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Corporate/Elitist Welfare vs. Personal Welfare – An In-Depth Analysis


By Mitch Gurney

Jan 8, 2012

Some among the conservative flock think only the needy game the system, as seen by reading this article by Lloyd Marcus, The Ultimate Devastating Price of Government Dependency posted at a conservative blog, The American Thinker. The article reflects a common opinion often perpetuated by many conservatives that poor people are poor because they are lazy and thus more likely to game the system. Consequently their mantra is welfare creates freeloaders and demand the programs be cut. But seldom do they demand cuts to subsidies that benefit the wealthy and corporations nor even acknowledge the existence of the corporate welfare system. I had written an article a while back related to the topic of public welfare and this mentality can be seen manifesting in many of the comments the article received.

Mr Marcus writes from his personal experience and generalizes that what he observed growing up is applicable across the spectrum for all poor people. His berates only the needy and goes as far as to issue this warning:

You government dependency junkies do not get off scot-free. Remember, nothing in life is free. You ultimately pay a devastating price for your class envy, laziness, hatred, and fear. In the process, you lose yourself.

Throughout the article Marcus implies these “lazy government dependency junkies” are lifelong recipients of welfare. He is certainly entitled to his opinion but opinions are rarely the basis for facts. What he infers though as generational welfare recipients is, today, largely untrue. He parrots the same mean-spirited rhetoric so often heard from others among this flock as seen in this satire by Jon Stewart’s Daily Show World of Class Warfare.

What we will endeavor here is to debunk this argument plus show that the wealthy and corporations benefit from their own form of corporate welfare as well and are just as likely to game the system as anyone. What’s true about human behavior is that some people, regardless of stature, with a predisposition to game the system will do so when an opportunity presents itself.

In 2007 the Cato Institute reported at length about the Corporate Welfare State, while reporting only on subsidy programs that resulted in direct expenditures within the federal budget plus excluded tax preferences, trade barriers, and Government–Sponsored Enterprise (GSE) reported:

The federal government spent $92 billion in direct and indirect subsidies to businesses and private sector corporate entities — expenditures commonly referred to as “corporate welfare” — in fiscal year 2006.

For the purposes of this study, “corporate welfare” is defined as any federal spending program that provides payments or unique benefits and advantages to specific companies or industries

…the federal government…subsidize[s] some of the biggest companies in America. Boeing, Xerox, IBM, Motorola, Dow Chemical, General Electric, and others have received millions in taxpayer-funded benefits through programs like the Advanced Technology Program and the Export-Import Bank. In addition, the federal crop subsidy programs continue to fund the wealthiest farmers.

My guess is Mr Marcus grew up during the 1950’s and 1960’s. Granted welfare programs were in dire need of reform back then. But the programs have changed numerous times over the years with the most dramatic having occurred in 1996. But he doesn’t mention this but implies instead that once a person gets on public assistance it automatically leads to “generational welfare.”

As I wrote in my article, the Federal assistance system took a massive fundamental shift in 1996 when the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) was enacted. PRWORA instituted Temporary Assistance to Needy Families (TANF) that replaced Aid to Families with Dependent Children (AFDC).  PRWORA instituted a block system that granted states more authority “to design their own systems, as long as states met a set of basic federal requirements.” Because of the workforce component in PRWORA, it was heralded by supporters as a reassertion of America’s work ethic. TANF was reauthorized in the Deficit Reduction Act of 2005.

TANF program guidelines are summarized as follows:

Work Guidelines
1. Recipients of TANF must be working no later than 2 years from the start of receiving the government assistance program TANF.

2. To maintain eligibility toward the States eligibility guidelines, work must consist of employment of no less than 30 hours per week (or 20 hours a week if there is a child in the household under 6 years of age).

TANF Benefits

There is a maximum of 60 months of TANF benefits within one’s lifetimes. There is oftentimes a differentiation between adults and children. If you are a child and receive TANF benefits, depending on your State, you could receive another 60 months as an adult. Some states pay fewer than 60 months in benefits.

TANF Eligibility Requirements

  • You must be a US Citizen
  • Children must be citizens or have eligible alien status
  • You must have a social security number
  • Your family must earn less than a certain amount of money per month
  • Children must be 18 years old or younger. If you are older than 18, you must be a full-time student with an expected graduation date before the age of 20. – Families must have a child

Since the enactment of TANF in 1997 the number of recipients receiving monthly assistance has declined from over 12.3 million in 1996 to 4.3 million in 2010.

Mr Marcus complains about the number of people receiving food stamps, today known as the Supplemental Nutrition Assistance Program (SNAP). SNAP provides assistance to low or no income people and families. In 2010 fiscal year, $64.7 billion were distributed with an average monthly benefit per recipient per household of $133.48. As of June 2011 the number of Americans receiving food stamps is about 45 million. Today all food stamp benefits are distributed using cards.

The former Food Stamp Program went through several changes over the years as well and although reauthorized in the 1996 Farm Bill, PRWORA enacted major changes to the program, among them were:

  • eliminating eligibility to food stamps of most legal immigrants who had been in the country less than five years;
  • placing a time limit on food stamp receipt of three out of 36 months for Able-bodied Adults Without Dependents (ABAWDs) who are not working at least 20 hours a week or participating in a work program;

The Budged Act of 1997 made some changes that had been implemented by PRWORA among them:

  • Restored eligibility for certain elderly, disabled and child immigrants who resided in the United States when PRWORA was enacted

See more

As a result of these changes participation in the program had initially begun to decline in 1997 but began increasing in 2001. Today, since the onset of the Great Recession in 2007, the number of people receiving SNAP benefits is over 46 million.

As we see recipients of TANF benefits are limited to 60 months during their life time. The most a recipient might receive if they were a child when receiving TANF, depending on the state, may receive another 60 months of benefits as an adult. Recipients of SNAP that are able-bodied adults without dependents are limited to three out of 36 months if they are not working at least 20 hours per week or participating in a works program. Today the current regulations for these programs hardly foster an environment for generational welfare.

Passage of PRWORA was the culmination of many years’ research and debate between the Republicans and the Democrats over the merits and flaws of the former AFDC program. PRWORA was the corner-stone of the Republicans Contract with America and President Clinton’s pledge to end welfare as we knew it. The legislation was introduced by House Rep. E. Claw Shaw Jr. (R.Fl.22).

The irony in the opposition still waged by many conservatives is they seem unaware of these changes as reviewed here even though their party was instrumental in enacting the changes. And more perplexing they describe a welfare system that existed in the past, not the one that currently exists.

That more people are drawing benefits today should be of concern and should serve as an indication that something is seriously wrong. But not all of these people are lazy and to make such generalized judgments is unjust. The reality is there is a shrinking job base providing a living wage to support the expanding working population.

The unemployment crisis plaguing us today is an accumulative result of this country bleeding middle class jobs profusely for over 30 years. U.S companies have been outsourcing jobs and transferring their manufacturing abroad since the late1970’s. Today we have a massive mind-boggling trade deficit and a massive collapse in jobs. According to a recent study of BLS data over 56,000 factories have shut down since 2001 alone. Currently there are an estimated 27 million people unemployed in the U.S. In contrast to BLS U-3 jobs reporting of 8.5% unemployed, Shadow Stats estimates that over 20% of the work force is now unemployed. With so many now in need public assistance is clearly obvious and seems the compassionate thing a society of our stature should do for our own citizens.

As mentioned we seldom hear our guardians against freeloaders demand similar cuts to corporate welfare programs. While it seems obvious why we would help those in real need it seems perplexing why corporations and the wealthy need government support at all. Doesn’t this challenge another popular mantra made by conservatives; that of demanding a free enterprise system? Public Campaign reports in For Hire: Lobbyist or the 99%, How Corporations Pay more for Lobbyist than in Taxes:

  • The thirty big corporations analyzed in this report paid more to lobby federal policymakers than they paid in federal income taxes for the three years between 2008 and 2010, despite being profitable.
  • Despite making combined profits totally $164 billion in that three-year period, the 30 companies combined received tax rebates totaling nearly $11 billion.
  • Altogether, these companies spent nearly half a billion dollars ($476 million) over three years to lobby Congress—that’s about $400,000 each day, including weekends.
  • In the three-year period beginning in 2009 through most of 2011, these large firms spent over $22 million altogether on federal campaigns.
  • These corporations have also spent lavishly on compensation for their top executives ($706 million altogether in 2010).

The needy can’t afford to lobby Washington to protect their interest but the wealthy and corporations can. The Public Campaign report illustrates that while many companies like G.E and Boeing between 2008 – 2010 paid no taxes during the same period each paid millions, G.E $84 million and Boeing $52 million in lobbying and G.E $3.6 million and Boeing $3.8 million in campaign contributions while each fed from the public trough.

The Cato report mentioned earlier lists and outlines case studies of the various corporate subsidy programs. One in particular is subsidies for exporters known as the Export-Import Bank (Ex-Im Bank) whose main purpose is to finance the purchase of U.S. goods in foreign markets:

The loans and guarantees that Ex-Im Bank grants to U.S. companies qualify it as the underwriter of the sales of some of the biggest Fortune 500 companies, none of which would have trouble getting funding for worthwhile overseas projects. As Table 3 shows [see pg. 10 of PDF report], Boeing is the largest corporate beneficiary of Ex-Im Bank loan activity, leading many commentators to refer to the Ex-Im Bank as “Boeing’s Bank. [G.E, per the report, is the second largest beneficiary].

There is a trade practice known as trade offsets which I wrote about in American Protectionism – 30 years too late. It would come as no surprise to learn if the Ex-Im Bank funds these sorts of activities. With respect to trade offsets I explained in my article:

Trade offsets is the “transferring of technology and/or production by U.S. MNCs to another country in return for a sale and involves high-paying, high-technology jobs in the export sector, typically the defense sector, potentially impacting national security. Offsets can involve outsourcing, licensing procurement, subcontracting, research and development, foreign investments, countertrade, financing, and co-production.” Boeing, for example, as part of its “$4.4 billion contract in 2002 with South Korea for 40 F-15s “committed not only to hiring South Korean workers for the current purchase but for future F-15 work as well, that if it sells F-15s to other countries, South Korean workers will build the same parts and do the sub-assembly for those new Boeing customers.” News accounts reported at the time that it would “create more than 30,000 jobs in South Korea, jobs performing work that once was done by St. Louis workers” The agreement also stipulated “Boeing will transfer jobs and skills to South Korea that will enable it to produce its own fighter jet by 2015.” (See Offsets Report)

Oklahoma Republican Senator Tom A. Coburn takes a position rare among the conservatives and reports on the Subsidies of the Rich and Famous. His report finds that:

From tax write-offs for gambling losses, vacation homes, and luxury yachts to subsidies for their ranches and estates, the government is subsidizing the lifestyles of the rich and famous. Multimillionaires are even receiving government checks for not working. This welfare for the well-off – costing billions of dollars a year – is being paid for with the taxes of the less fortunate, many who are working two jobs just to make ends meet, and IOUs to be paid off by future generations.

These billions of dollars for millionaires include $74 million of unemployment checks, $316 million in farm subsidies, $89 million for preservation of ranches and estates, $9 billion of retirement checks, $75.6 million in residential energy tax credits, and $7.5 million to compensate for damages caused by emergencies to property that should have been insured. All and all, over $9.5 billion in government benefits have been paid to millionaires since 2003. Millionaires also borrowed $16 million in government backed education loans to attend college.

On average, each year, this report found that millionaires enjoy benefits from tax giveaways and federal grant programs totaling $30 billion. As a result, almost 1,500 millionaires paid no federal income tax in 2009.

Read full report

It should come as no surprise the report reveals that the subsidies received by the wealthy are mostly for luxury’s they can easily afford. This is in far contrast to those in need without jobs and struggling to put food on their tables and keep a roof over their heads.

Senator Coburn’s report does not review corporate subsidies but as we have seen there are corporations on the dole. In another report, Corporate Welfare, a Time Investigative Report found that:

The Federal Government alone shells out $125 billion a year in corporate welfare, this [was] in the midst of one of the more robust economic periods in the nation’s history. Indeed, thus far in the 1990s, corporate profits have totaled $4.5 trillion–a sum equal to the cumulative paychecks of 50 million working Americans who earned less than $25,000 a year, for those eight years.

Blog Good Jobs First tracks corporate subsidy and profiles case studies of industries like Wal-Mart and others with heavy subsidy use.

Obviously a glaring contradiction exist in which some conservatives take issue with welfare for the needy but not for the wealthy or corporations.  As Mr Marcus makes clear he and his flock hate these programs because they believe they create freeloaders and that people should fend for themselves, except for the wealthy and corporations of course. Many of today’s staunch conservatives, regardless of their own personal financial status have the mindset that everything can be earned but nothing is owed and anything can be achieved but nothing should be given. This mindset often materializes through their tax policies and allows most conservatives to oppose welfare for the needy yet see no contradiction in supporting government subsidies that benefit corporations and the wealthy. It never occurs to them that wealthy people and corporations are just as likely to game the system as is anyone. They fail to recognize the perversity in permitting those that have to feed at the public trough while those in need should be left to fend for themselves.

Ironically some of the states that have the lowest per capita income and receive the most per capita in welfare benefits have long been conservative states:

Here’s a list of the ten states with the highest median incomes: 1. New Hampshire, 2. Connecticut 3. Maryland 4. New Jersey 5. Alaska 6. Virginia 7. Hawaii 8. Massachusetts 9. Colorado 10. Washington.

Notice something about the above? Except for Alaska, whose numbers are skewed because of their largely socialized economy, in which oil companies pay them money for simply living there and pay their taxes for them, and the purplish Virginia and New Hampshire, ALL are bright BLUE.

Just as interesting are the BOTTOM ten states; 50. Mississippi 49. Arkansas 48. West Virginia 47. Tennessee 46. Kentucky 45. Louisiana, 44. Alabama 43. Montana 42. South Carolina 41. North Carolina.

Notice something about that list? …except for West Virginia, which can be a bit purple, all of the above states are reliably RED.

The above statistics have been pretty much static for the last 40 years; the groupings haven’t changed much. And the poverty levels back that up.

[Now}…meet the state welfare queens; these are the states that get the most bang for every buck they pay in federal taxes. Every single one of them gets more federal tax money than they pay in, which means other states get less than they pay in. Next to each state is how much money they get back for every dollar in federal taxes they pay in; 1. New Mexico; $2.03, 2. Mississippi; $2.02, 3. Alaska; $1.84, 4. Louisiana; $1.78, 5. West Virginia; $1.76, 6. North Dakota, $1.68, 7. Alabama; $1.66, 8. South Dakota; $1.53, 9. Kentucky; $1.51, 10. Virginia; $1.51.

Now, based on Republican logic, the following states should be ones screaming the loudest about those Red State welfare queens. These are the ten states who receive the LEAST federal money; 50. New Jersey, $0.61, 49. Nevada, $0.65, 48. Connecticut, $0.69, 47. New Hampshire, $0.71, 46. Minnesota, $0.72, 45. Illinois, $0.75, 44. Delaware, $0.77, 43. California, $0.78, 42. New York, $0.79, 41. Colorado, $0.81.

While I agree with Mr Marcus that nothing in life comes free this age-old proverb applies evenly to everyone regardless of stature. If conservatives want more cuts to programs for the needy than cuts to subsidies for the wealthy should not be excluded.

Mitch Gurney

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