Big Business, Big Handouts Capitol_Building15

May 23, 2014 07:00 PM





Published: May 23, 2014 Updated: 4:27 p.m.

Read original column here:

The corrupt practice of Washington politicians spending tax dollars to help private industry with subsidies, grants and loans is as old as the federal government itself. What’s equally old and battle-tested is the lesson that Washington never seems to learn: When it comes to picking business winners and losers, Congress and the White House almost always wind up picking losers.

This is the central message of a readable new book by Burton and Anita Folsom, "Uncle Sam Can’t Count," a history of federal subsidies to big business. The authors document that the first industry to get special assistance from government was the fur trade, trappers who sold beaver pelts.

Next came steamship building, followed by the intercontinental railroads, and then subsidies to build the world’s first airplane. In each case, the hand-picked, can’t-miss, welfare-recipient companies failed, and unsubsidised rivals took command of the market.

The railroads that avoided bankruptcy and bailouts were privately funded. Even more amazing: The experts in Washington ignored the airplane the uncredentialed Wright brothers were inventing in North Carolina and bestowed millions of tax dollars (and this was when "millions" was a lot money) upon a rival with the expertise and intellect to make this man-made bird fly by propelling it through the air in a giant slingshot contraption. On multiple occasions, this "plane" gloriously coasted a few hundred feet and ignominiously crashed to the ground.

"The subsidies actually ended up inhibiting these markets from developing," says Mr. Folsom. "It’s amazing the government has such as unblemished record throughout history of betting on the wrong horse."

Fast forward to the 21st century. In the weeks ahead, Congress will decide on whether to keep doling out tax dollars to the Export-Import Bank – a federal agency that subsidizes U.S. exports – and the Overseas Private Investment Corp. About half the cash from the Ex-Im Bank goes to just a few Fortune 50 giants, like Boeing and General Electric. The excuse is always the same: We should give corporate handouts to our companies because foreigners do the same for theirs.

But, as Utah Sen. Mike Lee notes, "We’ll never sell our agenda on welfare reform as Republicans until we show Americans we can get Big Business off the dole." That’s true; too bad so few of his colleagues agree with him.

Some respond that the money paid out in business favors is too small to make a fiscal difference in balancing the budget. Nonsense. Corporate welfare is a surprisingly large, though well-hidden, stash of cash, estimated at about $100 billion a year, according to a study by the Cato Institute.

An Illinois-based watchdog group, Open the Books, this year scrupulously tallied up all federal grants, loans, direct payments and insurance subsidies flowing to individuals and companies. It examined all accounts, from the Commerce Department to the Transportation Department, and found that corporate welfare payments from the federal government to firms ranked in the Fortune 100 totaled $1.2 trillion. I recommend a visit to to see where your tax dollars go.

Most of that $1.2 trillion was for contracts between private firms, like Lockheed Martin and General Dynamics, and government agencies, like the Defense Department. But the tally does not include the hundreds of billions of dollars in housing, bank and auto company bailouts in 2008-09, or special mandates for ethanol producers, like Archer Daniels Midland, or special tax breaks for wind and solar manufacturers.

But about $21.3 billion was doled out in the form of outright income transfer subsidies to corporate America. On average, each Fortune 100 company received about $200 million in such handouts. The table below shows a list of the major corporate welfare queens.


FEDERAL GRANT RECIPIENTS 2000-12 (in millions)


General Electric: $380

General Motors: $370

Boeing: $264


Archer Daniels Midland: $174

United Technologies: $160


Source: Open the Books, 2014


Perhaps the most depressing statistic is that all but one of the Fortune 100 stood in the federal soup line to take at least some form of benefit. That means 99 percent of the biggest U.S. companies are on the dole.

Redirect the money

Here’s a pro-growth idea. How about eliminating all these grants and subsidies and using the savings to cut the federal corporate income tax in half? It would be a good trade, but would the corporate welfare recipients take it?

It’s a pretty safe bet that we’re never going to balance our budget in Washington until our elected officials get Big Business off the dole. House Budget Committee Chairman Paul Ryan wants to do that. So do Sens. Lee and Rand Paul of Kentucky. They are lonely voices in the GOP.

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