McClaughry: Combating ‘welfare for the rich’

By John McClaughry

People seeking and using political influence to make themselves richer by enlisting government to their advantage has long been a deplorable practice in the history of this country.

Enrichment techniques are legion. Outright cash grants and credits. Preferential taxation. Tariffs and quotas to block competing imports. Regulatory favoritism and obstructionism. Subsidized insurance and guarantees. Stringent occupational licensing. Government-sanctioned cartels.

Fourteen years ago Tim Carney’s “The Big Ripoff: How Big Business and Big Government Steal Your Money” exposed the advanced corporate welfare schemes of Enron, Big Tobacco, Big Sugar and Big Ethanol.

John McClaughry

John McClaughry is vice president of the Ethan Allen Institute.

Now comes another valuable contribution, this one from libertarians Phil Harvey and Lisa Conyers, titled “Welfare for the Rich: How Your Tax Dollars End Up in Millionaires’ Pockets — And What You Can Do About It.”

Harvey and Conyers go beyond Carney in documenting a vast collection of laws and regulations that disproportionally favor the rich, and do little, nothing, or worse for the not-rich. Big Sugar is the absolute worst example. The sugar program is an intricate combination of fixed prices, import quotas, subsidized loans and tariffs and distribution of political contributions to make a few powerful people very rich, notably the Fanjul brothers of Miami.

The authors walk readers through the labyrinthine income tax code, the estate tax, bewildering tariff schedules, farm price supports, the ethanol scam, the carried interest ripoff, never-ending bank bailouts and “state subsidies for stadiums, movies and Mickey Mouse.”

A particularly annoying corporate welfare scheme involves grants, rebates, infrastructure improvements and tax concessions to a large company that is shopping around for the most lucrative deal to locate a big job-producing project or pricey sports arena in a state or city. These almost always leave taxpayers holding the bag.

To be fair, it’s hard to blame a company for shopping for the best deal for locating a plant. For the local government to offer a sewer extension or a traffic flow improvement or even a limited tax abatement is not wholly unreasonable. But all too often job-hungry politicians give away the benefit store, so to speak, to create a ribbon-cutting photo op the next election year.

There’s only one Vermont example in the book, dating to 1980. It wasn’t corporate welfare, but labor unions using the federal government to put unorganized workers — in this case, dozens of home knitters of ski caps — out of business. The union’s weapon was a 1943 regulatory payoff to unions that prohibited women from working at home, often while watching their small children, and selling their products to a local manufacturer. The Reagan secretary of labor repealed the regulation. The ILGWU got a court to block the repeal on technical grounds. Eventually the next secretary invented a workaround that kept at least some of the women earning much needed family income.

Not discussed are the huge-for-Vermont benefits shoveled out to the renewable industrial complex: feed in tariffs, standard offer, production tax credits, sales tax exemptions, bonus depreciation, free use of the highways by subsidized electric vehicles, and the renewable portfolio standard that requires utilities to buy high-priced electricity from wind and solar producers.

I avoid the authors’ populist practice of citing the high salaries earned by corporate CEOs, that seems more appropriate to a Bernie Sanders envy outburst, and I am skeptical of demands for the rich to pay their unascertainable “fair share.”

But those aren’t consequential objections. This is a valuable book. It boldly shines a searchlight beam onto a wide range of government policies that by accident or design — mostly design — make the rich richer. The problem rarely solved, or even diminished, is how to mobilize ordinary, not-rich people to force their politicians to roll back the most egregious feed-the-rich policies.

In old English villages the Committee of Watch and Ward kept a sharp eye out for threats to the peace and the schemes of Ye Olde Deluder. When such were spotted they raised the “hue and cry” to put a stop to the wrongdoing. Our Vermont forebears established a Council of Censors to review every seven years the workings of the state government to make sure they remained in line with the frugal principles of the Constitution. (It was regrettably discontinued in 1871.)

Perhaps the best available method to rein in “welfare for the rich” today is for citizens to draw on the expertise of think tanks to understand the multifarious schemes, and raise an organized hue and cry, focused on legislators and governors, every time some new feed-the-rich scam rises to public attention.

John McClaughry is vice president of the Ethan Allen Institute.

Images courtesy of Public domain and John McClaughry

13 thoughts on “McClaughry: Combating ‘welfare for the rich’

  1. Perhaps it might be worth looking back to a similar time in our history, the Gilded Age and how one Republican President, Teddy Roosevelt handled the power of large corporations. While viewing big business as a necessary part of the American economy, Roosevelt aggressively used the 1890 Sherman Antitrust Act to prosecute the “bad trusts” that restrained trade and charged unfair prices.
    A book worth reading is “To Make Men Free: A history of the Republican Party” by Heather Cox Richardson. She shows how the Republican Party was both founded on the principle of and at times made strides on using government constructively to benefit all not just a few Americans.

    I wonder as well what Mr. McClaughry thinks about Increasing decentralization and increasing simplification as part of an antidote to the corruption he describes. One of my favorite programs was Revenue Sharing. Instead of the federal government spending money as they saw fit, this program in the 1970’s and early 80’s gave money collected by the federal government directly back to communities to use as they saw fit to meet their needs. Far easier to track to see if it was being used properly as how it was used in my community was part of our annual Town Reports.
    Simplifying the tax code to eliminate most deductions especially as they relate to businesses might also be of use. The more complex things are, the easier misdeeds can be hidden from the public.

    • John F,

      Jeff Bozos has created a wonderful company, called AMAZON.
      Because he owned a significant percentage of the company ON STARTUP, he became rich.
      Others tried and failed.
      His riches are merely a paper issue.
      It has NOTHING to do with the PHYSICAL AMAZON

      The same is true for TESLA, and APLLE, and thousands of other companies.

      The FREE US is BLESSED to have such companies.
      They are the ENVY of the world.

      The SOCIALIST, UN-FREE, OVER-REGULATED EU bureaucrats respond by trying to regulate/badmouth US companies into oblivion, IN FAVOR OF THEIR OWN COMPANIES, as they did with AIRBUS, by subsidizing it up to the armpits, as they did with the European branches of Ford and GM

  2. These big tech companies, and then our people like Bezos.. they have amassed more power and wealth than even the government has at this point..
    They have been growing to actually have the power and control to be stronger than our own government.
    We’ve seen congress haul in Zuckerberg and Dorsey and what did you see happen?
    What were the results?
    They have continued right on cracking down business as usual.
    So what does that say? these men are certainly not shaking in their boots. They know they don’t have to be.

    All I can think of as a solution, which brings us to this article, is that these places should be broken up at a certain point.. we cannot have a company or even a single person amass more power and wealth than a small country has or our own government.

    Americans are now being ruled over in a Fiat power system by Walmart, Education, “Big” Everything out there, the media, and this is in addition to our tyrannical government overlords.
    This has all gotta go!

  3. There are many hidden sources of revenue for the elite politicians other than their (meager) salaries.. They also have the benefit of insider stock trading. They have so many perks.

    Then Leaky Leahy’s infamous EB5 promotion with Jay Peak, Newport, Burke Mt projects that went belly up. He should be in Court trying top protect himself. He wrote promotional letters to entice investors that got shafted and lost $599K each to get a green card. The investigation needs to include him and other politicians. Notice his pictures show him smiling.

  4. The problem is that the average person out there, who is a voter, has no idea about all of this stuff.

    When you look at this article, you can see why they keep us dumbed down and how well that has worked for them.
    Add in that we have no mainstream media anymore doing the real work of watchdogging the government and keeping the masses up to speed on what they are up too..
    People aren’t even smart enough to know what they don’t know anymore.

    When I read this article, all I see is that this is the results of what they have done with our money.
    No wonder they use so much voter fraud- they have quite a gravy train they want to see keep on running.

  5. Unfortunately Trump is the cure and the cheating dems and media may have us back to the status quo. Cornpop, Hunter, the chinese and all the members of Joe’s “team” will be on the take. Disgusting that Americans are too stupid to realize this.

    • Kind of makes me believe that a civics course should be required before a person can vote. And, we need to number ballots and count them by hand or on machines that are for counting only. No internet connection or USB ports for thumb drives and absentee ballots on request only with verification of residence with signature on file. In person voting requires a picture ID and addressed envelope to the address of the voter. All attempts of election reform thwarted by democrats have led to this election fiasco. Laws pertaining to the media should include loss of FCC license and prison time for censoring during an election. Time to take our country back!

      • Dano, you are absolutely correct.
        The first thing the incoming new legislature(s) in all 50 states should do is gather up a referendum from the grass roots, and get this passed this coming session.
        Waiting will only let this problem go on in infinity.

        • Thanks, but that won’t happen until the corruption of those politicians who are in control of the fraud are rooted out and punished for their dishonesty. Many states have no referendum, Vermont doesn’t. Nor do we have a recall of crooked politicians or those who violate their constitutional oath to defend our constitution. The statement of affirmation by a Vermont politician upon taking office, “under the pains and penalties of perjury” means nothing to them anymore because no one has been charged with perjury even though they offer, promote and pass unconstitutional laws.

      • Dano,

        A voter should have on file with a Town Clerk

        1) Up-to-date photo ID
        2) Full name signature
        3) Birth certificate (or citizen papers)
        3) Proof of residence

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