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Subsidies Galore: Corporate Welfare For Politically-Connected Businesses Is Bipartisan

July 11, 2018 in Economics

By Doug Bandow

Doug Bandow

Congress created the usual special interest frenzy with its
latest iteration of the Farm Bill. Agricultural subsidies are one
of the most important examples of corporate welfare, money handed
out to businesses based on political connections.

Business plays a vital role in a free market. In real capitalism
there are no guaranteed profits. But corporate welfare eliminates
this handicap for the well-connected.

Business subsidies that allow politicians to channel economic
resources toward their preferred ends distort investment and trade.
Moreover, turning government into an engine of illicit profit
encourages what economists call rent-seeking. Well-organized
special interests usually triumph over the broader public and
national interest.

Aid comes in many forms.

Agriculture has spawned a gaggle of sometimes bizarre subsidies.
Like a dairy program which created milk surpluses, in turn
encouraging state price fixing, generating massive cheese stockpiles, in
turn triggering giveaways to the poor. Payments, loans, crop
insurance, import quotas, and more underwrite farmers.

In real capitalism there
are no guaranteed profits. But corporate welfare eliminates this
handicap for the well-connected.

Money also goes to agricultural enterprises through the Rural
Business-Cooperative Service, which supports “business
development.” The recently defeated Farm Bill even included $65
million in special health care subsidies for agricultural
associations. Ironically, farm households enjoy higher median
income and wealth than non-farm households.

The Market Access Program is one of several initiatives to
subsidize agricultural exports. Other programs support general
trade and investment.

For instance, the Export-Import Bank is known as Boeing’s Bank.
It provides cheap credit for foreign buyers of American products.
Which, ironically, gives foreign firms an advantage over U.S.
producers who must pay full fare. Ex-Im’s biggest beneficiary in
recent years has been China, especially its state-owned firms.

The Overseas Private Investment Corporation underwrites U.S.
investment in potentially unstable nations. If the project pays
off, investors win. If not, the rest of us lose. Why should the
public guarantee investor profits?

At the other end of the commercial spectrum is the Small
Business Administration. Smaller firms are a vital part of the
American economy but they are not an underserved market. There is
no dearth of, say, liquor stores. SBA is a response to a political
opportunity, not an economic need.

Much corporate welfare is disguised in broader terms. The
Commerce Department’s Economic Development Administration
subsidizes “development” in “distressed communities,” meaning the
agency underwrites business, with dubious results. There are some
180 federal pork barrel “economic development” programs.

The Rural Utilities Service (formerly the Rural Electrification
Administration), continues, never mind that rural America got
electricity decades ago. Today RUS has expanded into Broadband
internet and even television service.

The Bureau of Land Management (mis)manages federal lands,
subsidizing use of …read more

Source: OP-EDS

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