A new report from the Cato Institute highlights the extent to which corporate welfare has infiltrated the federal budget. According to the analysis, released this month, Washington spends $181 billion annually on aid to business interests. The number includes both direct and indirect support. “More industries are becoming dependent on the federal government and driven by politics,” the report notes, “which is a dangerous move toward central planning in the economy. Cutting corporate welfare would free markets, boost growth and trim alarmingly high federal budget deficits.”
Democrats often accuse Republicans of supporting handouts to corporations, but the problem is bipartisan. In fact, former President Joe Biden’s signature legislative accomplishments were notable not only for the rampant inflation they triggered but for their unabashed efforts to shower billions on favored corporate special interests. The Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS and Science Act all included hefty outlays for the energy, broadband, semiconductor and manufacturing sectors in an effort to promote green and other progressive objectives.
The previous administration’s “corporate welfare laws created subsidies for industries that had not previously received regular federal subsidies,” Cato observes.
The costs will amount to trillions of dollars over coming decades. Much of the support, Cato reports, was “designed as ‘direct pay,’ meaning that (it is) actual government spending rather than simple tax cuts.” There is a difference, after all, between allowing individuals or corporate entities to keep more of the money they earn and providing them with direct payments courtesy the American taxpayer.
The corporate welfare encompasses a wide range of programs, including: agricultural subsidies for growers of wheat, cotton, rice, corn and other crops ($11.2 billion a year); broadband and manufacturing subsidies through the Department of Commerce ($7 billion); water and grazing subsidies for farmers and ranchers ($7 billion); and various handouts to energy interests ($15.2 billion).
The costs of allowing politicians and special interests to override the marketplace are high and can be difficult to reverse. “Even when subsidy programs repeatedly fail, the government persists in funding them,” the report notes. “The government spent $684 million on eight coal carbon-capture plants over the past 15 years, and none of them are operating.” Witness the imminent demise of the Ivanpah Solar Generating Station near Primm, a product of federal subsidies that was once touted by government planners as the future of solar energy.
Corporate welfare can unite diverse interests on the left and right. The Cato report should be a beneficial guide for congressional budget hawks and White House cost cutters.
