Corporate Welfare Queens - Democratic Underground

McCamy Taylor

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Fri Feb-12-10 06:36 PM
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Corporate Welfare Queens

Warning! This is one of my longest posts ever---because there is nothing more rampant in the United States today than corporate welfare.

Obama’s budget includes the payoff, promising to start a multibillion-dollar greenhouse gas industry by 2012. In a letter this week, GE’S Immelt told shareholders that current events present an “opportunity of a lifetime,” because “capitalism will be ‘reset.’”Immelt wrote: “The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”

http://www.washingtonexaminer.com/politics/Obamas-hidden-bailout-of-General-Electric_03_04-40686707.html

Intro Ever wonder why France can afford to give its citizens decent health care, but the richest nation in the world, the United States can not? Maybe it has something to do with all the handouts our government keeps giving to the already rich---often under the guise of “reforming” the government.

I. Medicare Part D: Christmas Everyday for Pharmaceutical Companies

Medicare Part D was supposed to help seniors pay for their expensive medications. That must be why Congress created the so called “donut” hole---which cuts off insurance payments in the middle of each year and forces seniors to dip into their own retirement savings to pay for their even more expensive medication.

How much has Corporate Fascist America made from Medicare Part D? From an article aptly titled “Corporate Giveaway in the Name of Reform”

This produced in excess of $3.7 billion that went straight to the drug manufacturers in the first two years of the program. Johnson & Johnson received the largest windfall, making $615 million off the program in 2006 and 2007. More than $500 million of that additional revenue came from the sales of just one drug—the anti-psychotic Risperdal. Bristol-Myers Squib received a boost of $400 million, including over $200 million in additional revenue from sales of Plavix, a heart-attack and stroke medication.

http://www.workers.org/2009/us/sickness_1105/

II. Iraq War for Fun and Profit: Halliburton

Who did not make money from the invasion and occupation of Iraq? Dick Cheney’s Halliburton was the big winner, hauling in an estimated $17.2 billion from 2003-2006, but this link names other war profiteers as well.

http://www.businesspundit.com/the-25-most-vicious-iraq-war-profiteers/

This invasion was supposed to be about making Iraq(’s oil fields) safe (for Exxon and Chevron), but it has generated windfalls for merchants of death, like Halliburton, which was teetering on the verge of bankruptcy before W. decided to invade a country which had not attacked us.

III. Enron and the California Price Gouging

What Halliburton was for Cheney, Enron was for W. Ken Lay was W.’s biggest supporter. So, it was only natural that his administration would return the favor. They allowed Lay to handpick the head of the FERC, Nora Mead Brownell (aka Nora Mead Brownout). Federal regulators who were actually trying to do their job could have shut down the scam, in which electricity prices were artificially inflated. Sanders Hicks reports that Enron was able to generate an additional $60 billion in revenue in 2000---mostly from electricity consumers in California.

http://www.sanderhicks.com/articles/enron1.html

Too bad all that money could not save the house of cards from collapse. But never fear, the energy industry took note of Enron’s methods and decided to try them out in other states, like Texas, where energy prices have soared in recent years. But wait! There is more for the nation’s energy producers.

IV. Cap and Trade Part 1: Exelon

Oh look! It's green !

The current crop of Democrats were sent to Washington with a mandate to stop global warming. In response, they dreamed up yet another way for energy companies to rake in the dough. It is called “Cap and Trade”, and it is near and dear to the heart of Exelon the nuclear power giant which is to Obama what Enron was to W.

Exelon, which owns a large fleet of nuclear generators, would actually make money from cap-and-trade, to the tune of $1.7 billion annually, the report says.

http://energyandenvironmentblog.dallasnews.com/archives/2009/11/some-utilities-would-profit-fr.html

My! No wonder Big Business likes to invest in politicians. The rewards are huge.

V. Cap and Trade Part 2: The Great GE Bailout

Pop quiz: Which 24 hour news network championed Obama all through the primary---and vilified his opponents, especially Hillary Clinton? Answer, MSNBC, owned by GE.

The Obama administration energy plan (which was supposed to be about keeping Tennessee from becoming beach front property) also includes big bucks for General Electric.

Labeled “climate revenues” and totaling $646 billion over eight years, this line item in Obama’s budget has inspired confidence in GE Chief Executive Officer Jeff Immelt. As Immelt put it in a letter this week, he believes that the Obama administration will be a profitable “financier” and “key partner.”

snip

GE has started a joint venture called Greenhouse Gas Services, which invests in — and hopes to manage the trade in — greenhouse gas credits. But these investments and this trading floor are of basically no use and nearly no value without government restrictions on greenhouse gases.
Hence the lobbying, buttressed by generous campaign contributions: Employees and executives gave $1.35 million to politicians in the past election while GE’s political action committee shelled out $1.55 million. About 64 percent of this $2.9 million went to Democrats, with Obama easily the top recipient of GE money.

http://www.washingtonexaminer.com/politics/Obamas-hidden-bailout-of-General-Electric_03_04-40686707.html

GE’s investment pays off when Cap and Trade dollars start rolling into its coffers. Note that Obama adviser David Axelrod is a professional astro-turfer---that means he creates the appearance of a popular demand for something that is actually designed to benefit a special interest.

VI. The Great Bank Bailout Swindle of 2008

We knew that something was up when W. got on TV and did his impression of a deer startled by the headlights of an oncoming car. Here he was, all but handing the election to Obama. Why on earth would he do that? For money, of course.

In a move that proved “You can fool all of the people some of the time”, W., Obama and most of Congress decided to write the nation’s banks a $700 billion (!!!) check. What had they done to deserve the largest single act of corporate welfare in our country’s history? (In 2001, the Cato Institute estimated that total U.S. corporate welfare payments were just $87 billion per year. Link here http://www.cato.org/pubs/pas/pa415.pdf ) The banksters had cost the nation its home and jobs. They brought on a Second Great Depression. Dedication to the cause of corporate fascism (which wants to see us all reduced to a state of serfdom) had to be rewarded.

Where has all the money gone (besides enabling AIG to reimburse the Bush Family’s own Carlyle Group for its losses)? It has not been used to free up credit. The banks are not about to loan out any of that money to small companies that are feeling the economic pinch. It has not been used to keep folks in their homes. As far as I can tell, it is being kept in a bank somewhere and it will be used to bribe politicians in 2010 and 2012. Now, that is what I call a slush fund!

VII. Health Care (Insurers’ Profits) Reform

No estimate yet on what this one is going to do for Big Business in this country. However, since an estimated 30 million people will be forced to purchase health insurance policies at rates set by private insurers, we know this will generate a minimum of $100 billion extra income each year. (That is 30 million people times the $3800 fine the insurance industry wants to level on folks who do not participate. Such a fine would be just above the cheapest policy available on the theory that folks would rather pay for a piss poor policy than give the money to the government and get nothing. The actual amount of the fine as set by Congress is irrelevant in this equation). While some of that money would go to pay medical costs, a percentage would be kept by the insurers to cover their inflated overhead, CEO bonuses and to produce “profit”---which is apparently considered holy in the United States of Corporate Fascist America.

http://healthdisparities.virginia.edu/2009/12/24/senate-health-reform-bill-pro-insurance-profits-anti-abortion-rights/

As a result, millions of people will be denied health coverage, millions more will be forced to reduce their incomes by buying private health insurance, billions of public dollars will be channeled into the hands of private owners of insurance and pharmaceutical companies, and abortion rights will be further restricted. A Christmas present working people will want to return for sure.

VIII. Archer Daniel Midland: Corporate Welfare Queen of the 1990s

Corporate Welfare is not something new. Check out this paper from 1995.

The Archer Daniels Midland Corporation (ADM) has been the most prominent recipient of corporate welfare in recent U.S. history. ADM and its chairman Dwayne Andreas have lavishly fertilized both political parties with millions of dollars in handouts and in return have reaped billion-dollar windfalls from taxpayers and consumers. Thanks to federal protection of the domestic sugar industry, ethanol subsidies, subsidized grain exports, and various other programs, ADM has cost the American economy billions of dollars since 1980 and has indirectly cost Americans tens of billions of dollars in higher prices and higher taxes over that same period. At least 43 percent of ADM's annual profits are from products heavily subsidized or protected by the American government. Moreover, every $1 of profits earned by ADM's corn sweetener operation costs consumers $10, and every $1 of profits earned by its ethanol operation costs taxpayers $30

http://www.cato.org/pubs/pas/pa-241.html

We pay $30 so that some rich as sin company can earn an extra buck? Would not it be easier just the put the CEO and executives of Archer Daniel Midland on welfare? Say, pay them a few million bucks each year not to do business?

There is more. It is scary stuff.

ADM champions political control over markets and then invokes that control as an excuse for its continued political manipulation. Andreas has exerted his influence in Washington to ensure that the U.S. form of "socialism" resembles 1930s' Italian corporate statism: the government plunders the citizenry for the benefit of politically connected corporations. And, though Andreas does not like to admit it, there are many markets in the world for agricultural products that are not controlled by politicians.

Yesterday, I wrote about how we have become the new Italy under Mussolini, a corporate fascist state. If anyone doubts me, they should study the above document. Also note that Democrats as well as Republicans have competed for Archer Daniel Midland’s money.

IX. Welfare for Those Who Need It Least: The Oil Industry

I am beginning to suspect that the key to financial success in the U.S. is not making a better product. Companies become profitable by raking in more federal handouts.

Which is the last sector of the economy that you would think in need of---or deserving of---corporate welfare? After eight years of flagrant price gouging, abetted by the oil loving Bush-Cheney administration, companies like Exxon should be able to pay their own way, right?

Wrong.

In its report “Federal Financial Interventions and Subsidies in Energy Markets 2007,” the U.S. Energy Information Administration estimated that FY 2007 subsidies for the oil and natural gas industry totalled $2.1 billion.

http://wonkroom.thinkprogress.org/2008/05/06/big-oil-welfare/

To put this in some kind of perspective, in 2007 Congress estimated it would cost $6 billion a year to fully enroll all the kids who could be covered by Medicaid and SCHIP. That means tax breaks for Big Oil eat up one third of the money needed to keep our next generation healthy. Talk about investing in the future.

Here is more:

During a time of record high oil prices and record profits among oil companies, Congress gave subsidies to oil companies worth $30 billion over five years. They receive $5.4 billion in subsidies for exploration and an additional $4.7 billion for the depletion of discovered wells. Yet the oil companies receiving these subsidies have seen huge profits: Exxon Mobil at $36 billion; Chevron at $189 billion; Conoco Phillips at $166 billion; and Valero Energy at $81 billion.

http://www.ourfuture.org/corporate-welfare

Which begs the question, do they really expect us to believe that the oil fields would stop producing if oil companies had to pay their fair share in taxes? That is like saying that people would stop breathing if we imposed a tax on air.

Hmmm. Seems to me that the ones getting the most corporate welfare are not the neediest. Instead, it is the companies that are most profitable, presumably because they have the most money left over at year’s end to bribe elected officials. And the Supreme Court just made it easier for the fat cats to buy politicians.

X. 19th Century Corporate Welfare: The General Mining Act of 1872

Ever wonder why companies can stake a claim to federal lands with contain billions of dollars in mineral resources and pay U.S. taxpayers the equivalent of a box of beads? Blame the General Mining Act of 1872. A recent attempt to impose a (tiny) tax of 2-5% on these mineral deposits is expected to face stiff opposition---from Senator Harry Reid. Miners love the law the way it is, and they do not want to share their wealth with anyone, not even the American people who own those lands. Because, hey, that is what corporate welfare is all about. What is mine is mine and what is yours is mine to mine.

Most lists like this would stop at 10. However, this is no ordinary compilation. This is a list of corporate welfare atrocities in the United States, the country that has made taking from the poor and giving to the rich its national pastime.

XI. Wal-Mart: We PAY Them to Destroy the Nation’s Small Businesses

Here is an excellent summary of the kind of thinking that makes corporate welfare possible. The authors call it “Free Market Fundamentalism”.

Free Market Fundamentalism often leads to corporate welfare because deregulated markets often allow corporations to become so overgrown, even to the point of monopoly, that their influence over the government balloons and balloons. They can game the system so that government programs end up funneling money straight into their own pockets.

http://www.ourfuture.org/corporate-welfare

Wal-Mart double dips. First, it gets big handouts that are supposed to be necessary for it to build its stores (and provide jobs). Then, it enrolls its employees on Medicaid, the federally funded insurance program designed for the poor . You know these people must be making shitty wages if they can qualify for Medicaid. What kind of community would shell out money---and drive its small business owners out of business---in order to create jobs like this? A community that wants to see all power concentrated in the hands of a few and everyone else reduced to the status of a Russian serf. Now that’s American!

XII. Katrina: The Profits of Despair

When they put Karl Rove in charge of the billions earmarked for Katrina reconstruction, we knew that there would be trouble. Bush used the emergency---which his own Army Corp of Engineers helped create---to enrich big businesses. He suspended the Davis-Bacon rule which required federal contractors to pay the prevailing wage----enabling companies like Halliburton to bring in illegals who would end up never getting paid. And he did away with the requirement that federal contracts be allocated to small and minority owned businesses.

http://www.mail-archive.com/pen-l@sus.csuchico.edu/msg07849.html

Here is more on Halliburton’s windfall after Katrina, along with an alarming bit of information:

Big earners were the focus of “Executive Excess 2005,” a study published in September by the Institute for Policy Studies and United for a Fair Economy. The study found that the ratio between CEO and worker pay now stands at 431-to-1. In real numbers, this adds up to $11.8 million in earnings for the average CEO compared to $27,460 for the average worker.

http://www.inthesetimes.com/article/2335/alls_or_nothings/

XII. The Insurance Industry: Privatizing the Premiums and Socializing the Risks

Here is more about the true nature of capitalism in the United States.

The idea can be summarized thusly: capital and profits are kept private, but losses and risk are shifted to the public. We can see this happening in the housing/mortgage fiasco, which frequent contributor Zeus Y. covers in detail below.

A corollary policy of this utterly hypocritical "we like free markets until we lose money" school of fake free-marketers is that the government exists to gather taxes which can be funnelled to private interests.

http://www.oftwominds.com/blogsept07/bailouts.html

The author is writing about the bank bailout, but the insurance industry has long been a master of avoiding the risks which are what insurance is supposed to be all about.

Take the health insurance industry. Right now the United States spends twice as much per person as any other country in the world to achieve poor quality health results. Half of this spending comes from the private sector and the other half comes from the government.

Now, think about that for a moment. Our government already pays the same amount per person that countries like France and Canada pay to achieve good quality results for everyone. How is it possible for us to fritter away so much money for so little?

Private insurers collect premiums from healthy, young, working people. However, their benefits are often poor, and people who find themselves afflicted with catastrophic disease often go bankrupt---losing the jobs, homes and health insurance. No problem! The federal government is there to pick up their care via either Medicare or Medicaid. Plus, as people get older and start getting sicker, the federal government takes over the responsibility of paying their bills. In this way, private insurers know that they will never be called upon to cover the truly needy, because the feds will do it for them.

All insurance is like this nowadays. Guess which industry posted record profits after Katrina?

The companies that provide Americans with their homeowners and auto insurance made a record $44.8-billion profit last year even after accounting for the claims of policyholders wiped out by Hurricane Katrina and the other big storms of 2005, according to the firms' filings with state regulators.

Snip

They said that even with the increase, insurers face deep problems that can be fixed only by substantial premium hikes, a scaling back of commitments by several firms to the most disaster-prone portions of the country and, according to some, a greatly expanded role for the state and federal governments in insuring individuals against the largest of catastrophes.
"Unless insurers can get relief, you're going to see a pullback by the private industry," warned Robert P. Hartwig, chief economist of the industry-funded Insurance Information Institute.
"We're not being good stewards of our investors' capital or our policyholders' surplus if we keep doing business where we can't make money."

http://articles.latimes.com/2006/apr/05/nation/na-insure5

My! The things folks will say when they think that no one is paying attention. Let me see if I have this straight. The insurance industry, which makes insane profits, is going to stop writing policies if we do not increase their profits? Isn’t this a bit like threatening to hold your breath until you turn blue? We would not reward this kind of behavior in a five year old, and yet American business expects to have its petulant demands met.

XIII. Car Manufacturers: Who Needs an Education When They Can Have a Low Wage Job, Instead?

In 2009, oil companies dominated the list of world’s biggest most profitable enterprises at Fortune 500. Wal-Mart was there. So was a bank. One surprising entry, coming in at number ten was Toyota, recently in the news because they hired ex-government officials to keep the lid on their little acceleration problem for almost a decade.

How does Toyota make money? By selling their popular product? Hell no! That business model is for chumps. Toyota, which is rolling in money, makes even more money by bribing local officials to plunge their constituents into poverty---so that the car manufacturing company will move in with a handful of jobs.

The case study of TMMTX exposes the myth of lean manufacturing. Looking beyond the corporate rhetoric at the actual establishment and operation of TMMTX indicates that the extensive exploitation of cheap labor, both on- and offshore, and the substantial reduction of operational costs through state and local subsidies and tax abatements boost company revenues far more than the manufacturing practices in the plant, no matter how efficient they actually might be.

http://axisoflogic.com/artman/publish/Article_58411.shtml

In other words, it is much more profitable to bribe a few local officials than it is to actually make a product.

What is the pubic cost? It is more than just the dollars in taxes that are forgiven. Since the taxes in question would be used to pay for public schools, the American education system suffers.

The economic impact of TMMTX on the community of south San Antonio parallels the impact on labor -- while select individuals and groups clearly benefit from the presence of the plant in the area, the community at large is losing. The impact on the community is most clearly seen in the area of public education.

In other words, when foreign car manufacturers move into a southern community and cut the school tax base, they are ensuring themselves a second generation of poorly educated, low wage workers to continue slaving at their plants. Imagine that. While we outsource jobs to India, because of their low wages, other industrialized countries are outsourcing jobs to us , for the same reason. Makes you wonder. One day, will China ship all of its factory work over here, because Americans will work for peanuts?

XIV. Microsoft---You Are Never Too Rich to Need Corporate Welfare.

Here is a gem of a post.

I just heard the announcement that Microsoft will build a $500 Million data center in Iowa. This would not have happened if the Governor hadn't arranged tax breaks as an incentive.
Bill Gates, the World's Richest Man, does not need Corporate Welfare payments. Iowa taxpayers will be footing the bill for Microsoft. The data center will provide only 75 jobs, it is unlikely that any of them will go to Iowans. The data center will require massive amounts of electric power, straining Iowa's power infrastructure. This is an exceptionally bad decision by the Iowa State government.

http://weblog.ceicher.com/archives/2008/08/microsoft-gets-corporate-welfa.html

Tax breaks to build something that will not provide any local jobs? The must be rolling in money in Iowa. How can I get some of that loot? I guess Bill Gates got the idea from the deal which Iowa cut with Google the year before.

As work proceeded on the bill to remove much of its tax burden, Google threatened to end negotiations because legislative staff didn't write exactly what it wanted. State Commerce Secretary Jim Fain was asked to "prevail upon" the bill writer.

Indeed, the first set of state documents released from the 13-month negotiations reveal a company obsessed with secrecy and not above bullying, tactics that helped get it tax breaks that could top $100 million over three decades.

"I sort of had to work in the dark," said Sen. Jim Jacumin, a Republican who represents Caldwell County. "That bothered me.They need to respect the laws of the land, even if they're business."

http://state29.blogspot.com/2007/04/iowa-senate-approves-google-corporate.html

Time out. If even the world’s third richest man sees nothing wrong with denying our kids an education so that he can make a few extra bucks, you know that something is rotten in Denmark, U.S.A.

Anyone out there interested in fixing it?