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Corporate Welfare Lives on and On

August 29, 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. The
legislation suffered a surprise defeat in the House, being viewed
as too stingy. But it is certain to return.

Fiscal responsibility is out of fashion. The latest federal
budget, drafted by a Republican president and Republican-controlled
Congress, blew through the loose limits established under
Democratic President Barack Obama. The result is trillion-dollar
deficits as far as the eye can see.

Spending matters. So does the kind of spending. Any amount of
corporate welfare is too much.

From farm subsidies to
the Export-Import Bank, special interest feeding frenzies are still
the norm throughout government.

Business plays a vital role in a free market. People should be
able to invest and innovate, taking risks while accepting losses.
In real capitalism there are no guaranteed profits. But corporate
welfare gives the well-connected protection from many of the normal
risks of business.

Business subsidies undermine both capitalism and democracy.
Allowing politicians to channel economic resources toward their
preferred ends distorts 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.

Explained Mercatus scholar Tad DeHaven, then a budget analyst at
the Cato Institute: “Corporate welfare often subsidizes
failing and mismanaged businesses and induces firms to spend more
time on lobbying rather than on making better products. Instead of
correcting market failures, federal subsidies misallocate resources
and introduce government failures into the marketplace.”

While corporate welfare suggests money for big business, firm
size is irrelevant. There is no substantive difference between,
say, the Small Business Administration and the Export-Import Bank.
Both turn capitalism into a rigged game of Monopoly.

Aid comes in many forms. There is spending, typically in grants,
loans, and loan guarantees; limits on competitors, such as tariffs
and quotas; tax preferences, attached to broader tax bills to
benefit individual companies and industries. All help ensure
business profits.

Agriculture in particular has spawned a gaggle of sometimes
bizarre subsidies. Payments, loans, crop insurance, import quotas,
and more underwrite farmers. When these distort the marketplace,
further efforts are concocted to address those dislocations. A
dairy program created milk surpluses, which in turn encouraged
state price fixing that generated massive cheese stockpiles, in
turn triggering giveaways to the poor. The federal government
killed off cows even as it continued to subsidize milk.

Money also goes to agricultural enterprises through the Rural
Business-Cooperative Service, which supports “business
development.” Through it, observed the Cato Institute’s
Chris Edwards, Washington subsidizes “utilities, …read more

Source: OP-EDS

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