I will give you the short version- Corporate welfare is the government picking winners and losers. It is not the government’s job to pick winners and losers, because it interferes with individual rights, and the free market. Time has also shown that they aren’t always so good at it.
Corporate welfare can come in a variety of forms, usually grants, loans, loan guarantees, limits on competitors, and tax preferences (Bandow). One most known example of corporate welfare was after the 2008 financial crisis, when the federal reserve bailed out banks, and investors that made bad decisions, and other companies deemed ‘to big to fail’, such as General Motors (Chevrolet), Chrysler and Ford. Although Ford did not need the money, it took the money since it did not wish to compete with subsidized companies. The auto-industry bailout was 80.7 billion dollars just for these 3 companies. The largest companies were the only ones to receive subsidies, reducing competition in the auto-industry and ignoring moral hazard. Well it is debatable whether the failure of certain banks could not be allowed to happen, the Obama administration did not have sufficient reason to bailout these car companies. GM and Chrysler were responsible for their near-bankruptcy, as they should have cut certain jobs, production and dealerships years earlier (Amadeo). Much like many other examples of corporate welfare, this demonstrates the government choosing winners and losers, rather than allowing a combination of free individual decisions to do so.
One of the reasons that the colonies broke away from Great Britain was the gross injustice of favors within a system of mercantilism. The people of this great country have a history of being mad about Crony Capitalism, because it hurts small businesses and only furthers the divide between the rich and the poor. In fact, the Boston tea party happened mainly because the colonists were mad at special treatment the East India Company was receiving (Winters). The Supreme Court struck down subsidies to Robert Fulton’s steamboat company, as he was able to keep prices artificially low, and maintain monopoly power (Winters).
These types of corproate favors have become a major issue today, and have bred a brand of crony capitalism. Most recently, Amazon has recieved 1.39 billion dollars in subsidies since 2000 (Bandow). This destroys the basic market tenant of creative destruction, that some companies will thrive and some companies will eventually fail. Government has chosen winners and losers with a bad track record. According to Doug Bandow, – “Obama administration funneled $535 million worth of loan guarantees to Solyndra, which President Barack Obama called an “engine of economic growth.” The company filed for bankruptcy in 2011 afer spending $1.8 million on its Washington lobbyists. The Washington Post later reported that $3.9 billion in Energy Department grants and financing were owed to 21 companies backed by arms and connected to the Obama administration staffers and advisers.” These types of special interests are what fueled the fire for Donald Trump’s anti-establishment campaign.
In Oklahoma circa 2015, wind farms recieved 45 million dollars in cash refunds, and coal companies earned 6 million dollars in cash-back subsidies. Apple bought 6 billion dollars in cash-back credits between 2012-13’ because they are sometimes transferable (Oklahoma watch). According to the Washington examiner, – “A recent study by Troy University scholars demonstrates that “economic development” aid rarely delivers the goods of higher state growth and economic freedom,” and, “Of 32 peer-reviewed studies on the impact of targeted subsidies on the community at large, only three find a positive impact.”
Corporate welfare gives some a systematic advantage, well giving others an even larger systematic disadvantage. A system that does not have equal opportunity is distinctly un-American. It is time to end corporate welfare, and return freedom and equality to the people and small businesses of America.
p.s- below I have attached a number of links and documents.
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