When cutting back on welfare, don’t forget corporate welfare

December 8, 2012

When a poor person gets a government handout, it’s called welfare. When a rich corporation gets one, it’s called an economic development incentive.

With local, state and federal government budgets tighter than ever, social programs are getting a hard look. But what about corporate welfare?

The New York Times started a good conversation last week with a three-part investigative series called the United States of Subsidies. Reporter Louise Story spent 10 months analyzing corporate tax breaks, gifts and other incentives in all 50 states, which she figured add up to at least $80 billion in annual taxpayer subsidies to business.

Business subsidies have mushroomed since the 1980s, when automakers started pitting states against one another to host new assembly plants. The strategy worked so well that other industries demanded freebies, too.

A big reason corporate welfare has flourished is that politicians love being able to announce lots of new jobs coming to their area. (They often are out of office when those jobs never materialize or leave for another state offering better incentives.)

From a national perspective, it is a zero-sum game. State and local incentives do little or nothing to grow the national economy; they just determine where in the nation the growth will occur.

But it’s more insidious than that. Incentives redirect billions of tax dollars to corporate bottom lines instead of to improving education, health, safety, infrastructure and making other public investments that will create genuine, long-term economic development.

The Times website (Nytimes.com) has state-by-state breakdowns of incentives and a searchable database of recipients. It shows that the nation’s biggest business incentive Santa is high-growth, low-wage, high-poverty Texas, at $19 billion a year. West Virginia and Oklahoma give up incentives equal to one-third of their budgets.

The Times calculates Kentucky’s annual incentives at $1.41 billion — about 15 percent of the state budget, or $324 per Kentuckian. Those include $264 million in personal income tax credits; $108 million in sales tax refunds, exemptions and discounts; and $69.2 million in corporate income tax reductions, credits or rebates.

The Times reports that most Kentucky incentives, $569 million worth, go to mining, oil and gas industries — no surprise there, given their political clout. That is followed by $341 million for agriculture and $180 million to manufacturers.

As is true nationally, some of the biggest Kentucky incentive recipients in recent years were automakers: $307 million for Ford; $83.8 million for Toyota and $10 million for General Motors. Given their high wages and large supplier networks, those might be good investments.

But the big head-scratcher in the Times’ database was $94.1 million in incentives to Tyson Foods from 1995-2009 for a low-wage chicken-processing plant in Henderson County. Is that the kind of economic development Kentucky taxpayers should be subsidizing?

While the Times’ report is impressive in its national scope, there has long been debate about the value of incentives. The Herald-Leader published an investigative series in 2005 that questioned the value of many Kentucky tax breaks and other giveaways. The report resulted in some improved accountability, but did little to stem the flow of tax money into corporate pockets.

A state-commissioned study issued this summer came up with incentive figures smaller than the Times reported, but still pretty staggering: $1.29 billion between 2001 and 2010. The report said 577 companies took incentives to locate 55,173 jobs in Kentucky at a cost to taxpayers of $23,385 per job.

The incentive system favors large corporations over small businesses — often the employers who are already in a community and aren’t looking to leave. Officials have responded by coming up with some incentives for them, too, which just further drains government coffers.

How do we stop this racket, where cities and states compete to steal jobs from one another? It would be great if Congress could pass a law, but it probably can’t. Still, with about 20 percent of state and local government budgets coming from federal dollars, somebody needs to be looking out for the national interest.

Taxpayers should demand reform of these corporate welfare systems, just as they did social welfare systems in the 1990s. But it won’t be easy. Corporations employ more lobbyists and make more campaign donations than poor people do.


‘Watson’ lawmakers might pull us out of jeopardy

February 19, 2011

Since the U.S. Supreme Court has decided that corporations are people, why can’t computers be politicians?

Watson for president! Better yet, let’s make clones of Watson – the computer IBM engineers built to clobber two human Jeopardy! champions last week – and put them to work in Congress and state legislatures.

Machines programmed to make decisions based on facts and logic would be an improvement over many of the human robots controlled by special interests who now run our government.

Big-money influence has always been a problem in politics. But the floodgates were opened last year when an activist Supreme Court majority expanded the legal idea that corporations are people. They overturned decades of campaign finance law and allowed corporations and unions to spend huge amounts of often-anonymous money to influence elections.

Computer politicians could help solve this problem, because they lack human greed. All computers really need is a cool room for their servers and a little maintenance. As long as they have a steady supply of electricity, they aren’t hungry for power.

Engineers could design computer politicians much the way they did Watson. They could fill their electronic brains with rich databases of facts and experience. Then they could write decision-making algorithms based on human logic and American ideals. You know, ideals that human politicians laud in speeches but often ignore in practice – fairness, justice, public good.

Consider how a computer politician could help with deficit-reduction. IBM named its Jeopardy! computer after the company’s founder, Thomas Watson. Let’s call our computer politician Webster, after that great 19th century statesman, Daniel Webster.

Webster could begin by analyzing how we got into this mess. His database would tell him that federal surpluses turned to huge deficits between 2000 and 2008 primarily because of massive tax cuts and more than $1 trillion borrowed to fight wars in Iraq and Afghanistan.

Public debt was compounded by a deep recession caused largely by a housing bubble and irresponsible Wall Street speculation. With Wall Street now back to record profits, Watson might suggest a transactions tax on financial speculation to bring in billions to help balance the budget.

Many members of Congress act as if budgets can be balanced and debt eliminated by simply cutting discretionary, non-military spending. Free from human ideology, Webster would use facts and logic to conclude that any serious attempt to solve our financial problems will require ending the wars, curbing health care costs and raising taxes.

Webster’s database would show him that today’s income tax rates are the lowest in decades – lower than during the boom years of the 1990s, and far lower than during the economic boom that followed World War II. His electronic brain would dismiss the “taxed enough already” crowd, because facts show they are taxed less than in the past.

That is especially true of the wealthiest Americans. Because data show that assets held by the richest 5 percent of Americans have grown from $8 trillion to $40 trillion since 1985, Webster would logically conclude that they can afford to pay more in taxes. And that it would be in the best interest of the nation that created the environment that allowed them to prosper.

Webster’s database would show plenty of wasteful government spending to trim – much of it in the huge military budgets that some human members of Congress don’t want to touch.

I suspect Webster’s electronic brain would recognize the folly of slashing low-cost, high-value government programs such as public broadcasting, Teach for America and AmeriCorps.  He would conclude that cutting education is no way to build a more competitive economy. The logic of maintaining oil and coal subsidies while cutting investment in developing the energy technologies that must eventually replace fossil fuels just wouldn’t compute.

Decision-making algorithms based on American ideals would never allow essential aid to the poor, sick and elderly to be slashed, while preserving billions in wasteful military spending and subsidies for industries that don’t need them.

I’m sure some people will argue that machines can never replace human politicians, because even the best computers lack essential human traits, such as empathy. They have no heart.

I don’t see that as a big problem. Many of our current politicians don’t seem to have hearts, either.