$100 Billion of Corporate Welfare


Wednesday August 8th, 2012   •   Posted by Craig Eyermann at 9:37am PDT   •  

How much welfare do corporations receive as a direct cash benefit from the U.S. government?

According to a recently published Cato Institute policy analysis, it’s nearly 100 billion dollars. We mined the report to visualize which U.S. government agencies or spending categories are the biggest recipients of the largesse of U.S. politicians:

The majority of this spending goes to benefit large corporations and businesses. The report’s author, Tad DeHaven, describes how skewed the government’s spending is for the federal farm programs that make the U.S. Department of Agriculture the largest single distributor of corporate welfare in the government for 2012:

Federal farm programs redistribute wealth from taxpayers to a small group of relatively well-off farm businesses and landowners. The United States Department of Agriculture figures show that the average income of farm households has been consistently higher than the average of all U.S. households. In 2010, the average income of farm households was $84,400—or 25 percent higher than the $67,530 average of all U.S. households.6

Moreover, the majority of farm subsidies go to the largest farms. For example, the largest 10 percent of recipients received 68 percent of all commodity subsidies in 2010.7

One surprising category of spending that turns up repeatedly in the expenditures of many government agencies is “Applied R&D”. Here, rather than funding basic science research as a public good from which general applications might be produced by businesses, the U.S. government is instead providing funding directly to corporations for the purpose of developing specific products and services, even if they don’t make any real business sense.

Which they don’t. Because if they made any real business sense, corporations are more than capable of developing them on their own, without any government prompting or assistance.

A classic case in point of how wasteful that spending can be is the politically-driven Department of Energy’s funding for the development of “green” energy technologies in recent years, where many companies, such as Solyndra, have proven to be better able to tap the “Bank of Washington” than they have at achieving success by developing successful products that genuinely satisfy people’s needs. When all is said and done with that single failure, U.S. taxpayers will be on the hook for well over half a billion dollars.

So what savings could be generated by cutting off the politicians’ spigot for corporate welfare? Well, for about $100,000,000,000 of wasteful spending in 2012, the savings would work out to be about $847 per American household.

Wouldn’t it be a lot smarter to keep that extra money in the hands of individual Americans themselves? Where they can independently determine what products meet their needs best, and in the meantime, signal to businesses what new products and technologies they really want?

Update:

Speaking of the wasteful nature of the government’s green energy subsidies, Mark Perry points to Steve Landesburg’s blog, which features a guest post on the topic from solar-powered refrigerator maker Sundanzer CEO David Bergeron, who describes them as follows:

Here is the real problem: Subsidies make solar appear viable today, so where is the motivation for an entrepreneur to risk money, or even focus on developing real energy alternatives when solar is “almost” there? How can an inventor justify striving with the effort it takes to really develop something great when he is competing against a straw man technology which can provide power at almost the same cost of traditional power sources today? But of course it really doesn’t.

The answer is he can’t justify the effort, so the next great thing is not developing, at least not with the sense of urgency it should be. Why enter a contest when you are competing against someone with an unfair advantage? You may be the faster swimmer, but your competitor is using flippers.

Solar subsidies are a placebo which is giving the general public a sense of security about our energy future and is robbing the motivation of those entrepreneurs that could actually address our energy problems. Subsidies are much worse that just wasteful, they’re diabolical. They lull us into thinking we have almost solved the problem and they hinder us from seeking the real solutions.

Indeed.




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