NCPA - National Center for Policy Analysis

Corporate Welfare Alive And Well

May 25, 1999

Capital Hill Republicans loaded millions of dollars worth of corporate welfare into the emergency spending bill for NATO actions in Kosovo. Those gifts won't do America's largest corporations any good in the long run, economists say.

In a recent Hoover Institution essay, economist Stephen Moore warned that corporate welfare "has all the systemic debilitating effects, including dependency and self-destructive behavior, that characterize the troubled legacy of the Great Society social welfare agencies."

Moore itemized some past instances of corporate welfare:

  • Rockwell International won 39 cash grants totaling $29.4 million in 1996.
  • That same year, Westinghouse took 14 grants totaling $26.1 million.
  • At the same time, General Electric snagged 15 grants worth $20.1 million.
  • Each of those companies had profits in excess of $500 million in the same year they took the grants.

Moore figures that grants, low-interest loans and loopholes benefiting big business cost taxpayers nearly $100 billion a year. If those corporate welfare programs were abolished, Congress could eliminate both the capital gains and estate taxes.

Alternatively, it could cut personal and corporate taxes 10 percent across the board.

While advocates of corporate welfare justify the transfer on ground of more jobs or increased export, Moore points out that returning the money to taxpayers would have its own beneficial effect on the economy. But that effect is rarely considered.

Harvard University economist Dale Jorgenson says the economy loses $1.35 in potential output for every $1 the government takes in taxes. So unless the beneficiaries of corporate welfare can demonstrate a 35 percent return on their grants, low-interest loans or tax loopholes, the economy is worse off.

Source: Editorial, "Corporate Welfare: America's Pastime," Investor's Business Daily, March 25, 1999.


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