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Cutting Corporate Welfare
by Ralph Nader
Seven Stories Press, 2000
Introduction
Corporate welfare-the enormous and myriad subsidies, bailouts, giveaways, tax loopholes, debt revocations, loan guarantees, discounted insurance 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 our national security, and weaken our democracy.
At a time when the national GDP is soaring, one in five children lives in deep poverty, one might expect that a public effort to curtail welfare would focus on cutting big handouts to rich corporations, not small supports for poor individuals. But somehow the invocations of the need for stand-on-your-own-two-feet responsibility do not apply to large corporations.
At a time when even growing federal budget surpluses do not persuade our nation's political leaders to devote public resources to repairing and enhancing the built elements of our commonwealth-such as the nation's schools, bridges, clinics, roads, drinking water systems, courthouses, public transportation systems, and water treatment facilities-one might expect to see calls to divert taxpayer monies from flowing into private corporate hands and instead direct them to crying public needs. But somehow the cramped federal budget-as well as similarly situated state and local budgets-always has room for another corporate welfare program.
This is a deeply rooted problem, one which cuts across party lines. Democrats and Republicans are both culpable for the proliferation of corporate welfare spending. Indeed the leading Congressional crusader against corporate welfare has long been outgoing House Budget Committee Chair John Kasich, R-Ohio, and efforts to forge bipartisan coalitions to take on corporate welfare founder more on lack of Democratic support than Republican.
Patching the corporate drain on public resources will require an informed and mobilized citizenry that both forces changes in our systems of campaign finance, lobbying and political influence, and demands careful and critical scrutiny by the media, Congressional committees and ultimately the citizens who lose out from government transfers of resources, privileges, and immunities to corporations...
THE POLITICAL ORIGINS OF CORPORATE WELFARE
It is raw political power that creates and perpetuates most corporate welfare programs. There is no serious public policy argument for why television broadcasters should be given control of the digital television spectrum-a $70 billion asset-for free. The endless tax loopholes that riddle the tax code-such as an accelerated depreciation schedule that's worth billions to oil companies-cannot be explained by any exotic theory of fair taxation. Local taxpayers rather than billionaire team owners pay for the new sports stadiums and arenas that dot the American landscape because of the political leverage sports teams and their allies gain through corporate cash and the threat to move elsewhere.
An examination of corporate welfare is, therefore, at one important level, an examination of the state of our political democracy. Unfortunately, the burgeoning corporate welfare state does not speak well for the state of democratic affairs. The following examples, discussed in more detail later in this pamphlet, illustrate how political payoffs-what former Member of Congress Cecil Heftel, D-Hawaii, calls "legalized bribery"-distort decision-making so that the public commonwealth is corporatized to enrich the already-rich.
The savings and loan debacle
Perhaps still the largest corporate welfare expenditure of all time-ultimately set to cost taxpayers $500 billion in principal and interest-the S&L bailout is in 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 freed the industry from historic constraints and paved the way for the speculative and corrupt failures that came soon after. Then more industry campaign contributions and lobbying led the Congress to delay addressing the problem - resulting in more S&L failures and skyrocketing costs for corrective measures. When Congress finally did address the problem, it put the bailout burden-totaling hundreds of billions of dollars-on the backs of taxpayers, rather than on the financial industry.
The costs of S&L deregulation and the subsequent bailout were, and remain, severe both in monetary terms and in the mutation and eventual destruction of an industry that contributed to broader home ownership among all Americans. "In the end," writes economics commentator William Greider, "the goal of housing was thrown over the side and the government's regulatory system was perversely diverted to a different purpose- "socializing" the losses accumulated by freewheeling bankers and developers by making every taxpayer pay for them." 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 on taxpayers or financial institutions and that would have enabled consumers to act on their own to prevent future S&L-style crises and bailouts.
Of the many factors contributing to the S&L debacle, which festered throughout the 1980s and into the early l990s, none was more important than industry lobbying money and campaign cash. "Leaving aside the financial and economic complexities," writes economics commentator William Greider, "the savings and loan bailout is most disturbing as a story of politics-a grotesque case study of how representative democracy has been deformed."
"At every turn, any effort to rein in the thrifts' powers and accountability has been shackled," Representative Jim Leach, R-Iowa, then a House Banking Committee member and now the Committee chair, told the Los Angeles Times in 1989. "If there ever has been a case for campaign finance reform, this is it."
The giveaway of the digital television spectrum
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 rights to use them. New digital technologies now make possible the broadcast of digital television programming, (the equivalent of the switch from analog records to digitized compact disks), and the broadcasters sought rights to new portions of the airwaves. In recent years, the Federal Communications Commission has, properly, begun to recognize the large monetary value of the licenses it conveys to use the public airwaves-including for cell phones, beepers, and similar uses-and typically auctions licenses. The 1996 Telecommunications Act, however, prohibited such an auction for distribution of digital television licenses, the most valuable of public airwave properties, and mandated that they be given to existing broadcasters.
How to explain this giveaway, especially when other industries, such as data transmission companies, were eager to bid for the right to use the spectrum.
Look no further than the National Association of Broadcasters (NAB)
The broadcasters are huge political donors, donating about $3 million in the 1995-1996 election cycle. They have close ties to key political figures, most notably Senate Majority Leader Trent Lott, R-Mississippi; NAB head Eddie Fritts is Lott's college friend. Lott took good care of his buddy, threatening the FCC in no uncertain terms if it failed to promptly oversee the transfer of the licenses to the broadcasters.
Above all, the broadcasters are able to leverage their control over the most important media into influence over politicians. Not surprisingly, the nightly news was silent on this giant giveaway. Few if any Members of Congress were willing to challenge the giveaway. Most feared that bucking the industry would result in slanted news coverage in the next election. Those few who feel secure in their position figure it is not worth taking on the broadcasters-given the fealty of their fellow Members to the industry; they conclude, why bother.
And again, the giveaway not only represents the failure of our working democracy, but an additional erosion. Congress and the FCC failed to include provisions in the legislative and regulatory allocation of the spectrum to force the broadcasters to serve the public interest in concrete ways-for example, by providing free air time for political candidates, or by ceding partial control of the airwaves to citizen groups to air civic programming. (A vague public interest obligation imposed on the broadcasters remains without concrete definition, but preliminary efforts to specify those obligations are underwhelmed) For more on this entitlement program see: http://www.thirdworldtraveler.com/Nader/CutCorpWelfare
Cutting Corporate Welfare
by Ralph Nader
Seven Stories Press, 2000
Introduction
Corporate welfare-the enormous and myriad subsidies, bailouts, giveaways, tax loopholes, debt revocations, loan guarantees, discounted insurance 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 our national security, and weaken our democracy.
At a time when the national GDP is soaring, one in five children lives in deep poverty, one might expect that a public effort to curtail welfare would focus on cutting big handouts to rich corporations, not small supports for poor individuals. But somehow the invocations of the need for stand-on-your-own-two-feet responsibility do not apply to large corporations.
At a time when even growing federal budget surpluses do not persuade our nation's political leaders to devote public resources to repairing and enhancing the built elements of our commonwealth-such as the nation's schools, bridges, clinics, roads, drinking water systems, courthouses, public transportation systems, and water treatment facilities-one might expect to see calls to divert taxpayer monies from flowing into private corporate hands and instead direct them to crying public needs. But somehow the cramped federal budget-as well as similarly situated state and local budgets-always has room for another corporate welfare program.
This is a deeply rooted problem, one which cuts across party lines. Democrats and Republicans are both culpable for the proliferation of corporate welfare spending. Indeed the leading Congressional crusader against corporate welfare has long been outgoing House Budget Committee Chair John Kasich, R-Ohio, and efforts to forge bipartisan coalitions to take on corporate welfare founder more on lack of Democratic support than Republican.
Patching the corporate drain on public resources will require an informed and mobilized citizenry that both forces changes in our systems of campaign finance, lobbying and political influence, and demands careful and critical scrutiny by the media, Congressional committees and ultimately the citizens who lose out from government transfers of resources, privileges, and immunities to corporations...
THE POLITICAL ORIGINS OF CORPORATE WELFARE
It is raw political power that creates and perpetuates most corporate welfare programs. There is no serious public policy argument for why television broadcasters should be given control of the digital television spectrum-a $70 billion asset-for free. The endless tax loopholes that riddle the tax code-such as an accelerated depreciation schedule that's worth billions to oil companies-cannot be explained by any exotic theory of fair taxation. Local taxpayers rather than billionaire team owners pay for the new sports stadiums and arenas that dot the American landscape because of the political leverage sports teams and their allies gain through corporate cash and the threat to move elsewhere.
An examination of corporate welfare is, therefore, at one important level, an examination of the state of our political democracy. Unfortunately, the burgeoning corporate welfare state does not speak well for the state of democratic affairs. The following examples, discussed in more detail later in this pamphlet, illustrate how political payoffs-what former Member of Congress Cecil Heftel, D-Hawaii, calls "legalized bribery"-distort decision-making so that the public commonwealth is corporatized to enrich the already-rich.
The savings and loan debacle
Perhaps still the largest corporate welfare expenditure of all time-ultimately set to cost taxpayers $500 billion in principal and interest-the S&L bailout is in 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 freed the industry from historic constraints and paved the way for the speculative and corrupt failures that came soon after. Then more industry campaign contributions and lobbying led the Congress to delay addressing the problem - resulting in more S&L failures and skyrocketing costs for corrective measures. When Congress finally did address the problem, it put the bailout burden-totaling hundreds of billions of dollars-on the backs of taxpayers, rather than on the financial industry.
The costs of S&L deregulation and the subsequent bailout were, and remain, severe both in monetary terms and in the mutation and eventual destruction of an industry that contributed to broader home ownership among all Americans. "In the end," writes economics commentator William Greider, "the goal of housing was thrown over the side and the government's regulatory system was perversely diverted to a different purpose- "socializing" the losses accumulated by freewheeling bankers and developers by making every taxpayer pay for them." 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 on taxpayers or financial institutions and that would have enabled consumers to act on their own to prevent future S&L-style crises and bailouts.
Of the many factors contributing to the S&L debacle, which festered throughout the 1980s and into the early l990s, none was more important than industry lobbying money and campaign cash. "Leaving aside the financial and economic complexities," writes economics commentator William Greider, "the savings and loan bailout is most disturbing as a story of politics-a grotesque case study of how representative democracy has been deformed."
"At every turn, any effort to rein in the thrifts' powers and accountability has been shackled," Representative Jim Leach, R-Iowa, then a House Banking Committee member and now the Committee chair, told the Los Angeles Times in 1989. "If there ever has been a case for campaign finance reform, this is it."
The giveaway of the digital television spectrum
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 rights to use them. New digital technologies now make possible the broadcast of digital television programming, (the equivalent of the switch from analog records to digitized compact disks), and the broadcasters sought rights to new portions of the airwaves. In recent years, the Federal Communications Commission has, properly, begun to recognize the large monetary value of the licenses it conveys to use the public airwaves-including for cell phones, beepers, and similar uses-and typically auctions licenses. The 1996 Telecommunications Act, however, prohibited such an auction for distribution of digital television licenses, the most valuable of public airwave properties, and mandated that they be given to existing broadcasters.
How to explain this giveaway, especially when other industries, such as data transmission companies, were eager to bid for the right to use the spectrum.
Look no further than the National Association of Broadcasters (NAB)
The broadcasters are huge political donors, donating about $3 million in the 1995-1996 election cycle. They have close ties to key political figures, most notably Senate Majority Leader Trent Lott, R-Mississippi; NAB head Eddie Fritts is Lott's college friend. Lott took good care of his buddy, threatening the FCC in no uncertain terms if it failed to promptly oversee the transfer of the licenses to the broadcasters.
Above all, the broadcasters are able to leverage their control over the most important media into influence over politicians. Not surprisingly, the nightly news was silent on this giant giveaway. Few if any Members of Congress were willing to challenge the giveaway. Most feared that bucking the industry would result in slanted news coverage in the next election. Those few who feel secure in their position figure it is not worth taking on the broadcasters-given the fealty of their fellow Members to the industry; they conclude, why bother.
And again, the giveaway not only represents the failure of our working democracy, but an additional erosion. Congress and the FCC failed to include provisions in the legislative and regulatory allocation of the spectrum to force the broadcasters to serve the public interest in concrete ways-for example, by providing free air time for political candidates, or by ceding partial control of the airwaves to citizen groups to air civic programming. (A vague public interest obligation imposed on the broadcasters remains without concrete definition, but preliminary efforts to specify those obligations are underwhelmed) For more on this entitlement program see: http://www.thirdworldtraveler.com/Nader/CutCorpWelfare
