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Ending corporate welfare as we know it

Corporate welfare - the enormous and myriad subsidies, bailouts, giveways, tax loopholes, debt revocations, loan guarantees, discounted insurance and other benefits conferred by government on business - is a function of political corruption.
May 26, 2004

Nader Urges Kerry: "Take the First Steps to Ending Corporate Welfare as We Know It"

Amherst, MA: Independent Presidential candidate Ralph Nader today called on Senator Kerry to put "deed to his word." Nader noted that Senator Kerry has recently called for 'ending corporate welfare as we know it.' "Now it is time for Senator Kerry to take the initial baby steps to ending corporate welfare so the tens of billions of dollars spent to support corporations can be spent providing health care to all Americans, breaking our addiction to fossil and nuclear energy by investing in renewable, clean energy sources, ending poverty, providing affordable housing, rebuilding the infrastructure of the United States and meeting the other urgent necessities of Americans," said Nader. Below are Ralph Nader's initial plans for ending corporate welfare as we know it.

Corporate welfare - the enormous and myriad subsidies, bailouts, giveways, tax loopholes, debt revocations, loan guarantees, discounted insurance and other benefits conferred by government on business - is a function of political corruption. Corporate welfare siphons funds from appropriate public investments, subsidizes companies ripping minerals from federal lands, enables pharmaceutical companies to gouge consumers, perpetuates anti-competitive oligopolistic markets, injures our national security and weakens our democracy.

At a time of record deficits, a shredded safety net, rising poverty, homelessness, loss of jobs and underemployment as well as the need for massive public works programs to rebuild the US infrastructure, we can no longer afford big handouts for rich corporations.

It is now past time to End Corporate Welfare as We Know It.

1. Develop a framework to analyze corporate welfare that allows us to ask whether it advances a genuine public interest, whether government has a proper role in subsidizing the corporate interest, whether there are democratic procedures in place for public participation, whether the government should charge market rates for services or assets it is providing corporations, whether the government is requiring appropriate reciprocal commitments from corporate welfare beneficiaries, whether the program or subsidy exceeds the authority of an implementing agency, and whether there are clear criteria for delineating subsidies' successes and failures. Under such a framework in 1996 when the government gave the broadcasting industry the rights to broadcast digital television on the public airwaves - a conveyance worth $70 billion - in exchange for nothing there would have been a framework to analyze the giveaway and reach a conclusion more beneficial to the public interest. And how would a new framework for analyzing corporate welfare effect expenditures of hundreds of millions on sports stadiums be evaluated. Cities have capitulated to the threat of a sports franchise moving to another city. This includes Baltimore, Cleveland, Denver, San Diego, Nashville, Indianapolis, Pittsburgh, Miami, San Francisco, St. Louis, Seattle and Detroit.

2. Eliminate the corporate tax loopholes which drain more than $76 billion from the federal treasury in fiscal year 1999, according to conservative estimates by the OMB. The Internal Revenue Code is riddled with calculated loopholes, exemptions, credits, accelerated depreciation schedules deductions and targeted exceptions that are carefully crafted to benefit one or a handful of companies. Some examples: Many corporate tax breaks actually encourage undesirable activity, including environmentally destructive activity. The oil and gas industry wins major subsidies through the tax code even though the need to encourage a transition to renewable fuels is clear. Why does the Internal Revenue Code continue to encourage more aggressive oil drilling? Tax escapes and credits to the oil and gas industry take more than $500 million from taxpayers annually. Another example, special benefits for Amway Corporations and four other companies in the 1997 tax bill where Section 1123 and will cost taxpayers $19 million over 10 years. The amendment was added shortly after Amway's founder and his wife each gave half million dollar soft money contributions to the RNC.

3. All corporate welfare programs should be periodically sunsetted. Giveaways like the 1872 Mining Act should not be permanently enshrined in the law. The 1872 Mining Act allows mining companies to claim federal lands for $5 an acre or less and take billions of dollars of gold, silver, copper or other hard rock minerals with no royalty payments to the public treasury. How does the Mining Act persist - from 1987 to 1994, the mining companies gave $17 million in campaign contributions to key congressional representatives, a small price to pay to extract $26 billion worth of minerals, royalty free, during the same time period.

4. The military industrial complex is a web of corporate welfare. No government agency is cozier with industry than the Department of Defense, and corporate welfare is pervasive at the agency famous for cost overruns, waste, fraud and abuse. For example, the Pentagon's merger subsidy program which pays defense contractors to merge, lessening competition for government bids and increasing the lobbying power of newly combined defense megafimrs. Merger subsidies, which began in the 1990s, include extravagant "golden parachute" bonuses to executives of acquired companies. For example when Lockheed merged with Martin Marietta, taxpayers paid for $30 million in bonuses.

5. Where corporate welfare is granted reciprocal obligations should be exacted, e.g. agreements to abide by environmental standards, pay workers a living wage, charge consumers a fair price for products invented with government help (like pharmaceuticals) enable consumers to band together through invitations in billing envelops or to otherwise advance broad public purposes. Take the case of Taxol, a leading anti-cancer drug developed by federal government researchers. The National Cancer Institute discovered, manufactured and tested Taxol in humans. NCI licensed Taxol to Bristol-Myers Squibb which now charges 20 times its manufacturing cost. A single injection can cost more than $2,000 and the treatment requires multiple injections. BMS's only contribution was to provide 17 kilograms of Taxol to NCI and to process paperwork. It pays no royalty on its billion dollar annual sales.

6. Annual agency reports on corporate welfare should be required listing every program under its purview which confers below-the-cost or below-market-rate goods, services or other benefits on corporations. This should include the dollar value of the subsidy conferred and the corporate beneficiary.

7. The SEC should require corporate welfare disclosure for publicly traded corporations to list the subsidies (both type and amount) they receive from governmental bodies, and to publish this information on the Internet.

8. Limits on executive compensation in government supported corporations. When a corporations receives substantial benefits from the government it could reasonably require corporations to limit the scope of beneficiaries to those who do not engage in excessive executive compensation, which heightens income and wealth inequalities, and tears at the nation's social fabric. The government could set a limit on the ration between the highest paid executive to the lowest paid employee, perhaps 30 to 1.

9. Prohibition of government subsidies to criminal corporations convicted of corporate crime, fraud and abuse. An appropriate step might be to deny any form of corporate welfare, including tax expenditures, to any corporation convicted of a certain number of felonies and/or misdemeanors.

10. Funding should be provided to fund dozens of town meetings across the country on corporate welfare and help educate the public.

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