Corporate Welfare

Conservatives like giving away government money too, they just do it differently. Whether they are billion dollar sole-source contracts to Halliburton, farm subsidies that benefit California millionaires with a hobby ranch in Wyoming, or the twelve billion dollars squandered monthly in Iraq, conservatives are quite liberal with American tax dollars.

Related Conservative Failures

Quagmire in Iraq

The special government favors that private contractors in Iraq—from Halliburton to Blackwater—enjoy, are like money in the bank to their stockholders—and a drain on the rest of our pocketbooks. read more »

Corporate Wilding

Corporate Wilding Sometimes it’s hard to figure out where corporate welfare ends and outright corporate malfeasance begins. When California privatized its power grid, it was both a gift to energy companies like Enron, and an open invitation to swindle the public. read more »

Failing Hurricane Katrina Victims

After the federal government set up special tax-advantaged "Gulf Opportunity Zones" to help Katrina victims who needed housing, is it any surprise that some of the money ended up with developers building luxury condos hundreds of miles from the storm? read more »

Abandoning Patients at Walter Reed

When conservatives privatize a government function like the management of Walter Reed, they always say it's to make the services better and more efficient. They never call it what it actually is—a giveaway straight from the public purse. read more »

More conservative failures

In the name of individual responsibility, conservatives proudly deny a helping hand to the poor and powerless. Meanwhile they ladle money into the banks of the rich and powerful in the form of tax subsidies or unquestioned contracts.

Free Market Fundamentalism > Corporate Welfare

Free Market Fundamentalism often leads to corporate welfare because deregulated markets often allow corporations to become so overgrown, even to the point of monopoly, that their influence over the government balloons and balloons. They can game the system so that government programs end up funneling money straight into their own pockets.

The giant retailer Wal-Mart has more workers enrolled in many state Medicaid programs—which are supposed to be reserved for poor people—than any other employer. They even hand out guides to help workers enroll in the programs. When the taxpayers subsidize services that companies should be providing to their employers themselves, that's corporate welfare.

Meanwhile, one study found over 240 examples of subsidies from taxpayers to help Wal-Mart build new retail outlets and distribution centers—in fact, 90 percent of these huge warehouses that Wal-Mart claims it needs were subsidized from the public purse. That's corporate welfare, too.

How does a company like Wal-Mart get away with it? Partly, by wrapping themselves in a mythology that their history was an entrepreneurial miracle—and that its gobbling up of smaller retailers happened because they did a better job in some kind of open, dog-eat-dog competition. In actual fact, it couldn't have happened without special favors from statehouses and Washington D.C. It takes a lot of ideological mumbo-jumbo to call that a triumph of the free market—but somehow conservatives manage it.

Trickle-Down
Economics

Conservatives’ false belief that anything having to do with business is automatically part of the free market both causes and justifies corporate welfare. Government subsidies—which conservatives teach us rot moral character, but only in the case of vulnerable individuals—get miscast as the operations of this mythical free market. The institutions that end up with the "freedom" always turn out to be big businesses, who throw around their market power to bully everyone else. Ordinary Americans end up less free—and the wealthiest Americans end up cornering the market. Here's how:

Tax Subsidies.  The federal government gives tax subsidies to business for particular purposes. Often these incentives are created in hope that the free market will find solutions to our nation’s problems.  However, the tax subsidies given to huge corporations and dishonest businessmen are often abused, subverting the free market in the guise of unleashing its dynamism.

The Oil Industry. With fuel prices soaring, oil companies are reaping record profits. Yet conservatives gave them $30 billion in tax subsidies to offset ordinary business expenses such as exploration.

Disdain for Government  > Corporate Welfare

Ronald Reagan summarized the soul of modern conservatism in his first inaugural address "Government isn't the solution to our problem,” he said. “Government is the problem.” By erasing government's role as referee, regulator and guarantor of the common good, such dogma gives away the store to already-powerful interests, and leaves ordinary Americans unprotected. Here are some examples:

Tax Avoidance

Big corporations pay staffs of attorneys and consultants to find legal ways to dodge taxes. They incorporate in Bermuda or the Bahamas, or they create fantasy charitable trusts with no tax liability. Meanwhile, as conservatives shrink government, the number of IRS tax auditors has dropped by a third since the 1990’s.

From 2001-2003, 275 large corporations on Fortune’s 500 list earned almost $1.1 trillion in pretax profits in the United States. Had all of those profits been reported to the IRS and taxed at the statutory 35 percent corporate tax rate, then those 275 companies would have paid $370 billion in income taxes over the three years. Instead, the companies reported only about half of their profits—$557 billion—to the IRS. Instead of a 35 percent tax rate, the companies as a group paid a three-year effective tax rate of only 18.4 percent. Loopholes and other tax subsidies cut taxes for the 275 companies by $43.4 billion in 2001, $60.8 billion in 2002 and $71.0 billion in 2003—for a total of $175.2 billion in tax breaks over the three years.

General Electric tops the list of corporate tax dodgers during the study years. It avoided $9.5 billion in taxes from 2001-2003.  Other large scale corporate tax dodgers include: Citigroup at $4.6 billion; IBM at $4.6 billion; Microsoft at $4.6 billion; AT&T at $4.5 billion; and Exxon Mobil at $4.3 billion.  Other corporations paid NO taxes during the study years between 2001-2003 while reaping huge profits: Principal Group with $2.1 billion in profits; AT&T with $5.7 billion in profits; and Time Warner with $4.9 billion in profits.

Enron

Enron took advantage of lax oversight following deregulation and formed a complicated web of more than 2,800 subsidiaries — more than 30 percent (874) of which were located in officially designated offshore tax and bank havens.

The federal government gives tax subsidies to favored businesses or to favor certain business behavior. In some cases, it can subsidize important advances. In many cases, it’s just a gift. Pay-to-play politics are another example of the fallout of conservative ideologies in practice.

Oil Companies

Oil Well

During a time of record high oil prices and record profits among oil companies, Congress gave subsidies to oil companies worth $30 billion over five years. They receive $5.4 billion in subsidies for exploration and an additional $4.7 billion for the depletion of discovered wells. Yet the oil companies receiving these subsidies have seen huge profits: Exxon Mobil at $36 billion; Chevron at $189 billion; Conoco Phillips at $166 billion; and Valero Energy at $81 billion.

Miscast Morality > Corporate Welfare

Conservatives rose to political power on the wings of a critique of welfare—so long as the entities getting the welfare critique were single black mothers. Ronald Reagan used to chase around the campaign trail telling a story—entirely invented—about a Chicago mother supposedly receiving so many welfare checks off various phony social security numbers she was able to buy a Cadillac. Unfortunately, stories of corporate welfare—unlike Reagan's welfare Cadillac—are absolutely true. And yet you'll rarely hear conservatives getting their back up over them, let alone using them to try to win elections.

Conservatives are great at moralizing when the target is a vulnerable individual. When it's a big corporation that's exploiting the public purse, they're silent.