ARTICLE

Ending Corporate Welfare as We Know It

The Welfare Reforms Applied to Individuals Should Also Apply to Businesses

MAY 01, 1999 by LAWRENCE W. REED

Corporate welfare is one of the toughest nuts to crack in Washington. While almost everyone says he is opposed to it, Congress hasn’t done much about it. Maybe, just maybe, that has something to do with the fact that many congressmen are on the dole too—in the form of campaign contributions from corporate welfare recipients. A new approach is needed if American taxpayers are ever to get this monkey off their backs.

The Cato Institute estimates that direct subsidies from the federal treasury to businesses big and small, cash-rich and bankrupt alike, amount to at least $80 billion annually. (No doubt state and local governments dole out a few billion dollars more on top of that.) Companies (most notably Archer Daniels Midland) defend the handouts as being good not just for them but for the economy as a whole.

That’s not an argument that was ever given much credence in debates over welfare for individuals. Most people seemed to understand that taking from A to give to B doesn’t stimulate anything but B’s spending at A’s expense. Aid to Families with Dependent Children (AFDC) and other welfare programs for individuals were defended primarily as necessary and helpful to the recipients, rarely as a general economic stimulus. Then came overwhelming evidence that these programs were actually harmful to the recipients themselves—producing lifelong slothfulness and demoralization, intergenerational dependency, and the breakdown of families. Reforms at the federal, state, and local levels are now aimed at getting people off welfare and into work.

It seems reasonable that what’s good for individuals ought to be good for companies too, especially since companies are nothing but collections of individuals anyway. Perhaps we’d be more successful at ending corporate welfare if we made it plain that it’s only fair to apply the same welfare reforms to businesses that we apply to individuals. Sort of a twist on the old canard, “What’s good for General Motors is good for the country.”

Following this prescription, here’s what corporate welfare reform might look like (and I’m being only a little bit facetious).

Declare an end to any and all “entitlements” to corporate welfare.

President Clinton signed a historic bill in 1996 that ended individuals’ legal entitlement to federal subsidies. He should put businesses on notice that they are not owed anything either, except for the same common defense and other constitutional functions intended by the Founders for all of us. States should follow suit.

Put time limits on corporate welfare.

If we can’t get rid of all these business handouts forthwith, then Congress should at least do what a growing number of states are doing with families formerly on AFDC: limit any company’s time at the trough to five years.

Impose a “family cap” on corporate welfare recipients.

New Jersey was the first state to deny additional aid to any families having more children while on welfare. Businesses should be advised that while on the corporate welfare rolls, they cannot get an increase in assistance if they hire additional employees.

Start drug testing for CEOs.

Governor John Engler of Michigan, regarded as a national leader in welfare reform, wants to deny welfare payments to individuals found to be abusing drugs. Taxpayers should not be required to subsidize corporate CEOs who abuse drugs either and there’s only one way to find out if they are: if they’re gettin’ handouts, test ‘em.

Get tough with work requirements.

To one degree or another, states now require welfare recipients to show evidence of conscientiously searching for gainful employment or doing volunteer work in their local communities. Corporate executives on the dole should also be required to prove that they are trying to straighten out their lives and develop a serious work ethic.

Require attendance at welfare-to-work counseling sessions.

Columnist Paul Gigot describes ethanol as a mixture of corn and your tax dollars. There’s no reason why Dwayne Andreas, the longtime head of the Archer Daniels Midland Company and recipient of massive ethanol subsidies, shouldn’t have to sit through the same social worker lectures that other welfare recipients have to endure.

Put a “LearnFare” program in place.

Wisconsin was the first state to cut welfare benefits to parents if they couldn’t keep their kids in school. Companies should be cut off if they can’t keep their executives in remedial economics classes taught by economists who can explain the importance of the free economy, property rights, and keeping your hands in your own pockets.

Create incentives for the bureaucracy to discourage corporate welfare.

Wisconsin was also among the first states to reward welfare department employees for helping recipients leave the welfare rolls or stay off them in the first place. Early retirement with handsome severance packages for federal and state bureaucrats who lop corporate clients off the rolls might save us a lot of money in the long run.

President Clinton pledged in 1992 to “end welfare as we know it.” He did not qualify the statement with anything like “it depends on what you mean by the word ‘welfare.’” So let’s call his bluff and ask him to end all welfare, as we’ve known it and as many of us would like to forget it.