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What is Corporate Welfare?

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  • Written By: Sherry Holetzky
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 September 2014
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Corporate welfare can be defined generally, as any assistance provided by a government, which gives a private business an advantage over others. In the United States, corporate welfare refers to any number of favors, costing billions of dollars each year, bestowed on corporations by the federal government. It includes, but is not limited to, tax breaks, direct grants for corporations, and various other forms of special favorable treatment.

As with other forms of welfare, many individuals and groups oppose the concept. One of the main contentions concerning corporate welfare is the fact that it like other welfare programs is unconstitutional at the federal level. The Constitution provides no authority for Congress to redistribute money collected via taxation, in an effort to subsidize businesses or individuals. In fact, the spending power of Congress is specifically detailed and limited.

While entitlement programs ostensibly designed to assist families or individuals are often described as “leveling the playing field,” those who support public assistance rarely apply this position to corporate welfare. In fact, it is as inaccurate concerning corporate welfare as it is in regard to other entitlement programs.

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Corporate welfare is accused of not leveling the field at all, but distinctly providing advantages for select industries or companies at the expense of other businesses and often consumers. Not only that, but the cost is astronomical, and the taxpayer doesn’t get a say in which companies will be propped up. Adding insult to injury, some say that the government seems to choose blindly when determining which industries or businesses will yield a return on this huge investment.

Corporate welfare is not always recognizable in its various forms. Along with cash bailouts there is also money provided to pay for research and development, insurance, or for subsidized loans. Favors also include acts of protectionism, shielding only certain American industries or businesses, from foreign competition. This of course, stifles free trade, limits other companies, and means that Americans often pay more for goods and services.

Many people believe that corporate welfare also breeds corruption. It seems that frequently, those that make the greatest campaign contributions receive the greatest windfalls. Aside from monetary concerns, certain industries sometimes have greater lobbying power when it comes to legislation. Can you think of any industry that has been able to persuade the government that the purchase of its product or service should be mandatory? If so, you have just discovered another form of corporate welfare.

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anon308070
Post 5

Why can't companies with government contracts pay at least some taxes? The biggest welfare divas make billions in profit, get billions in tax credits, received billions in subsidies and pay no taxes, like GE, Lockheed-Martin, Boeing etc., etc., plus the oil companies. -- Concerned Citizen.

SauteePan
Post 4

Also, don’t forget that the Energy Department also offers annual grants of up to 2.7 billion dollars a year in order to develop research for alternative fuels and improving what is currently available.

The Commerce Department also offers a research grant to enhance better forms of weather forecasting. It does not end there.

There is also an Export-Import Bank that according to the Cato Institute offers subsides of 700 million dollars a year in order to secure foreign investment in domestic goods.

This program lends money and guarantees loans to foreigner buying of our goods overseas, it also offers credit insurance and below market loans.

Many people feel that subsidies that are offered for agricultural products offer a disadvantage to the consumer because they are forced to pay more for a product because the government wants to protect the production of it.

subway11
Post 3

The CATO Institute estimates that there is about 100 corporate subsidy programs in the federal budget that amount to annual spending upwards of 75 billion dollars a year.

In addition, it is estimated that if we consider cutting corporate welfare we can save the American taxpayers almost 450 billion within five years.

There are several categories of corporate welfare programs. The first is the direct grants to businesses.

The most specific example is the Market Access Program that automatically grants 100 million dollars to the US agricultural industry to exporters in order to defray the foreign advertising costs.

There is also a subsidy of 200 million dollar a year program that offers funding to high tech companies in order to develop highly marketable products.

GreenWeaver
Post 2

Now the company has emerged from bankruptcy with an initial public offering that was supposed to be issued to pay back the tax payers, but the only people that made money were the Saudis and the Chinese.

China now owns 20% of an American iconic company like General Motors. This example is a good case for companies rethinking their acceptance of corporate welfare.

Had General Motors allowed going through a normal bankruptcy and then reemerging they would have learned their financial lessons while still remaining in control of the company.

Anything that the government manages is destroyed because the government has so much red tape that it is impossible to achieve anything or make any kind of traction. This corporate welfare statistic should be a reminder to companies of what could happen to them under Obama.

mutsy
Post 1

Corporate welfare of 2009 bailed out the banks and General Motors, but although these entities benefited from the influx of cash this also allowed the federal government access to these companies and granted them a certain degree of control that is unprecedented in American Politics.

This is why the majority of the banks paid back the loans with interest in record time. Many feel that General Motors was offered the bailout because of its union ties.

Not only did the federal government nationalize this company, there was a growing joke that its name was changed to “Government Motors” because the federal government even went so far as to fire the CEO of the organization.

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