Strange Bedfellow

Corporate-Welfare NIMBYs

In your district, it’s corporate welfare. In my district, it isn’t.

By Jacob Weisberg

A great turn of phrase can transform the political debate. Robert Reich, as secretary of labor, first deployed the phrase “corporate welfare” in a 1994 speech. The phrase was brilliant political jujitsu, turning the Republicans’ favorite issue against them. The GOP wanted to cut poor people off the dole, but was ignoring the much larger sums that go to businesses in the form of tax breaks, direct subsidies, and regulatory favoritism. In fact, Reich’s slogan has been so successful that it has created a new, bipartisan class of Washington hypocrites–the corporate-welfare NIMBY.

Corporate-welfare NIMBYs are those who want to slash corporate welfare, but not in their own back yards. They are unalterably opposed to handouts for private businesses–as long as the businesses are in somebody else’s state or district. They are outraged by federal largess that goes to the undeserving–except when the undeserving happen to include their own friends, contributors, and constituents.

To see this double standard in action, you don’t even have to watch C-SPAN for very long. On Feb. 13, for example, the Senate Governmental Affairs Committee busied itself with hearings on something called the Corporate Subsidy Reform Commission Act. This is a bill to create a commission to propose cuts in corporate welfare. Like the military-base-closing commission on which it is modeled, the corporate-welfare commission would produce a hit list, and Congress would then vote “yes” or “no” on the whole package. Chairing the hearing was a fervent supporter of the idea, Republican freshman Sen. Sam Brownback of Kansas.

Brownback, who succeeded to Bob Dole’s seat in the Senate, casts himself as the Senate’s most fervid enemy of government waste. “Pork has no place when we’re so broke,” he told a roomful of reporters at a Jan. 28 press conference announcing the corporate-welfare-commission bill. At the end of the event, journalists from Kansas surrounded Brownback to ask whether he considered government ethanol subsidies to be corporate welfare. Ethanol is distilled from corn, so the subsidies benefit Kansas farmers as well as the politically connected Archer Daniels Midland Co. There are few better examples of corporate welfare. But Brownback “made clear that wasn’t what he meant,” says one person who attended the event. Brownback, by the way, cast the lone vote against the confirmation of William Daley as commerce secretary. Brownback insisted that Daley hadn’t made clear enough his hatred of corporate welfare.

The chief Democratic sponsor of the Senate bill is Sen. Russ Feingold of Wisconsin. “Ending corporate welfare is not a luxury, it is a necessity,” Feingold noted in a press release. Would that include, say, federal dairy supports and marketing orders for the milk industry, which somehow escaped being scaled back in the 1996 Farm Bill? “I told you he’s for a commission,” says Feingold’s press secretary, Mary Bottari. Feingold, who is up for re-election in 1998, carries a different tune when it comes to aid to families with dependent cheese.

L iberals and conservatives do tend to mean different things when they denounce corporate welfare. To Democrats, corporate welfare usually means indirect subsidies in the form of tax breaks, like the ethanol tax credit or the rule that allows firms to depreciate some of their advertising costs as capital. Reich himself seldom complained about spending programs like the Overseas Private Investment Corp. and the Export-Import Bank, which subsidize American exports.

To Republicans, on the other hand, corporate welfare generally refers only to spending. To close any of the loopholes that the Congressional Budget Office says cost the Treasury $32 billion a year would mean raising taxes. Grover Norquist (of the Americans for Tax Reform), who is part of Ohio Rep. John Kasich’s corporate-welfare-cutting coalition, takes the standard conservative line that tax subsidies should be addressed separately, and only in context of a tax-cutting bill that reduces rates. Meanwhile, Republicans are busy expanding this form of corporate welfare. According to the Washington Post, House Speaker Newt Gingrich and Ways and Means Committee Chairman Bill Archer slipped into last year’s minimum-wage bill a new version of the huge tax break that goes to firms operating out of Puerto Rico. The corporate-welfare queens who asked for this goody were lobbyists for the National Federation of Independent Business.

But the distinction between a tax subsidy and a payment subsidy doesn’t account for all the double standards. Many Democrats supported the old version of the Puerto Rico tax subsidy. And Republicans will support subsidies for any form of agricultural production. Perhaps the most absurd examples are people like Sen. Dan Coats of Indiana–a co-sponsor of the corporate-welfare-commission bill–who voted last year to stop a brave attempt by Arizona Republican Sen. John McCain to get rid of the so-called Market Access Program. This handout for the rich is perhaps the purest example of corporate welfare in the federal budget. It’s a direct grant to giant food and wine companies like Gallo, Tyson Foods, and Campbell Soup to pay for their advertising costs overseas.

Another favorite Republican cause is the Small Business Administration, which exists to make loans to companies that banks deem nonviable. Even a maverick like Republican Rep. Michael Forbes of New York–who, according to press reports, has been treated as a nonperson by his GOP colleagues since he voted against the re-election of Newt Gingrich as speaker–bleats like a goat when the SBA field office in his Long Island district is threatened. And then there are the Democrats like Ted Kennedy and John Kerry, who have the gall to sign on as co-sponsors of the corporate-welfare bill while holding out for ludicrous federal maritime subsidies. Their interest is in protecting the shipyard in Quincy, Mass.

There are a few opponents of corporate welfare who don’t instinctively exempt their own oxen from being gored. McCain is one (though it should be noted that the big federal boondoggles in retiree-rich Arizona are Social Security and Medicare, not corporate welfare). Kasich, who represents farm-free Columbus in the House, is another who practices what he preaches. But even these relatively honest conservatives have let all the fat fish wriggle off the hook. Kasich’s proposed corporate-welfare package draws together a measly $11.5 billion in cuts over five years. The Progressive Policy Institute’s Rob Shapiro, who invented the concept of corporate welfare before Reich gave it a name, has identified $300 billion worth.

And slight as they are, most of Kasich’s proposed cuts aren’t really corporate welfare at all. They’re regular old spending that Republicans happen not to like, such as support for the International Monetary Fund and highway demonstration projects in Democratic districts. Kasich isn’t a corporate-welfare NIMBY. He’s a corporate-welfare wimp. But that’s another story.