Corporate Welfare Enriches Big Business

Cato scholar proposes reform commission on behalf of taxpayers

May 14, 2007

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WASHINGTON — During fiscal year 2006, the federal government spent $92 billion on corporate welfare. In the policy analysis “The Corporate Welfare State: How the Federal Government Subsidizes U.S. Businesses,” the Cato Institute’s director of budget studies, Stephen Slivinski, finds that billions of dollars are annually spent to cushion America’s largest companies at the taxpayers’ expense.

Slivinski defines corporate welfare as “any federal spending program that provides payments or unique benefits and advantages to specific companies or industries,” justified as remedies to market failure. Special interests argue that without subsidies, competition or an industry’s viability would be jeopardized. However, Slivinski demonstrates that the “market failures on which the programs are predicated are either overblown or don’t exist.” Large corporations including Boeing, Xerox, Motorola, Dow Chemical and General Electric have received millions in taxpayer dollars while playing paupers to the federal government.

“Nowhere in the Constitution is Congress granted the authority to spend funds to directly subsidize industry, or to enter into joint ventures with automobile companies, or to guarantee loans to favored business owners. Yet, since the New Deal … the Supreme Court has allowed Congress to redistribute wealth from taxpayers to favored business interests.”

Slivinski adds: “Recipients of subsidies have a substantial interest in making sure they protect the flow of money to them. That leads to a great deal of lobbying by special interests but very little lobbying on behalf of taxpayers.”

Slivinski proposes creating a Corporate Welfare Reform Commission (CWRC) to remedy this situation. “The CWRC would compose a list of corporate welfare programs to eliminate and then present that list to Congress, which would be required to hold an up-or-down vote on the commission’s proposal,” bringing much needed transparency to a federal budget that has favored a few special interests at the expense of millions of taxpayers.
 

Policy Analysis no. 592: http://www.cato.org/pub_display.php?pub_id=8230