitalists (http://www.spaz.org/~dan/in
dividualist-anarchist/software/konkin-interview.html), categorizes State support of
businesses as dangerous

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