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The Real Welfare Problem: Government Giveaways to the Corporate 1%
While Romney and Ryan lie about welfare (and just about everything else), and Obama and the Democrats demurely mumble objections, there is a real welfare horror story going on in America.
But it’s not about welfare queens vs hard working whites; its not about race or ethnic divisions; it’s not about any of the standard Republican bait and switch, divide and conquer BS.
It’s about handouts to the uber-rich and the corporations.
Bottom line: if you’re a Fortune 500 company or a member of the wealthiest 1%, you’re getting welfare, and a hell of a lot of it.
If you’re one of the dreaded entitlement crowd – which, if you include social security and Medicare, is the vast majority of the remaining 99% -- you’re getting chicken feed, and the Republicans want to take even this meager sustenance away.
Let’s run the numbers.
Corporate Subsidies: We spend $59 billion on social welfare programs, but more than $92 billion on corporate subsidies. According to the Environmental Law Institute, fossil fuel industries alone get more than $70 billion in subsidies, with most going to the oil and gas sector. Yeah, we certainly can’t afford to deprive Exxon of its record profits just to give money to needy kids.
Sheltering Off-Shore Profits: Corporations are given $58 billion* a year in tax breaks for “deferred” taxes for off shore profits. Yep. Sure want to encourage US companies to hide profits off-shore. Can you say “job creators?”
Capital gains: Rich folks make the majority of their money in the form of dividends and capital gains, which are taxed at only 15%. This allows them to avoid some $59 billion in taxes per year.
Carried interest: Hedge fund managers avoid at least $2.1 billion in taxes a year. This sweet deal – not available to the ninety-nine percenters, by the way – lets hedge fund managers and other selected fat cats take what amounts to ordinary wages and have them taxed as if they were capital gains. So instead of being taxed at 35% (39.5% if we eliminate Bush’s tax cuts for the rich) it’s taxed at 15%. Ayn Rand would be proud. Thomas Jefferson, not so much. This amount – $2.1 billion – is roughly equivalent to the entire budget for the Administration on Aging. Wouldn’t want to deprive millionaire and billionaire hedge fund managers of their windfall just to help a lot of old geezers.
Bank Bailouts: Then there’s the $700 billion bank bailout – to rescue banks from problems they themselves created. Yes it got paid back; and yes, we had to do something. But the reason this money was little more than welfare was because the banks got to do what they wanted to with it. It could have come with strings – we could have insisted that they write down mortgages to market value or allowed refinancing at lower interest rates or longer amortization periods. We could even have given the money directly to stressed homeowners, instead of the banksters who caused the problem. Any of these approaches would have prevented defaults, slowed – or even reversed – the precipitous declines in real estate values, and given low and middle income consumers some ability to consume, which, at the end of the day is the real “job creator.” And we most certainly could have insisted that banks money loan out the money to small businesses and home buyers.
But we did nothing like that. Instead, we allowed the banks to play a high stakes game of pump-and-dump – complete with flash trading – with our money. Instead of loans designed to jump start the economy, we got risky investments underwritten with our tax money that paid off only the Wall Street elite.
Talk about welfare. Talk about your welfare kings and queens. It doesn’t get any more obscenely selfish and opportunistic than this.
$9 Trillion in Low and No Interest Loans from the Fed: And now for the mother of all welfare programs, how about $9 trillion loaned at below market rates – some of it as low as .5%. Here again, this money disappeared into the money vaults of the select few, rather than benefiting the common good.
And here again, we could have insisted that public money be used to serve the public good. But instead, it was given as white-collar welfare – a freeby to the real welfare kings and queens – the financial sector and the fat cats they serve.
To the extent conservatives acknowledge these facts, they justify it with a neo-Reaganomics logic that the wealthy and the corporations who receive this largess are the “job creators.”
But here’s the deal. As long as the middle class is in debt and feeling insecure, no company in its right mind will invest in expanding or any other type of job creation. Why on earth would they? If people aren’t buying your service or product now, how will making more of your product or expanding your capacity to provide your service make them do it? And Paris Hilton, Mitt Romney or Paul Ryan and other millionaires can only buy so many yachts; so many second, third, fourth or fifth homes. They simply don’t have the numbers to lead to an economic recovery.
The proof of this is in the numbers. Corporations are sitting on over $2 trillion in profits. What job creation is occurring is happening overseas in China, India and other low wage countries.
So the next time some conservative comes up to you praising the power of the free market and bemoaning the welfare state or our slide into socialism or some other mindless talking point, make a deal with them. Tell ‘em we’ll agree to cut welfare by 90%, but we get to decide whose welfare gets cut.
* Note/Clarification: One commenter raised a good point: what exactly was I including in this number? People have their own definitions of what is and isn’t welfare. In this statistic, I used the amount dedicated to housing assistance and rent subsidies. It does not include food assistance, unemployment, nor tax revenue not collected as a result the earned income credits. A more expansive definition of “welfare” might include both housing assistance and food assistance, which comes to about $160 billion per year. If you were to add unemployment and the so-called “social exclusion” category – both of which most Americans don’t consider welfare -- the amount in next year’s budget reaches approximately $400 billion. A total that is less than the bailout for banks. In a brief article it is impossible to include all details, and it should be noted I did not include much of what many people would consider “white collar welfare,” including, payroll tax deductions for S corporations ($1.1 billion); a stock options loophole ($2.5 billion); LIFO and LCM accounting trickery (almost $10 billion); Section 199 deductions (more than $16 billion); Use of accelerated depreciation (about $57 billion); and finally, the fact that securities transactions are untaxed while we pay sales tax on virtually every transaction we make (applying a modest transfer tax would add between $160 to $320 billion, depending upon its size). Transfer taxes would have the added benefit of dampening market volatility and increasing patient capital.
The bottom line is clear, regardless of how you slice and dice the numbers – the 1% and corporations are the biggest and greediest pigs at the federal welfare trough, by far. They are getting far more than the poor, and particularly on a per capita basis, their share of the welfare pie is astronomically larger than what low income people get.