Corporate Welfare Horror Stories

The first-ever Congressional hearings critical of corporate welfare the hundreds of billions of dollars given annually in subsidies, bailouts, giveaways, tax escapes, etc. were held June 30th by House Budget Committee Chairman John Kasich (R-Ohio). And most of the major media organizations did not show up. But C-SPAN did and relayed a remarkable array of witnesses and testimony to the American people who are paying these bills.

The Kasich hearing was public education by Congress at its best. No sound bites. Instead the testimony was detailed, the questions thoughtful, and the proposals for ending these boondoggles were numerous.

In a rare moment of agreement, both conservative and progressive groups lined up to criticize the looting of Uncle Sam and the very big business that such looting has become.

My testimony described several categories of corporate welfare. These included: the giveaways of hard-rock minerals such as gold and molybdenum to domestic and foreign mining companies; The giveaway of the public airwaves, which belong to the people, to private radio and television stations (including the latest $70 billion gift of the digital spectrum); Taxpayer subsidies for giant defense corporation mergers and commercial weapons exports to governments overseas; and making patients pay twice for drugs once as taxpayers to develop the medicine and again as patients after the federal government gives monopolistic control over the chemical’s manufacture to a price-gouging drug company.

The impact of these handouts to corporations on taxpayers is sad. A woman with ovarian cancer contacted us with her desperate story of having to pay about $14,000 for six treatments of Taxol, sold by Bristol-Meyers Squibb. Thirty-one million dollars of taxpayers’ money developed this drug, right through the human clinical trials.

Bristol-Meyers owns the rights to make Taxol. No other company may. So there is no price competition to drive the price down. If patients with cancer have to go on Medicaid because they cannot afford this gouge, then the taxpayers again pay Bristol-Meyers for Taxol.

By the way, Bristol-Meyers is not obligated to pay Uncle Sam any royalties on what this year will be $1 billion in sales. Do you know any business that develops and gives away its assets like that?

Then there is the Partnership for a New Generation of Vehicles which Clinton and Gore announced in August 1993 at a White House ceremony with Detroit bigwigs. Under this deal, taxpayers give $1 billion to General Motors, Ford, and Chrysler to entice them to build a more fuel efficient vehicle. These giant companies are reporting record profits year after year and should be competing on their own to develop more efficient engines.

It gets worse. PNGV effectively gives the auto companies immunity from the antitrust laws in this area, takes away the competitive pressures, and staves off overdue consumer protection regulation. After six years, what is the result? A few technical papers, no model cars, and no competition. Guess which automakers will market a car next year that will get over 60 miles per gallon? Toyota and Honda, which are not part of this do-nothing partnership.

My testimony contained many proposals both procedural (disclosure of corporate beneficiaries on the Internet, sunset provisions, and competitive bidding for taxpayer assets) and substantive (such as an outright repeal of the corporate handouts, charging fair market value for inventions and natural resources, and reasonable pricing provisions on government-developed products such as Taxol).

It will be interesting to see if the Presidential candidates, including Kasich, will strive to make corporate welfare a major issue. For in addition to its other symptoms, corporate welfare breeds corruption in politics and often presents unfair competition to taxpaying small businesses that have to coexist with the Chryslers, Intels, Marriotts, and others. Corporations such as them have demanded and received huge property-tax holidays for their buildings.

To obtain copies of the Kasich hearing testimonies, go here. You may wish to contact Rep. Kasich’s office with your opinion. His phone number is (202) 225-5355.