All about ideas…

Congress Gives Billions To Corporations…While You’re Asked to Tighten Your Belt.

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Congressional Office BuildingToday, Dana Milibank of The Washington Post wrote an editorial on corporate responsibility, using Blankenship, CEO of Massey Energy – the corporation whose mine in West Virginia exploded recently. However much I would like to write about corporate responsibility and the fact that we each talk about the necessity of maintaining a certain level of individual responsibility for our actions, we as yet don’t seem to require the same of corporations. Nevertheless, there is another, often ignored, point in this editorial that deserves to be highlighted.

Consider the efforts this month by the U.S. Chamber of Commerce, once a center of moderate Republicanism that worked with both parties but now a sort of radicalized corporate Tea Party, spending $75 million this fall mostly to defeat Democrats. The chairman of the group’s board — on which Blankenship served until recently — accused the Obama administration and congressional Democrats of a “general attack on our free enterprise system.” Specifically, the chamber accused the Democrats of “an ill-advised course of government expansion, major tax increases, massive deficits, and job-destroying regulations.

Taxes? The nonpartisan Tax Foundation in May described Americans’ tax burden in 2009 as the lowest since 1959. Job-destroying regulations? The lack of regulation on Wall Street led to a financial collapse that killed millions of jobs. Massive deficits? One of the biggest causes of the gap is the $800 billion stimulus package supported by — wait for it — the U.S. Chamber of Commerce. And the chamber wants the government to spend even more: It demands that Congress “quickly pass a multiyear federal surface transportation bill.” That would costs hundreds of billions more. And let’s not forget the chamber’s desire to “get the money from the government” to help pay for the BP oil cleanup.

This election year sees a great deal of argument and controversy about the national debt and deficit. Even President Obama has taken the matter seriously enough to create a deficit commission. However, few talk about one of the leading reasons why the deficit continues to grow: Corporate Welfare.

Whether or not you agree with the philosophic arguments of GreenScissors2010, it points out the billions of taxpayer dollars that subsidize big business. Using the coal industry as an example, consider this:

Subsidies to the coal industry began in 1932, when the federal government first began allowing companies to deduct a portion of their income to help recover initial capital investments (the percentage depletion allowance). Since then, coal companies have enjoyed billions more in subsidies, while earning billions in profits. Over the last decade, revenues at the top three domestic coal companies have gone through the roof. Peabody Energy, the largest private-sector coal company, posted record earnings in 2008 with a net income of $953.5 million, up 261 percent from a year earlier. Consol Energy recorded near-record income in 2009 of $540 million.8 And this year, Arch Coal will probably triple its sales, while Peabody is expecting almost $2 billion in revenue. […]

Then there is the Department of Energy Title XVII Loan Guarantee Program, which uses taxpayer dollars to cover the debts of coal companies if a project goes belly-up. Scrapping just this loan guarantee program could save taxpayers more than $50 billion.

While I believe it is necessary to continue to fund research and development that more often than not occurs at the University level and believe that companies should be able to deduct R&D expenses, I do not believe that the taxpayer should continue to pay subsides to major corporations. Take a look at how the oil and gas industries are being funded by the taxpayer:

Last year [2009], ExxonMobil received so many giveaways that it paid zero federal taxes, despite earning tens of billion sof dollars in profits. Right before setting the gulf coast awash in oil from the Deepwater Horizon catastrophe, BP saw its first quarter profit jump an astounding 135 percent to $6.1 billion dollars. ExxonMobil recorded a 38 percent increase in profit from a year earlier to $6.3 billion, Shell posted a 49 percent increase to $4.9 billion, and Chevron saw its profit more than double to $4.6 billion.[…]

President Obama’s fiscal year 2011 budget called for the elimination of more than $36.5 billion in oil and gas subsidies over the next decade. These cuts are a good start, but we need to go further.

Over just the next five years taxpayers can conservatively save more than $31 billion by eliminating just a few of the generous subsidies the oil and gas industry enjoys.

These are but two examples of the hundreds of billions of dollars that taxpayers are paying to major corporations and industry sectors. If all of these corporate subsidizes were eliminated from the federal budget, the country could easily fund social security in perpetuity and pay down the deficit.

Libertarians, and the CATO Institute, are correct in saying that old industries should be allowed to die rather than be supported by government. If the horse-and-buggy industry had received government subsidies, the automobile industry may never have come into fruition.

Government officials, let alone Congress, are not good predictors of where industry should progress, particularly as as result of potential abuses in campaign financing and lobbying dollars. Government can…and a substantial case could be made to…supply funds for research and development. But it is up to private industry – the free market (or marketplace) – to determine what technologies to fund and use. Of course, this theorem of free market financing requires a Wall St that funds industries rather than dark market derivatives and hedge fund speculation.

By the government providing hundreds of billions of taxpayer dollars to legacy industries, the government creates an economically competitive advantage to those old industries as well as preventing new industries from emerging. Uncompetitive funding of legacy industries through the use of taxpayer dollars is not the job of the Federal government.

In addition, it is not the job of the Federal government to fund local, state projects that provide no benefit to the country as a whole, especially if those projects benefit only one or a few corporations to decrease their financial liability/expenditure and not the country as a whole.

As I’ve written over and over again, corporate welfare of legacy industries bleeds our country dry and prevents innovation that could accelerate American advantage in a global marketplace and provide millions of new jobs. Right now, China is set to become the world leader in clean, renewable energy. Yet, the initial research and development was done right here in the US.

But because of Congress’ continued subsidized support of old technologies, i.e., legacy industries, China is setting itself up to be the market leader – and exporter – of new energy technologies because the Chinese government realizes these new technologies are the future, as opposed to the past, and to prevent their industries from held hostage to foreign energy prices.

It’s well past the time that Congress end its multi-billion dollar subsidizing of old industries and corporations at the expense of taxpayers, who are being asked to tighten their financial belts and give up so much, while Corporate America lives well on the taxpayer dollar. The national debt – which is a much larger, long-term problem, will never be solved until major, old industrial Corporate America stops expecting the taxpayer to pick up the cost of their very existence.


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    July 24, 2010 at 9:49 PM

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