Government Spends More on Corporate Welfare Subsidies than Social Welfare Programs

 

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Corporate Welfare Piggy Bank

Time Magazine, Vol. 152 No. 19

About $59 billion is spent on traditional social welfare programs. $92 billion is spent on corporate subsidies. So, the government spent 50% more on corporate welfare than it did on food stamps and housing assistance in 2006.

Before we look at the details, a heartfelt plea from the Save the CEO’s Charitable Trust:

There’s so much suffering in the world. It can all get pretty overwhelming sometimes. Consider, for a moment the sorrow in the eyes of a CEO who’s just found out that his end-of-year bonus is only going to be a paltry $2.3 million.

“It felt like a slap in the face. Imagine what it would feel like just before Christmas to find out that you’re going to be forced to scrape by on your standard $8.4 million compensation package alone. Imagine what is was like to have to look into my daughter’s face and tell her that I couldn’t afford to both buy her a dollar sign shaped island and hire someone to chew her food from now on, too. To put her in that situation of having to choose… She’s only a child for God’s sake.”

It doesn’t have to be this way. Thanks to federal subsidies from taxpayers like you, CEO’s like G. Allen Andreas of Archer Daniels Midland was able to take home almost $14 million in executive compensation last year. But he’s one of the lucky ones. There are still corporations out there that actually have to provide goods and services to their consumers in order to survive. They need your help.

For just $93 billion a year the federal government is able to provide a better life for these CEO’s and their families. That’s less than the cost of 240 million cups of coffee a day. Won’t you help a needy corporation today?

The Traditional Welfare Queen

Definition: social welfare

n. Financial aid, such as a subsidy, provided by a government to specific individuals.

When one thinks about government welfare, the first thing that comes to mind is the proverbial welfare queen sitting atop her majestic throne of government cheese issuing a royal decree to her clamoring throngs of illegitimate babies that they may shut the hell up while she tries to watch Judge Judy. However, many politically well-connected corporations are also parasitically draining their share of fiscal blood from your paycheck before you ever see it. It’s called corporate welfare. The intent here is to figure out which presents the greater burden to our federal budget, corporate or social welfare programs.

There are, of course, positive and negative aspects to this spending.The primary negative aspect is that you have to increase taxes to pay for it. Taxing individuals lowers their standard of living.  It reduces people’s ability to afford necessities like medical care, education, and low mileage off-road vehicles.The common usage definition of social welfare includes welfare checks and food stamps. Welfare checks are supplied through a federal program called Temporary Aid for Needy Families. Combined federal and state TANF spending was about $26 billion in 2006. In 2009, the federal government will spend about $25 billion on rental aid for low-income households and about $8 billion on public housing projects. For some perspective, that’s about 3 percent of the total federal budget.

Note: I do not consider Medicaid to be included in the term “welfare” as it is used in common parlance.  Typically, if one states that someone is “on welfare”, they mean that the person is receiving direct financial aid from the government.  If we included Medicaid in our definition of social welfare, we would also have to consider any service that the government pays for to be “welfare”.  For instance, public roadways to individuals’ homes would also be considered “welfare” under that expansive definition.

TANF (Temporary Aid to Needy Families)

Another negative aspect relates to the fact that social welfare programs reduce the incentive for recipients to become productive members of society. However, in 1996, Congress passed a bill enacting limited welfare reform, replacing the Aid to Families with Dependent Children (AFDC) program with the new Temporary Aid to Needy Families (TANF) program. One key aspect of this reform required recipients to engage in job searches, on the job training, community service work, or other constructive behaviors as a condition for receiving aid. The bill was signed by a man named Bill Clinton, who is much better known for an act of fellatio which, of course, had far greater societal implications. Regardless, the success of this reform was pretty dramatic. Caseloads were cut nearly in half. Once individuals were required to work or undertake constructive activities as a condition of receiving aid they left welfare rapidly. Another surprising result was a drop in the child poverty rate. Employment of single mothers increased substantially and the child poverty rate fell sharply from 20.8 percent in 1995 to 16.3 percent in 2000.

Graph of US Child Poverty Rates by Living Arrangements (1975-2009)

Graph Source: http://census.gov/hhes/www/poverty.html

The Corporate Welfare Queen

Now, let’s consider the other kind of welfare.

Definition: corporate welfare

n. Financial aid, such as a subsidy, provided by a government to corporations or other businesses.

The Cato Institute estimated that, in 2002, $93 billion were devoted to corporate welfare. This is about 5 percent of the federal budget.To clarify what is and isn’t corporate welfare, a “no-bid” Iraq contract for the prestigious Halliburton, would not be considered corporate welfare because the government technically directly receives some good or service in exchange for this expenditure. Based on the Pentagon’s Defense Contract Audit Agency (DCAA) findings of $1.4 billion of overcharging and fraud, I suppose the primary service they provide could be considered to be repeatedly violating the American taxpayer.On the other hand, the $15 billion in subsidies contained in the Energy Policy Act of 2005, to the oil, gas, and coal industries, would be considered corporate welfare because no goods or services are directly returned to the government in exchange for these expenditures.

US Energy Subsidies Infographic by GOOD Magazine & Deeplocal

Tax breaks targeted to benefit specific corporations could also be considered a form of welfare. Tax loopholes force other businesses and individual taxpayers without the same political clout to pick up the slack and sacrifice a greater share of their hard-earned money to decrease the financial burden on these corporations. However, to simplify matters, we’ve only included financial handouts to companies in our working definition of corporate welfare.

Whenever corporate welfare is presented to voters, it always sounds like a pretty reasonable, well-intended idea. Politicians say that they’re stimulating the economy or helping struggling industries or creating jobs or funding important research. But when you steal money from the paychecks of working people, you hurt the economy by reducing their ability to buy the things they want or need. This decrease in demand damages other industries and puts people out of work.

Most of the pigs at the government trough are among the biggest companies in America, including the Big 3 automakers, Boeing, Archer Daniels Midland, and now-bankrupt Enron.

Farm Subsidies

However, the largest fraction of corporate welfare spending, about 40%, went through the Department of Agriculture, most of it in the form of farm subsidies. (Edwards, Corporate Welfare, 2003) Well, that sounds OK. Someone’s got to help struggling family farms stay afloat, right? But in reality, farm subsidies actually tilt the cotton field in favor of the largest industrial farming operations. When it comes to deciding how to dole out the money, the agricultural subsidy system utilizes a process that is essentially the opposite of that used in the social welfare system’s welfare system. In the corporate welfare system, the more money and assets you have, the more government assistance you get. Conversely, social welfare programs are set up so that the more money and assets you have, the less government assistance you get. The result is that the absolute largest 7% of corporate farming operations receive 45% of all subsidies. (Edwards, Downsizing the Federal Government, 2004) So instead of protecting family farms, these subsidies actually enhance the ability of large industrial operations to shut them out of the market.

Graph of Direct Government Payments to Farmers (1990-2004)

Graph Source: http://ers.usda.gov/data

Wal-Mart.  Always high subsidies.  Always.

The same is true in all other industries, too. The government gives tons of favors to the largest corporations, increasing the significant advantage they already have over smaller competing businesses. If, in the court of public opinion, Wal-Mart has been tried and convicted for the murder of main street, mom-and-pop America, then the government could easily be found guilty as a willing accomplice. Wal-Mart receives hundreds of millions of dollars of subsidization by local governments throughout the country. These subsidies take the form of bribes by local politicians trying to convince Wal-Mart to come to their town with the dream of significant job creation. Of course, from that follows a larger tax base. For example, a distribution center in Macclenny, Florida received $9 million in government subsidies in the form of free land, government-funded recruitment and training of employees, targeted tax breaks, and housing subsidies for employees allowing them to be paid significantly lower wages. A study by Good Jobs First found that 244 Wal-Marts around the country had received over $1 billion in government favors.

The Big Picture

So now let’s look at the big picture. The final totals are $59 billion, 3 percent of the total federal budget, for regular welfare and $92 billion, 5 percent of the total federal budget, for corporations. So, the government spends roughly 50% more on corporate welfare than it does on these particular public assistance programs.

Should we spend less on corporate welfare and/or social welfare programs? Or should we spend even more? It’s up to you. A bunch of people died horrible deaths to make sure this country remained a democracy, so if you feel strongly about this issue you owe it to them to call or write your congressman and senators and give them a piece of your mind.

Some More Sources:

2013 Budget: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf

Source: Office of Management and Budget, Budget of the United States Government (Washington: Government Publishing Office), various years; and data from the American Association for the Advancement of Science R&D Budget and Policy Program, various years.

Source: U.S. Department of Agriculture, Economic Research Service, http://www.ers.usda.gov/data.

Source:  Export-Import Bank, 2006 Annual Report (Washington: Export-Import Bank, 2007).

Source Data from Chris Edwards at Cato:

Corporate Welfare by Agency

Corporate Welfare by Agency 2

Corporate Welfare by Company

I am extremely appreciative of any corrections or additional info that I left out.  Please include hyperlinked SOURCES.  I want to update this post with more recent numbers and more expansive definitions of both corporate and social welfare.  My ultimate solution to this problem is wiki-izing ThinkByNumbers.org so that good citizens such as yourselves can correct any unfortunate omissions.  I hope to have that feature functional in the coming months.

 

Guest • 5 months ago
Hmmm…seems as if some of you are angry at the article. I can only speak from personal experience. As of today, I have started 5 businesses-all successful. I have provided jobs and I don’t pay less than 3 times the minimum wage for I know no one can live off of that. But let’s go back in time…
I’m in my early 20’s. I was to go to one of the finest schools but the severe abuse at home took my dreams away-one parent was prosecuted and found guilty-documented in court records. We had been locked in rooms for months at a time. At 18 she then throws you out the door. She had taken the $30,000 I received from my real father that died, and that money was supposed to go for college too. I struggle with nightmares and am barely functioning but I manage to maintain my job as a waitress in a dinner house. I’m trying to take classes at Cal State at Long Beach, CA but I am weak and physically sick from a “dual ureter” on my right kidney. We have not enough for rent and food. I apply for food stamps and welfare in the early 80’s..
It gave me a chance to breath for 5 months (although $187 dollars is not that much even then and it took jumping through hoops to even get). By the sixth month I had my idea for my first business and I use the 6th month check to make some prototypes and they sell all in an hour. I cancel welfare and I’m a small business owner. The important part comes…
As I was jumping through hoops i got to know and see many who were applying. Most were down and out and barely hanging on-maybe 2 out of 10 were healthy and could find work and shouldn’t have been there. For the rest, there were no “welfare queens”-these people all needed far more help. I am more than happy to pay my taxes even if it goes to 8 out of 10 who need it. MORE THAN HAPPY!
More…
I was in the “gifted program” MGM in CA as a child and Math was always a breeze. I decide to find out how much the corporations are paying in taxes. So, I go to the IRS pie chart and it’s approximately $250 billion for several years back ..but their profits are record breaking at $6 trillion for the last years. Gee, so I divide 250 billion by 6 trillion and i get 4% in taxes. 4%???? What if they paid the other 26% like everyone else pays in the working class? Well that an additional $1.5 trillion dollars stolen from our revenues in loopholes and tax tricks. I don’t care if his numbers in his article were off by double or triple, for the fact remains that corporations owe us AT LEAST $1.5 TRILLION DOLLARS!! And I only calculated at 30% because that’s what we pay on average. So, corporations are getting a break that is OVER 50% of the revenues and what we can spend. Last point…
Do you think that $1.5 trillion would help out with our budget? Did you know we’d be swimming in surplus? Did all of you hear this? We would be swimming in surplus if corporations were not given tax subsidies and tax loopholes by the conservatives in our government. So I don’t give a d**** about what year vs. what year..or if he is off by half or by double. Where the hell is our $1.5 trillion? You don’t think they need to pay it? They use our roads, bridges, etc for their tankers, trucks, for their employees to drive back and forth to work. They pollute the environment more than any individual is even capable of imagining. They sell their product to the hundreds of millions who live in cities and cities can only exist with infrastructure, police, firemen, etc. 4% doesn’t cover anything! Maybe the parking space that their Mercedes are parked on …just that parking space-not the roads in general. And they shouldn’t pick up the phone for the Fire Department when they have a fire…or some other catastrophe because they want to take the money for maintenance and put it in their pocket.
There are your numbers!!!!!
(To all the spelling and grammar police, I had a severe brain injury and re-learned to read and write-and so I don’t give a d***about that kind of critique for I only have the deficits thanks to big business insurance companies who denied to insure me even when I offered them twice as much due to “pre-existing” conditions-what a shame we have to make a law to tell corporations that when they sell a product like insurance, they actually have to provide the service to people!!!)!
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    Chad Guest • 5 months ago
    Please run for office and never forget where you came from. Thanks for sharing your story!
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        Guest Chad • 2 months ago
        Chad, it’s ben months since I wrote this and you posted, but I wanted to thank and assure you, I will NEVER FOR GET WHERE I CAME FROM and I will always put all my effort in bringing the truth forward. Thank You!
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    donaldogomez Guest • 4 months ago
    Dear GIgi….thanks for the post. You are a truly remarkable woman and human being with a heart of infinite compassion. Your ability to take truly complicated statistics and transfigure them into easily understandable scenarios is fascinating and unique. I am a professional writer/film maker with a lot of credentials and awards but I tip my hat and bow deeply to salute your wisdom and moral courage. I am a true admirer
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        Guest donaldogomez • 4 months ago
        Without the writers/film makers, the dreams of those who fight for them, never get heard. Without your beacon, we have no light to be seen in the night or along the path. So that we may gather more as we march in unison-it is I who admire you! Truly and honestly, Gigi
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    JakeCake Guest • 4 months ago
    Great success story but you seem to be missing a very important part of this policy (as well as the author of the article). We are a nation competing in a global economy struggling to stay on top. Our mom and pop businesses are not the one in this country leading in terms of innovation by any means and without these shitty corporations our countries economy would collapse at a rate you wouldn’t believe. Do I like paying for these corporate subsidies- no- fuck no. Are they all fair and equal- hell no. Is there a reason they exist- yes, certainly so. We as the little shitty entitled Americans of the present do not seem to know the importance of our big industries. Did you know that the top %10 of earners in this country (almost all exclusively CEO’s and business owners) pay more total $ taxes than the rest of the 90%? I bet you didn’t. Did you know that that “measly 4% real corporate tax rate we have in the U.S. is the highest corporate tax rate in the world, responsible for paying more taxes to the U.S. government in 1% of industry dollar for dollar than all the 99% mom and pop operations? WOW bet I just blew your small little brain. Don’t believe- me research it for yourself and find the real numbers! And stop acting like life is so unfair you little turd.
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        Guest JakeCake • 2 months ago
        I’m going to give you a more complete reply. I am NOT missing any part of this equation -but your attempt to demean another has been duly noted. Here is what you don’t know, but should have researched before you made a comment full of mistakes. The top CEOs are not in any way responsible for “innovation”-in fact, innovation can come from a single individual working in his garage on a project. Here’s what the CEOs are responsible for and it does not contribute to our country in the least. They find these patents and discoveries by individuals or small groups of people, then they buy up all the rights to that technology or whatever they have discovered. They do this for two reasons: either they want exclusive use of the innovation so that others cannot benefit and even improve upon it…..or they have their own techniques which are inferior to the new ideas and by buying up the rights, they can keep this innovation from the public or anyone else and therefore keep it hidden so than can sell their inferior products. In fact, things YOU HAVE NO AWARENESS OF is that their is growing concern about the innovations being bought up and hidden so that no one can access them and this is being done by your psychopathic CEOs.
        Here’s another thing you think I don’t know…when in reality you are not even aware of: They pay 7% to 10% of all the revenues collected (see any IRS pie chart). Now, at one time, 40 years ago, they paid more that half (50%) than any other sector of the country-but that is not true now. Total taxes paid by corporations is $250 billion dollars (maybe projected $300 billion dollars this last year). Now if you understood math, you’d know that $250 billion dollars is not 90% of the 2.1 trillion dollars we collect in revenues is it? No! It’s just over 10% of what is paid in taxes.
        And you apparently don’t understand the “marginal tax rate schedule” for it you did, you would know that when they CLAIM to be paying the highest tax rate, they are basing it on the “marginal tax rate” of 35%-on paper only. 4% is the effectual rate and that is the lowest in the world…sometimes maybe second from the lowest as it fluctuates each year.
        Don’t worry-I won’t believe you because you haven’t stated one thing that is true. You aren’t capable of “blowing away” anyone because your small little brain missed all the facts. You only tried to be demeaning and you aren’t even good at that,, because without facts it makes you sound like a “little turd” who is not just acting, but intentionally lying.
        So the best idea is that you seek treatment for your mixed up mind and even more so, for your own sociopathic tendencies-although since I’m also a neuroscience researcher, science now knows that your delusions and poor attempts to demean are a result of the inability to access your anterior cingulate cortes in the pre-frontal cortex region-while your mean spirited hate and resulting lies come from an enlarged amygdala-also found in reptiles and snakes. It might behoove you to take care of your “reptilian brain” that has now been documented on fMRIs and SPEC SCAN.
        I don’t always have the time to put a demented mind in its place, but thought it might be of benefit for others who read this thread. And the funny part about it all, is that in your mind, you believe to be so superior in thought when you are not even capable of using logic, deduction, and facts. So, this is for any other who may be following this thread.