Waging War on Corporate Welfare

It’s nearly impossible to find a subject on which the left and right agree in modern-day America. That’s not necessarily a bad thing, but I’m sure that the current Congressional gridlock is driving the centrists and moderates of both parties absolutely nuts. While the gridlock will undoubtedly remain until one party achieves some sort of clear edge in November, I believe that there are a few topics on which many on the left and the right do agree. First and foremost, there’s the issue of corporate welfare.

Chances are, you don’t like corporate welfare. Neither do I. Nobody does, and who would? Big business getting a hand-out from the government immediately clashes with everyone’s idea of what’s fair.  Unsurprisingly, the bailouts conducted by both the Bush and Obama administrations have remained deeply unpopular with the American people from their inception.

I’m not asserting that everyone dislikes corporate welfare for the same reasons. Big shock: the left and the right (and moderates, for that matter) disagree over why corporate welfare is A Bad Thing.

The left (and particularly Occupy Wall Street) is disgusted that big banks and corporations run by wealthy individuals received a bailout in the midst of a recession, while the middle-class (particularly homeowners) and the poor received no such aid. Moreover, they believe that the “greed” of the bankers who racked up huge profits during the boom was the primary cause of the recession. Therefore, the idea that those very same bankers get a bailout awhile the rest of us suffered through the recession on our own infuriates them.

Moderates generally don’t take such a hard line against Wall Street and the wealthy, but they rarely support corporate welfare. Every moderate I’ve spoken with regarding corporate welfare opposes it on the basis that the big corporations could “take care of themselves.” If some business needed and deserved help due to the recession, wouldn’t it be small businesses?

After all, small businesses must already compete with their larger, well-established, and better-financed rivals in the marketplace. Why should the big guys get a government handout while the little guys continue to struggle? One moderate succinctly argued that, “Maybe the banks were too big to fail, but the Mom and Pop shops were too small to survive a bad economy.”

Conservatives (and particularly the Tea Party) tend to attack corporate welfare very differently. Whereas the left and moderates are concerned with making sure that “the right people” are bailed out instead of Wall Street and the rich, most conservatives don’t think that anyone should be getting bailed out. No such power is granted to the federal government via the Constitution, and saving corporations from bankruptcy certainly isn’t one of the proper functions of government.

Looking past the constitutional argument, corporate welfare just doesn’t fit within a free market. President George W. Bush infamously claimed that he “abandoned free market principles to save the free market system.” The point he’s trying to make is understandable, but it’s also misguided. Violating the rules of a system to preserve it rarely works, and even if it does, it sets a dangerous precedent that will probably destroy the system at a latter date.

It’s important to remember that corporate welfare is more than just bailouts. Subsidies, targeted tax breaks, government-granted monopolies and privileges, and many other government intrusions into the marketplace constitute corporate welfare. While some forms of corporate welfare may be less offensive than others, all of them will distort the price system and the invisible hand of the free market.

If hardly anyone supports corporate welfare, why were the bank bailouts passed at the start of the recession? Simply put, Congress was scared into it by prominent economists and the slowing economy. President Bush insisted “our entire economy is in danger.” Television pundits cried that the banks were “too big to fail,” and the idea spread that we were on the cusp of a second Great Depression.

Not everyone took President Bush at his word, and dissent came from elements of the left and the right. Progressive Congressman Lloyd Doggett (D-TX) complained, “The whole bill has been fueled by fear, and hinged on haste.” On the right, FreedomWorks actively fought against passage of the Troubled Asset Relief Program (TARP) and every other bailout.

Congressman Ron Paul (R-TX) wrote a CNN op-ed warning that by, “Using trillions of dollars of taxpayer money to purchase illusory short-term security, the government is actually ensuring even greater instability in the financial system in the long term.” This scattered opposition wasn’t enough to stop the growing panic within the media and leadership of both parties, however, and the bailouts ultimately passed.

Conservatives support a free market, not “big business.” Once you insert corporate welfare into a free market, you create a system of “crony capitalism.” Regardless of their reasoning, most Americans don’t support corporate welfare. Nobody expects this Congress to pass any significant legislation before the election, but if they were to change their minds, I would suggest passing a bill to end the practice of corporate welfare in the United States.

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About Daniel Anderson

I am a 21 year old Michigan native completing the final year of my undergraduate education at Hillsdale College. I tend to categorize my political philosophy as "constitutional conservatism." I also advocate free-market economics.
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9 Responses to Waging War on Corporate Welfare

  1. Raunak says:

    I need a clarification. When the government bails out a company, does it pick up an ownership in that company or is it completely in the form of subsidies and debt? thanks.

    • I’m not very well-read on the actual mechanism of how most US government bailouts operate, but I believe that the government does receive shares in the company in some cases. In other cases, the bailout funds are treated as a loan to the company.

  2. I totally agree with your analysis and your resolution. I just take issue with the note regarding whether or not the Constitution grants “bailout” authority to the federal government. Wouldn’t this fit perfectly in the framework of the “Commerce Clause?” Technically, this was the regulation of interstate and foreign commerce in favor of the auto companies and banks. But, it was also in favor of the people.

    • There are different interpretations of the Commerce Clause. Many consider it something of a blank check of power to Congress, allowing the legislative branch to intervene into the economy (and whatever can be loosely defined as “economic activity”). They may acknowledge that the Commerce Clause alone doesn’t confer such vast powers, but then they’ll pair it with the Necessary and Proper Clause. In so doing, they’ll argue that the paired clauses DO grant Congress those broad powers.

      I disagree with this interpretation. The Founders set out to frame a constitution that would create a government limited to specific, enumerated powers. Considering all of the compromises that went into forming the final document, it’s incredible that it fits together so neatly and coherently, even beautifully. I don’t believe that the Commerce Clause (even paired with the Necessary and Proper Clause) was meant to grant the federal government such wide-ranging powers.

      Why go to such effort to create a limited government of enumerated powers if you’re just going to give the legislative branch (which they considered the most likely branch to become tyrannical) a blank check of power with just one or two of the clauses? It would entirely defeat their purposes.

      Instead, I believe that the Commerce Clause was meant to do exactly what it says on the tin: “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” Obviously, regulating commerce with foreign nations (and Indian tribes, which were basically foreign nations that we didn’t treat with any respect) is a sensible power for the federal government to hold. Regulating commerce amongst the states was meant to remove trade barriers between the states, thereby unifying them into one nation (economically, at least). It was a very practical measure, and it was used for much of our early history to stop economically discriminatory state legislation.

      Under my reading of the Commerce Clause (one that I believe is well-supported by the thought of the Founders), bailouts of banks or businesses couldn’t possibly be justified under the Commerce Clause. Even on the most basic level, I’m not sure how bailouts (whether in the form of a big check or an emergency loan) could be construed as regulatory in nature.

      Thank you for reading and commenting, I appreciate it!

      • I understand your sentiment. I just think that it isn’t as cut and dry as many conservatives would like it to be. The notion that we should attempt to apply these principles exactly as the Framers (not the Founders since they are a wholly different set of individuals) intended implies that they would have possessed some all-knowing ability to foresee the state of America today. It is just like trying to read the Old Testament verbatim and apply it EXACTLY as it was INTENDED. This is not an issue of following the Constitution as it was meant. This is about whether or not you believe in an epistemology of historicism or empiricism. People must first agree about what the original intentions were before they can agree about how to execute against them appropriately.

        • Obviously, the Framers knew that they weren’t going to produce a perfect document that would withstand the test of time with zero problems. That’s why they included an amendment process. Yes, it’s very difficult to amend the Constitution, but that’s by design. Despite the difficulty, it’s happened 17 times (ignoring the Bill of Rights) in our relatively short national history.

          I disagree with the progressive notions that the Constitution ought to be read “flexibly” to fit modern times, and that the original intentions of the Framers are somehow impossible to discern (they wrote a TON, after all). The Framers (and Founders, for that matter, and there’s more overlap between the two groups than you’re suggesting) disagreed on a lot of the specifics, but they generally agreed on a lot of broad principles, such as the principle of constitutionally limited government.

          Your reading of the Commerce Clause instantly grants the government near-limitless power, because almost everything can be tangentially tied to commerce. We might not know what every single Framer/Founder thought about the Commerce Clause, but we should be able to recognize that they probably wouldn’t want the basic structure of the Constitution, with all of its checks and balances and carefully enumerated powers, to be undone by the Commerce Clause alone.

          I also disagree with your Old Testament comparison. The Constitution is not a religious text, it’s an outline for the federal government. It creates and shapes the government. It provides the government with certain responsibilities and certain powers to fulfill them. Thinking of it as some musty old document that probably shouldn’t be directly (and exactly) applied is frankly dangerous. Once you decide to ignore the amendment process and simply interpret the Constitution loosely instead, you’ve destroyed the idea of limited government.

          If you think that some part of the Constitution doesn’t mesh well with modern-day America, amend it. If you think the amendment process is too cumbersome, amend that. If the problem is as dire as you believe, you should be able to gather the support for it. Just don’t give up on actually holding the federal government to its constitutionally assigned duties and powers. Once you do, you’ve rendered the Constitution irrelevant, leaving the sovereign people as the sole check on government power.

          • I don’t want to mince hairs about the amendment process. But, I think it is worthwhile to note that although the most recent amendment was passed and ratified in the last twenty or thirty years, it took over two centuries to pass from its point of introduction. Additionally, although there was some overlap between the Founders and the Framers, you must at least acknowledge that the objectives, incentives, and benefits were quite different for the two groups. The Founders, meaning the men who signed the Declaration of Independence, had monetary soveriegnty as a primary goal. While the Framers, on the other hand, were the first “real” politicians. Their goals were not only about states rights and monetary preservation, but, for the first time, their goals were about representation, people’s rights, and the unity of this great nation. Not to say that the Founders didn’t have these goals but, in my humble opinion, the priorities were slightly different for the two groups.

            I also think using the terms “flexible” and “loose” automatically denigrates the idea of empiricism. It is not about conservative or progressive really. Take the Supreme Court for example. When comparing Plessy v Ferguson to Brown v Board of Education, does it make sense that the same judicial branch and same Constitution produced those two outcomes? It doesn’t logically. But, because the empirical knowledge acquired over time evolved to include a more vast understanding of equal rights, those two decisions were possible.

            This will be my last comment as it appears there is no point of agreement here and, as I said previously, I agree with you in many respects, but I think that self-identification along the ideological spectrum is what is dangerous here. We can debate the role of government, we can even debate Framers’ v Founders’ intentions, but we cannot debate policy if the goal is simply to say that the other side is wrong simlpy because they are the other side. I think, constitutionally, bailouts are sometimes necessary and proper. Not because of my political leanings, I am a moderate if that matters, but because of our function in the world.

            Free Market Capitalism sounds really wonderful on paper. It truly does. But, corporations of today are not the mom and pop store fronts and road stops of centuries past. They are hegemonic monoliths with banking, retail, governmental, employment and consumer ties that expand beyond what you or I could possibly conceive of. And, when that crumbles, basic notions of supply and demand can’t possibly do enough to turn things around. I would agree with you wholly if we were talking about an organic, corruption-free, pure free market system. But, the system is gamed. And, it’s broken. And, sometimes, the government has to get their hands dirty to make sure that the poeple who didn’t break it don’t get hurt when those who did take risks that fail. Good luck with school! Have a great day!

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