Ralph Nader in Cutting Corporate Welfare
On Corporations:
Corporate welfare is a function of political corruption
Corporate welfare-the enormous and myriad subsidies, bailouts, giveaways, tax loopholes, debt revocations, loan guarantees, and other benefits conferred by government on business-is a function of political corruption. Corporate welfare programs siphon
funds from appropriate public investments, subsidize companies ripping minerals from federal lands, enable pharmaceutical companies to gouge consumers, perpetuate anti-competitive oligopolistic markets, injure national security, & weaken our democracy.
Source: Cutting Corporate Welfare, p. 13
Oct 9, 2000
On Corporations:
S&L bailout helped bankers & hurt consumers
Perhaps the largest corporate welfare expenditure of all time-ultimately set to cost taxpayers $500 billion in principal and interest-the savings and loan bailout is in a large part a story of political corruption, the handiwork of the industry’s legion
of lobbyists and political payoffs to campaign contributors. The well-connected S&L industry successfully lobbied Congress for a deregulatory bill in the early 1980s, which the industry from historic constraints and paved the way for the speculative and
corrupt failures that came soon after. When Congress finally did address the problem, it put the bailout burden on the backs of taxpayers, rather than on the financial industry.
Congress even refused in the bailout legislation to include measures
to empower consumers to band together into financial consumer associations-a modest quid pro quo that would have imposed zero financial cost and would have enabled consumers to act on their own to prevent future S&L-style crises and bailouts.
Source: Cutting Corporate Welfare, p. 15-16
Oct 9, 2000
On Technology:
FCC gave away $70B in airwave licenses to large corporations
In 1996, Congress quietly handed over to existing broadcasters the rights to broadcast digital television on the public airwaves-a conveyance worth $70 billion-in exchange for. nothing. Although the public owns the airwaves, the broadcasters have
never paid for the right to use them. The FCC has recently begun to recognize the large monetary value of the licenses and typically auctions licenses. The 1996 Telecommunications Act, however, prohibited such an auction for distribution of digital
television licenses, and mandated that they be given to existing broadcasters.
How to explain this giveaway, especially when other industries, such as the data transmission companies, were eager to bid for the right to use the spectrum? Look no
further than the National Association of Broadcasters. The NAB are huge political donors & have close ties to key political figures.
Not surprisingly, the nightly news was silent on this giant giveaway. It represents a failure of our working democracy
Source: Cutting Corporate Welfare, p. 17-18
Oct 9, 2000
On Environment:
Mining companies get free mines for campaign contributions
The 1872 Mining Act is a relic of efforts to settle the West. It allows mining companies to claim federal lands for $5 an acre and then take gold, silver, lead, or other hard-rock minerals with no royalty payments to the federal treasury. Thanks to the
1872 Mining Act, mining companies-including foreign companies-extract billions of dollars worth of minerals a year from federal lands, royalty-free. Legislative efforts to repeal or reform the mining giveaway regularly fail, blocked by senators from
western states. These senators are not standing up for their states’ best economic interests; the giveaway mines create few jobs and massive environmental problems with high economic costs in foregone tourist and recreational revenues and uses. The
senators are standing up for the mine companies, which pour millions in campaign contributions into the Congress. From 1987 to 1994, the mining companies gave $17 million to congressional candidates; and extracted $26 billion worth of minerals.
Source: Cutting Corporate Welfare, p. 18-19
Oct 9, 2000
On Tax Reform:
Tax code loopholes benefit corporate donors & cost taxpayers
If anyone needs convincing about the need for campaign finance and political reform, they need look no further than the Internal Revenue Code. The Code is riddled with calculated loopholes, exemptions, credits, accelerated depreciation schedules,
deductions, and targeted exceptions-many of unfathomable consequences even to trained experts-that are carefully crafted to benefit one or a handful of companies. These exist solely because well-paid lobbyists representing fat cat campaign contributors
managed to convince a legislator to insert a special provision in long, complicated tax bills. The origin of many of the corporate tax loopholes are the stuff of Washington legend. It represents one of the worst distortions of our political democracy.
Well-heeled lobbyists, who spin through a revolving door between government and K Street and represent high-donor corporate interests, facilitate backroom deals that save their clients millions. The taxpayers, of course, lose commensurate amounts.
Source: Cutting Corporate Welfare, p. 20
Oct 9, 2000
On Homeland Security:
Corporate welfare: taxpayers fund defense industry mergers
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. Among the most galling of Defense Department corporate welfare handouts is
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 megafirms. The Pentagon subsidy plan began in the 1990s, when it
decided to encourage consolidation in the defense sector. The industry asked for and won encouragement in the form of payments to cover the costs of consolidation-including extravagant “golden parachute” bonuses to executives.
Levels of industry
concentration in the defense sector are now so high that the antitrust authorities are beginning to intervene to block some new mergers among primary contractors. But other defense mergers continue to proceed-with the help of the US taxpayer.
Source: Cutting Corporate Welfare, p. 21-22
Oct 9, 2000
On Welfare & Poverty:
Attack corporate welfare kings, not poor welfare queens
While President Clinton and the Congress have gutted the welfare system for poor people, no such top-down agenda has emerged for corporate welfare recipients. The savage demagoguery directed against imaginary “welfare queens” has never been matched with
parallel denunciations of gluttonous corporate welfare kings. While the minimal government benefits still afforded the poor are provided only to the most impoverished, no such “means testing” is applied to corporate welfare beneficiaries. By and large
the bigger the company, the more it extracts in government supports.
The new welfare law sets strict time limits for how long poor people can receive government supports, but no such time limitations attach to government handouts to big business.
The welfare law denies benefits even to legal immigrants; corporate welfare, by contrast, is far more non-discriminating-Uncle Sam subsidizes foreign corporations as well as domestic businesses., including millions to Canadian mining companies.
Source: Cutting Corporate Welfare, p. 23-25
Oct 9, 2000
On Corporations:
Rules needed for examining & challenging corporate welfare
[I propose] a new framework for analyzing corporate welfare; probing questions to ask of government subsidy programs for big business:- What rationales do private interests use to secure subsidies, and then shield them from legislative and judicial
challenges?
- How do corporate welfare programs become entrenched and immune to cessation or reform?
- To what extent do foreign corporations benefit from the expenditure of US taxpayer dollars?
- How can fair pricing mechanisms be used to allow
beneficial programs to be preserved, while eliminating welfare subsidy programs?
- What criteria should determine when corporate welfare programs should simply be cancelled?
- What administrative due process should apply to corporate welfare? How
can taxpayers be given standing and procedural rights to challenge arbitrary agency action?
- How do economic subsidies disadvantage non-subsidized businesses and foster undesirable market outcomes?
Source: Cutting Corporate Welfare, p. 29-30
Oct 9, 2000
On Corporations:
Scrutinize even “good” corporate welfare which helps public
If a program involves the government giving more to private companies than it gets back, then it should be considered corporate welfare. This definition suggests analytic inquiries other than whether a program is “good” or “bad.” It allows for the
possibility of “good” corporate welfare-programs that confer subsidies on business but are merited because of overall public gain. There ARE cases of “good” corporate welfare, but these too should be subjected to proper procedural and substantive checks.
Source: Cutting Corporate Welfare, p. 31
Oct 9, 2000
On Corporations:
Disallow benefits to companies except for public purposes
A series of inquisitive screens can be applied to corporate welfare programs, regardless of their merit: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. If it does serve some public interest, can the government achieve the same ends by retaining an interest in an asset being given away of doing a service in-house?Does the program involve functions that should be
properly left to the market? Is there any reason the government should not charge for services provided?Are there non-monetary reciprocal obligations that should be demanded? These might include reasonable pricing of government-subsidized goods
and services provided to consumers.Is the program subject to judicial challenge? What are the avenues for citizen challenge?Is there an institutional means of periodic review? Are criteria delineated by which the program should be evaluated?
Source: Cutting Corporate Welfare, p. 31-32
Oct 9, 2000
On Corporations:
Stadiums & other local tax abatements ignore small business
Large corporations routinely pit states and cities against each other in bidding contests that are structurally biased in favor of Big Business. The price of their doing business, they communicate explicitly and implicitly, is massive subsidization by
local and state authorities-through tax abatements, government financing of building projects, improper use of eminent domain, or other supports. This is corporate welfare in its rawest form. Among the most outrageous types of bidding for business
involves sports stadiums. Now gambling casinos are looking for similar subsidies.
Many tax breaks and abatements are directed to specific companies. They properly raise the public ire as citizens demand to know why the rich and powerful have taxes
forgiven while local small businesses are required to pay their fair share without special dispensation. This should sharpen the cutting edge of a nascent movement to end corporate welfare as we know it.
Source: Cutting Corporate Welfare, p. 35-36
Oct 9, 2000
On Corporations:
Federal regulation of state & local abatements & subsidies
Some corrective policy initiatives to oppose local and state giveaways:- States and localities should adopt a policy of annual disclosure of all corporate welfare recipients.
- Where state and local governments decide that taxpayer support for a
business is necessary, they should include binding commitments that recipients deliver on job creation and other promises.
- Congress should encourage states to refuse to enter a race to the bottom against each other in terms of special tax breaks and
related benefits.
- The federal government should levy a surtax on companies receiving state and local tax breaks, treating the tax breaks as income upon which federal tax should be paid.
- Finally, there must be court tests of the claim that the
provision of tax subsidies and similar incentives distort economic decision-making concerning the location of business activity and therefore constitutes an unconstitutional infringement of Congress’ power to regulate interstate commerce.
Source: Cutting Corporate Welfare, p. 44-45
Oct 9, 2000
On Technology:
Domain name registration needs openness to replace monopoly
The federal government currently contracts with Network Solutions, Inc. (NSI), to manage domain name registrations (including .com, .org, and .net). NSI’s monopoly on the valuable .com domain names has turned a tiny initial investment into a firm with
market capitalization of $2.5 billion-thanks to control of the power to sell the public the right to use their own domain names. At no time did the government seek any competitive bids to determine the prices that consumers and businesses should pay for
domain name registrations. The federal government is now trying to find ways to introduce competition and replace the current NSI monopoly with something new. This new initiative raises a number of questions regarding its lack of accountability,
and it is justified largely on the basis that the NSI monopoly needs to be “fixed.” But it is hard to see how the creation of a new unaccountable body constitutes a “fix.”
Source: Cutting Corporate Welfare, p. 54-55
Oct 9, 2000
On Health Care:
Enforce fair drug prices if sponsored by govt research
Since the early 1980s, the government has routinely given away the fruits of the research it sponsors, granting private companies exclusive, royalty-free rights to commercialize government-financed inventions while failing to include reasonable pricing
requirements in the licenses.In the critical area of pharmaceuticals, this research giveaway policy leads to superprofiteering by drug manufacturers, who charge unconscionably high prices for important medicines-costing consumers, and often resulting
in the denial of treatment to consumers who are unable to pay high prices.
Where the government hands an annual billion-dollar revenue earner [like exclusive licenses to distribute government-researched medicines] to a private company for a pittance,
is it too much to ask the relevant federal agency to enforce reasonable pricing requirements? This has resulted in a failure to avert preventable cancer deaths. Shame clearly will not work as a disciplinary force to limit corporate welfare abuses.
Source: Cutting Corporate Welfare, p. 57-58 & 62
Oct 9, 2000
On Corporations:
Cancel R&D giveaways to auto industry; let them do it
The Partnership for a New Generation of Vehicles (PNGV) is a public/private partnership between seven federal agencies and the big three automakers. The program represents an effort to coordinate the transfer of property rights for federally funded
research and development to the automotive industry. It is hard to imagine an industry less in need of government support than the highly capitalized auto industry, which is reporting record profits year after year. The government is supporting
research that the industry would or should do on its own in response to market demands, or could easily be required to do in order to meet tougher environmental standards.
The PNGV is not the only example of a federal research program that should be
eliminated. Research and development programs in areas like nuclear power and fossil fuels (among them the clean coal technology program) invest funds in undesirable non-renewable technologies. Such programs are not defensible.
Source: Cutting Corporate Welfare, p. 63 & 66
Oct 9, 2000
On Corporations:
Bailouts: require payback; practice prevention by regulation
The bailout, a premier form of corporate welfare, is yet another market distortion against the interests of small and medium-sized businesses. Bailouts are different from other corporate welfare categories in that they are ad hoc and unplanned. Some
lessons from recent bailout experience:- Congress should prioritize the issue of payback in full, after the company is nursed back to health.
- Monetary payback is not enough. Because the government is doing more than making a market-justified loan,
it has the right to make demands designed to prevent the need for future bailouts.
- The S&L crisis was triggered in large part by industry deregulation. This should be an important cautionary note: that underregulation paves the way for bailouts,
especially in the financial sector.
- Strong anti-trust policy and enforcement is a vital prophylactic against the emergence of too-big-to-fail institutions which are sure to benefit from a government bailout in the face of potential collapse.
Source: Cutting Corporate Welfare, p. 69-71
Oct 9, 2000
On Tax Reform:
Sunshine on tax loopholes; sunset on tax breaks
[To deal with] specially targeted loopholes [in the tax code, Congress should] remove the anonymity, which would make preservation of the tax advantages much more difficult politically. The OMB should be required to compile a list of the top 50
beneficiaries of each corporate tax expenditure. A second critical issue is that tax expenditures are designed to encourage specific kinds of behavior. Do they do so? Determining whether undesirable consequences occur requires more data gathering and
close scrutiny, which should come from Congress, the media, and citizens.
One way to facilitate that scrutiny is to have sunset provisions for corporate tax expenditures (as for other corporate welfare programs), which would require Congressional
review of tax breaks. Unproven tax expenditures should have a short first life, say two years, to allow testing and review of whether that achieved the desired effects.
Source: Cutting Corporate Welfare, p. 79-80
Oct 9, 2000
On Free Trade:
Restrict IMF power, or abolish it
The IMF makes loans to debtor countries to help overcome balance-of-payment deficits, conditioned on those countries adopting a policy package known as “structural adjustment.”When individuals are unable to pay their debts, the debtor and the creditor
share the pain, through bankruptcy or otherwise. No such thing happens in international financial markets. When countries are unable to meet their payment obligations, the IMF rushes in, and provides money to the borrower. This money is used to repay
creditors, letting them off the hook. The pain is borne exclusively by the borrowing country, which must accept recessionary austerity conditions from the IMF.
Working out a sensible system of international financial regulation, which avoids Wall
Street bailouts & unfairly punishing debtor countries, is a complicated matter. It is clear, however, that the IMF has to be reined in. Even some Wall Street conservatives suggest that the IMF’s power should be restricted or the IMF abolished altogether.
Source: Cutting Corporate Welfare, p. 84-85 & 89
Oct 9, 2000
On Free Trade:
End export assistance; it’s corporate welfare
Various government agencies maintain an array of export assistance programs. These programs raise the question of why overseas marketing and lending and other export assistance should be a government rather than a private sector function. As regular
beneficiaries of double standards, big business executives and lobbyists, it seems, are without a sense of irony. How do the corporate proponents of international trade agreements designed to promote misnamed ‘free trade’ explain their simultaneous
support for marketing subsidies? If it is only on the grounds that “other countries do the same thing.” Perhaps they should turn their multinational lobbying prowess to eliminating other countries’ export assistance programs.
The most disturbing
feature of many of these programs may be that the assisted companies export troublesome products or technologies-weapons, or environmentally hazardous equipment, for example. Such programs, especially arms exports initiatives, should be ended.
Source: Cutting Corporate Welfare, p.103-104
Oct 9, 2000
On Environment:
Highway pork leads to sprawl, air pollution, global warming
The federal highway bills are another major source of pork. Last year’s Transportation Equity Act, will allocate billions of dollars to new road construction, much of it unnecessary and harmful. Instead of supporting modern mass transportation, Congress
continues to surrender to the demands of road construction interests and the highway lobby. The harmful consequences include sprawl, air pollution, and contributions to global warming.
Source: Cutting Corporate Welfare, p.110
Oct 9, 2000
On Jobs:
Focus on family farms instead of large agribusiness
The government maintains a variety of agricultural subsidies, ranging from irrigation subsidies to crop insurance and price supports for certain commodities. Many of these benefits accrue to corporate agribusiness, and often support environmentally
harmful farm practices (such as overuse of water). The original purpose of farm supports was to support family farmers and enhance stability in agricultural markets, and it is doubtful whether the programs still fulfill this function. At the same time,
many farm supports were eliminated by the 1996 Farm Bill, with the general effect of promoting agribusiness consolidation and increased power for grain traders. Food prices have not declined. All of this suggests the need for a serious and open-minded
reassessment of farm programs, so that the public interest in protecting family farms and sustainable agriculture is advanced, while subsidies for large agribusiness are curtailed.
Source: Cutting Corporate Welfare, p.112-113
Oct 9, 2000
On Corporations:
Legislation to eliminate all corporate welfare
A Bill to Eliminate All Corporate Welfare: A simple bill could provide a valuable tool for citizen education and organizing. Such legislation would not propose a permanent ban on corporate welfare, but would require affirmative re-commencement
of subsidies under both procedural safeguards and reciprocal obligations. The central operative language for such a bill might read:- Every federal agency shall terminate all below-market-rate sales or arrangements with for-profit beneficiaries;
shall cease making any below-market-rate loans; shall terminate all export assistance ort marketing promotion for corporations; and shall terminate any below-market-value technology transfer or subsidy of any kind to for-profit corporations.
- The
Internal Revenue Code is amended to eliminate all corporate tax expenditures.
- The Internal Revenue Code is amended so that the value of local and state tax subsidies to corporations shall be treated as income.
Source: Cutting Corporate Welfare, p.116-117
Oct 9, 2000
On Corporations:
$1000 bounty for suing for abuse of corporate welfare
Citizen Standing to Sue to Challenge Corporate Welfare Abuses: Citizens could be empowered to mount judicial challenges to runaway agencies that reach beyond their statutory powers. Taxpayers could be given standing to file such suits, by
awarding a $1,000 “bounty” (plus reasonable attorney’s fees and court costs) for those who successfully challenge improper agency action. Consideration should be given to creating an incentive for such suits by awarding successful plaintiffs a
percentage of the money saved through such suits, perhaps according to a sliding scale of declining percentage returns for higher savings with a cap set at certain amounts. Just as qui tam suits under the False Claims Act have helped curtail oil
company underpayment of royalties owed the federal government, so such a measure would create a structural counterbalance to corporate influence over federal agencies.
Source: Cutting Corporate Welfare, p.118
Oct 9, 2000
On Welfare & Poverty:
Limit executive compensation to 30-to-1 over lowest pay
Limits on Executive Compensation in Government-Supported Corporations: Where the government is conferring substantial, voluntarily received benefits on corporations,
it could reasonably limit the scope of beneficiaries to those who do not engage in particular sorts of socially undesirable behavior. One such behavior is excessive executive compensation, which heightens income and wealth inequalities,
and tears at the nation’s social fabric. Government subsidies, including tax expenditures, could be denied to corporations whose executives receive more than a predetermined level of compensation,
say those whose ratio of executive-to-lowest-paid-employee compensation is more than a certain amount, perhaps 30-to-1.
Source: Cutting Corporate Welfare, p.120
Oct 9, 2000
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