Corporate Welfare: How Billionaires Enrich Themselves at Our Expense

 

Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill)

By David Cay Johnston

Penguin Group (2007)

Book Review

This book is an encyclopedia of the complex system of taxpayer-funded subsidies government grants the business elite to curry their political support. This support occurs in three main ways: as campaign contributions, as jobs (at the end of a civil servant’s government career) and outright bribes. According to Johnston, corporate welfare is as old as capitalism itself. Adam Smith (who Johnston quotes frequently) refers to corporate subsidies as “bounties.” He warns against them in his 1776 Wealth of Nations.

The author, who views corporate welfare as a major cause of America’s growing inequality, details a number of examples in which federal and state subsidies transformed ordinary entrepreneurs into billionaires.

• Sports stadiums – between 1995-2006 sports team owners persuaded state and local authorities to build more than 50 new major league stadiums and countless minor league stadiums. In many cases, the state or city seize private land via eminent domain on which to build the stadium. Johnston maintains that running a sports team is always a money-losing proposition – in nearly every case any profit is almost identical to the size of the subsidy. Former president George W Bush made his first millions by buying the Texas Rangers and using his father’s influence to pressure the city of Arlington to seize 200 acres of private land via eminent domain for a sports stadium.
• Walmart – founder Sam Walton built his retail empire by hiring lobbyists (Johnston calls them “bounty hunters”) to grant him free land via eminent domain, to “gift” him the sales tax he collects from customers and allowing him to raise capital via low cost government-sponsored industrial bonds. In total, Walmart has been granted more the $1 billion of government subsidies in 1/3 of their stores and distribution centers. In addition, as of 2007 they had (legally) avoided $4 billion in property and state income taxes.
• Health Maintenance Organization (HMOs) – Nixon launched the first non-profit HMOs in the early seventies. His goal was to reduce health care costs by enrolling patients in repaid care in where doctors worked on salary. In 1981, Reagan phased out the federal loans and loan guarantees Nixon enacted to help subsidize HMOs and allowed them to become for profit businesses.All over the country, CEOs sold and traded shares in HMOs built at taxpayer expense.The CEOs of non-profit hospitals and Blue Cross plans quickly followed suit. Johnston calls it the greatest legalized theft of public assets in US history.

Is Left-Right Collaboration Possible?

  Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State.

Ralph Nader (2014)

Book Review

A long time consumer advocate, Nader has spent most of his career battling the corporate takeover of government and US society. Although most analysts place him to the left of the Democratic Party, he frequently allies himself with libertarians and populist conservatives in specific campaigns. He now maintains the only way to restore accountable Constitutional government is by forming what he calls right-left convergences.

Traditional Labels Meaningless

Nader begins by defining “right” and “left,” as both have ceased to have any real meaning. He devotes an entire chapter to dispelling the common myths people from opposite ends of the political spectrum have about each other. He begins by discussing the philosophical architects responsible for the basic principles that underpin conservatism and libertarianism, with special emphasis on Adam Smith, Ludvig Van Mises, Frank Meyer, Russell Kirk and Peter Viereck. He goes on to trace links between contemporary conservatism and the 19th century populist movement in which farmers fought big banks and big railroads. This movement, commonly referred to as the “populist” or “decentralist” movement, would eventually evolve into Goldwater and Reagan conservatism. Nader maintains that many contemporary Republicans who call themselves “conservative” are really corporatists or corporate statists – working primarily for the benefit of the corporations who put them into office.

The US Left represents too many different tendencies – liberals, progressives, socialist, anarchists – to agree on a single overarching political philosophy.

Although Nader doesn’t mention it, many prominent figures identified with the so-called Non-Communist Left have been discredited by accepting major funding from CIA pass-through foundations.¹

Issues Ripe for Collaboration and Potential Obstacles

Nader identifies 25 potential issues that are ripe for collaboration between existing left and right-leaning movements (see below).²

He feels the biggest potential obstacle to potential is the knee-jerk ideological reaction of major party activists. It’s often hard to move Democratic Party loyalists past the tired knee-jerk reaction that conservatives are too narrow-minded, dogmatic and self-interested to be worthwhile coalition partners. Meanwhile many conservatives have the mistaken belief that all leftists are covert socialists who are only interested in big government, more welfare spending, more business regulation, more debt and and higher taxes.

Nader bemoans the tendency of ideologues from both ends of the political spectrum to get so focused in dogma and abstractions that they can’t lose sight of the constitutional crisis in front of them.

This is partly why left-right convergences tend to me more effective at the local level, where people are already shoulder-to-shoulder confronting the practicalities they face everyday. This is certainly consistent with what Susan Clark and Woden Teachout describe in Slow Democracy, their book on local direct democracy. It also reflects the the experience of the Community Environmental Legal Defense Fund (CELDF), which unites activists across the political spectrum in outlawing fracking, toxic sludge, factory farms and water bottling plants.

Examples of Successful Left-Right Collaboration

Unstoppable goes on to provide numerous examples of high profile right-left alignments in Congress (see below). ³

The main value of the book, in my view, is to remind us of the political power of strange bedfellow alliances and to discourage knee-jerk reactions to collaborating with people of different ideological persuasions. Since Unstoppable went to print, a left-right congressional convergence prevented Obama from going to war against Syria, and left-right convergences in Washington and Oregon passed ballot initiatives legalizing marijuana.

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¹Frances Stonor Saunders discusses this at length in her 1999 book Who Paid the Piper? The CIA and the Cultural Cold War.

²Personally, I think Nader’s list is too long. I myself would prioritize 6, 12, 14 and 22, as I already see evidence of left-right collaboration on these specific issues:

1. Requiring annual auditing of the defense budget and that ALL government budgets (including the CIA and NSA) be disclosed.
2. Ending corporate welfare and bailouts.
3. Promoting efficiency in government contracting and government spending.
4. Adjusting the minimum wage to inflation.
5. Introducing specific tax reform as well as pushing to regain uncollected taxes.
6. Breaking up the “Too Big to Fail” banks.
7. Expanding contributions to charity, using these funds to increase jobs and draw on available “dead money” (i.e. recycle wealth from millionaires and billionaires).
8. Legislating to allow taxpayers the standing to sue all government and “immune” corporations.
9. Expanding direct democracy by introducing ballot initiatives in the states that don’t have them and simplifying recall processes.
10. Pushing community self-reliance.
11. Clearing away obstacles to a competitive electoral process.
12. Restoring civil liberties.
13. Enhance civic skills and experience for students.
14. Ending unconstitutional wars and enforcing Article 1, Section 8 of the Constitution, which gives Congress the exclusive authority to declare war.
15. Revising trade agreements to protect US sovereignty and ending fast track approval for treaties.
16. Protecting children from commericialism and the physical and mental harm it causes.
17. Ending corporate personhood.
18. Controlling more of the commons than we already own.
19. Getting tough on corporate crime.
20. Ramping up investor power by strengthening investor-protection laws.
21. Opposing the patenting of life forms.
22. Ending the ineffective war on drugs.
23. Pushing for environmentalism.
24. Reforming health care.
25. Creating convergent institutions.

³ Among many others:
• The left-right coalition that stopped the Clinch River Breeder Reactor in 1983
• The left-right coalition that passed the False Claims Amendment Act in 1986 to protect whistleblowers who uncovered fraud in government contracts. The passage of the McCain (R)–Feingold (D) Act to reform campaign financing in 2003.
• The left-right coalition Ron Paul formed with sympathetic Democrats to introduce a bill to legalize industrial hemp in 2005.
• The bill Ron Wyden (D) and Rand Paul (R) introduced to legalize industrial hemp in 2013.
• The bill Ron Wyden (D) and Lisa Murkowski introducing requiring the reporting of donations over $1,000 to any group engaged in federal political activity.

 

Is Your Boss Pocketing Your State Income Tax?

Corporate Welfare for Goldman Sachs, Walmart and 2,700 Other Companies

According to investigative journalist David Cay Johnston, more than 2,700 companies have secret agreements to keep the state income tax they withhold from your paycheck.

Goldman Sachs, Walmart, Chrysler, Ford, General Motors, Nissan, Mitsubishi, Motorola, Proctor and Gamble, AMC Theaters, Toyota and Electrolux are but a few of the big name companies involved.

As Johnston writes in a 2011 Reuters column:

“Instead of paying for police, teachers, roads and other state and local services that grease the wheels of commerce, Illinois workers at these companies will subsidize their employers with the state income taxes they pay. The deal to let employers keep half or all of their workers’ state income taxes represents a dramatic expansion of a little-known trend in the law: diverting taxes from public purposes to private gain.”

As of April 2012, the states which have signed these secret agreements included Colorado, Connecticut, Georgia, Illinois, Indiana, Kansas, Kentucky, Maine, Mississippi, Missouri, New Jersey, New Mexico, North Carolina, Ohio, South Carolina, Utah.

Read more at Taxed by the Boss

 

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