=======================Electronic Edition========================
RACHEL’S ENVIRONMENT & HEALTH WEEKLY #422
—December 29, 1994—
News and resources for environmental justice.
==========
Environmental Research Foundation
P.O. Box 5036, Annapolis, MD 21403
Fax (410) 263-8944; Internet: erf@igc.apc.org
==========
The Back issues and Index are
available here.
The official RACHEL archive is here.
It’s updated constantly.
To subscribe, send E-mail to rachel-
weekly-request@world.std.com
with the single word SUBSCRIBE in the message. It’s
free.
===Previous
Issue==========================================Next
Issue===
BIG-PICTURE ORGANIZING–PART 4: CORPORATE WELFARE
As we saw last week, the Democratic Party has recently discovered
that most Americans are “treading water” economically –barely
avoiding drowning. The old “middle class” is disappearing. The
common bond that once held the nation together –an expectation
of a brighter future for everyone who worked hard and played by
the rules –has all but disappeared. As a result, street crime,
violence, drugs, white collar crime, dubious practices on Wall
Street, and a general attitude of “I got mine” have been steadily
growing.
The Secretary of Labor, Robert Reich, says that since the
mid-1970s members of the middle class have turned into the
“anxious class,” afraid of losing their jobs and their health
insurance, fearful for their children’s future. The underclass
has been steadily growing, permanently mired in the inner cities,
cut off from good jobs and hope. In 1993, in the midst of an
economic recovery with an expanding economy, an additional one
million Americans fell into poverty. [1]Meanwhile, the overclass
is scooping up most of the available benefits; the wealthiest 2%
of Americans saw their incomes rise by 75% during the 1980s. [2]
Increasingly the overclass is questioning its connection to the
rest of society –moving to elite suburbs, living behind iron
gates, protected by private armed guards and Dobermans.
The Secretary of Labor says the main factors destroying the
middle class’s jobs are high technology and global trade. He
says we cannot turn our back on these problems: we must confront
them and overcome them. He says that we cannot wish away
technology –we must retrain ourselves, prepare ourselves for
“lifelong learning” as we constantly adapt to a changing world.
Nor can we close our borders to trade and fall back into the
“protectionist” trading mode of years past when we kept foreign
goods out with tariffs and quotas. (Thus Mr. Reich embraces
NAFTA and GATT, the free trade accords passed by Congress in
1994.) If our economy is to grow, we must learn to compete
effectively in global markets, he says.
These two ideas –retraining the workforce to get the good jobs
to rebuild the middle class –and preparing our commercial
organizations to compete in world markets –come together in
Secretary Reich’s call for an end to “corporate welfare.”
As a political program, the idea of ending corporate welfare
originated last year inside the Democratic Party’s Progressive
Policy Institute, or PPI (which the WASHINGTON POST describes as
“moderate to conservative”). The PPI argues that decades of free
handouts from Uncle Sam to wealthy corporations should be ended
because (a) the money would be more productive if it were
invested in retraining the workforce, and (b) free handouts to
corporations shield them from competition in the global market,
ultimately weakening them.
The argument goes like this: In a world of global production,
capital and commerce, government subsidies to corporations
eventually erode the competitive position of both the industries
that receive them AND those that don’t. [2, pg. 3] Unsubsidized
companies find themselves at a competitive disadvantage relative
to subsidized companies. And, in a global economy, companies at
a competitive disadvantage will often move some operations and
jobs abroad, where labor and materials are cheaper or subsidies
are available. Thus corporate welfare harms the entire U.S.
economy.
Spending and tax subsidies, along with trade protections and
certain forms of economic regulation, all shield domestic
industries from the global competition that drives foreign rivals
to upgrade their products and production. Subsidies and
protections, therefore, leave their beneficiaries LESS able to
succeed. [2, pg. 3]
Most of these subsidies and protections stem not from economic
logic but from political influence, says the PPI. From farm
supports and tax breaks for oil and gas firms, to textile quotas
and telecommunications regulation, these special industry
entitlements force taxpayers, consumers and businesses to
transfer more resources to influential sectors than markets alone
would require. These subsidies are also profoundly regressive,
since the ultimate beneficiaries of these spending and tax
handouts are the shareholders of the subsidized industries, who
tend to be wealthy already. [2, pg. 3]
Corporate welfare has created a culture of dependency that has
encouraged certain industries to live off the taxpayers. Year
after year, these companies receive subsidies or handouts from
the federal government and never learn to fend for themselves in
the competitive marketplace. And, unlike the vast majority of
individuals who receive public assistance, most corporate welfare
recipients are not particularly needy. A few examples: [3]The
federal Bureau of Land Management rents out public lands to
ranchers for cattle grazing. In 1992, the BLM’s annual grazing
fee was $1.92 per animal, according to the National Wildlife
Federation. But private landowners charge their grazing
customers, on average, $9.26 per animal. The low grazing fees
amount to a food stamp program for livestock belonging to wealthy
ranchers. In 1992, the government’s below-market rates cost the
taxpayers an estimated $55 million in revenues.
A typical beneficiary of this subsidy is J.R. Simplot of
Grandview, Idaho. He paid the government $87,430 for the
privilege of grazing cattle on public land, according to the
National Wildlife Federation. If the government had billed
Simplot at free-market prices he would have had to pay $410,524.
And it’s not as if Simplot is going to suffer without public
assistance. He is on the Forbes’ 400 list of richest Americans
with an estimated net worth of just over $500 million.
Another federal handout to corporations is the Department of
Agriculture’s Market Promotion Program. This year the program
will give American companies $100 million to advertise their
goods and services abroad. The corporations with outstretched
palms include some of the biggest names in American business. In
1991 and 1992 Sunkist Growers, Inc. received $17.8 million to
promote citrus products, according to Agriculture Department
figures. The Department gave the American Soybean Association
$10.4 million in 1992 to promote soybeans. In 1991, Gallo Wines
received $5.1 million to promote wine, M&M/Mars received $1.1
million to promote candy bars, the Campbell’s Soup Co. received
$450,000 to promote V-8 Juice and McDonald’s took $465,000 to
promote Chicken McNuggets.
Another form of corporate welfare is the government’s failure to
charge reasonable fees or sales prices for mining minerals on
publicly-owned land. Perhaps the biggest beneficiary is the
American Barrick Resources Corp., based in Toronto. Since 1987
the company has extracted $8.75 billion (yes, billion) worth of
gold from a site in northern Nevada that is the property of the
American people. According to the Natural Resources Committee,
the federal government is now preparing to sell the land to
American Barrick for all of $15,000. By the way, the company’s
founder paid himself $32 million in 1992.
Vince Borg, a vice-president of public affairs for American
Barrick, rejects the idea that Barrick has benefitted unduly. He
says the company has spent $11.5 million since 1987 to maintain
its claims on the land while awaiting final approval of ownership
from the government and has paid $80 million in corporate income
taxes (a tax rate of less than 1% on $8.75 billion, we note).
Deadbeat corporations also take advantage of the taxpayers. For
example, forestry companies that signed contracts to purchase
government timber at a set price in the mid-1980s and then
defaulted owe the U.S. treasury $135.6 million. The corporations
claim that they are justified in breaching the contracts because
of falling lumber prices. But there’s no reason why taxpayers
should have to protect companies in pursuit of profits from
normal business risks.
Major pharmaceutical companies are on the federal dole too. While
the government pays for a substantial portion of the research in
developing new drugs to fight disease, private drug makers are
provided exclusive rights to market and profit from them. U.S.
taxpayers had spent $32 million over 15 years to develop Taxol,
an anti-cancer drug. Bristol-Myers Squibb was provided extensive
government data and exclusive commercial rights to Taxol in 1991
at which time it began charging patients $986 for a three-week’s
supply.
This year, taxpayers will spend $51 billion in direct subsidies
to corporations and lose another $53.3 billion in tax breaks for
corporations, according to the Office of Management and Budget
and Congress’s Joint Committee on Taxation. This $104.3 billion
give-away to businesses contrasts with the $75.1 billion total
cost of all federal welfare programs for individuals, including
help for the blind and deaf, drug and alcohol treatment,
assistance to the handicapped and elderly, care for the mentally
retarded, children’s vaccination and immunization programs, food
stamps (50% of which go to children [4]), and so on. [5] Our
federal welfare programs favor corporations more than people.
Not all subsidies are bad, says PPI. Some subsidies and
regulations serve compelling social purposes. PPI argues that
the need for economic growth does NOT dictate, as many so-called
“conservatives” suggest, that government should stop supporting
childhood immunization, end tax incentives for middle-class home
ownership or suspend health and safety regulation. [2, pg. 3]
These are government programs intended to promote social goals
that benefit everyone, not a wealthy few. Such programs are
needed to compensate for market failures. There are other
programs in this category as well. For example, federal spending
to protect bank depositors, and tax incentives for basic
research, compensate for failures of the free market.
In January, Congress will immediately begin debating these
issues, which will have a profound influence on environmental
policy. It seems doubtful that either the Republicans or the
Democrats will be willing to cut corporate welfare. After all,
the corporations ante up the hundreds of millions of dollars
needed to win elections. Until we get corporations out of our
elections entirely, we probably will not be able to end corporate
welfare. As citizen activists, we can achieve clarity about one
thing: our chief adversary is the corporate form, which has
poisoned much of our land and water, harmed our health, polluted
our politics, hijacked our democracy, and diminished our common
wealth. In times like these, when most news media rarely focus
on core issues, such clarity is a blessing. Happy New Year!
                
                
                
                
    
–Peter Montague
===============
[1] Jason DeParle, “Census Sees Falling Income and More Poor,”
NEW YORK TIMES October 7, 1994, pg. A16. A family of four is
defined as “poor” if their income falls below $14,763.
Descriptor terms: robert reich; corporations; welfare; corporate
welfare; anxious class; economy; economic growth; education;
poverty; jobs; overclass; progressive policy institute; ppi;
democratic leadership council; grazing fees; public lands; blm;
bureau of land management; usda; market promotion program;
logging; forestry; pharmaceuticals; subsidies; elections; money
in politics;