Tuesday, October 9, 2012

Corporate Welfare

Corporations receive a lot of tangible benefits from the government as well.

I should note, as a disclaimer, that I am a registered defense contractor, and also do contract work for the Federal Government.   While people tend to think of "government contractors" as Lockheed-Martin and Boeing, in reality, there are millions, if not tens of millions of small businesses and even individuals, who are paid by the Federal Government in one way or another.

I mention defense contractors, as they represent the largest corporate recipients of government money.  As I noted before, defense spending amounts to about 13% of our budget, or as much as that scary old Medicaid and Medicare spending.

Of course, you might argue that defense spending is necessary, as it defends our country, and we get something in return - all those nice high-tech weapon systems that our foes are scared to death of.  And of course, we pay our troops for their sacrifice and service.

But we also get something out of Medicaid and Medicare as well - people are cared for, instead of being left out in the street to die, like they used to do in Bombay, back in the day.   And we pay all those Doctors, and Nurses and caregivers as well.

But of course, there are huge amounts of waste in both programs.  And in the Defense Department, the waste can be particularly egregious, as Billions can be spent on weapons systems that either never work, never work quite as intended, or are never actually used in combat, deployed, or have a realistic chance of ever being deployed.

For example, in the last few years, we have developed not one, but two generations of new fighter jets, even as our potential adversaries have yet to develop any.  In fact, our primary foes these days are mostly armed with rocks and sticks, it seems.   And both jets (the F-22 and F-35) have been plagued with cost overruns, design and construction flaws, and are staggeringly expensive.  Drones have replaced the fighter jet as the weapon of choice in modern warfare.  The era of dogfighting at supersonic speeds has ended - if it ever really existed in the first place.

And there are other programs - ones you never hear about - that go on, tear through hundreds of millions of dollars, and then are quietly scrapped.  A friend of mine spent the better part of a decade developing a hovercraft for the army, to ship large containers of goods.  They built a number of these, at great expense, and then the entire program was scrapped.  Someone finally realized that boats belong to the Navy, not the Army, and the Navy already had their own hovercraft.   The four prototypes were given to Indian reservations in Alaska, under some wacko government guilt-trip program.   Chief Wa-Wa is now tearing around Juno in a hovercraft the size of a city block, provided he can find fuel for it (more likely, it is rotting on a beach somewhere).

Waste?  You bet.  And it gets worse.  Oftentimes, Congress authorizes money for projects that the Pentagon simply doesn't want.  Why?  Because the product is made in a factory in the district of a Congressman who is on the appropriation committee.   The Lockheed Electra was an utter failure as an aircraft.  Not only was it loud and uncomfortable, it was obsolete the day it was made, in the era of jet transport (I rode in one, as a youngster, and my fillings fell out).   It had a nasty habit of creating a standing wave in the wing spars, if the engines were not synced right - causing wings to fall off, on occasion - never a good feature for any aircraft.

But that was not the end of the aircraft.  The government continued to buy them as P-3 Orion sub-chasers, for decades.  They even spent money developing a follow-on plane, the P-7, in the 1990's.   Of course, America is not alone in salvaging a failing aircraft design as a military project.  In an eerie parallel, Great Britain used the ill-fated DeHavilland "Comet" jet (which also had a nasty habit of breaking up in flight, for different reasons) as a subchaser as well - the oddly named "Nimrod".  So it must be a military thing - if the government foists a crappy plane off on you, you turn it into a sub-chaser.

But of course, the Defense Department is not alone here.  There are hosts of other government programs that benefit many private corporate interests, often to the tune of Billions of dollars.  Government subsidies for agriculture, for example, sound so homey as they they protect the "family farmer" who is posited as some over-all wearing hick with a tractor, a red barn, and a silo.   But the reality is, farming is now "agri-business" and crop subsidies and price supports cost us billions - to support one specific industry.  And often, these forms of artificial market interference do not disappear, even after the need for such programs has disappeared.

But like with welfare for the poor, you could argue that such subsidies to lower prices for the rest of us (just as subsidies for the poor make it possible for them to work for lower wages).   And sometimes Uncle Sugar uses one subsidy to pay for another.  Gub-Ment Chee, for example, was made from dairy products bought to artificially prop-up milk prices.

But other industries benefit from government largess as well.  For example, the airlines would go bankrupt (more often), if the government did not spend money on airport infrastructure, aircraft tracking and traffic control systems, and research into basic aircraft technology and safety.  But again, you could make the argument that such spending is necessary for the industry to exist - and that we all benefit from having an air transportation system.

As this article notes, there are lots of other areas where the government benefits Corporations that don't appear to need benefiting.  And there are examples of Corporate Welfare that you and I never think of.   Cities and States fall all over themselves, trying to attract a professional sports franchise.  In some instances, they agree to build the owner a new stadium, offer him extensive tax breaks, and provide free or discounted Police services and traffic control   And after all that, the owner picks up and moves to a State with a better offer.

People go along with this - particularly sports fans.  But when Wal-Mart or a Korean Automaker demands 10 years of reduced property taxes in return for building a new store, warehouse, or factory, people cry foul.   After all, the "little guy" doesn't get such breaks, does he?  Of course he doesn't.  He also doesn't have a lobbyist.

Of course, these sort of gimmies are all justified under the rubric of "jobs".  Give a big corporation a tax break, and they will create jobs, we are told.  Where did this come from and when?   Let me tell you.  When I was a kid, back in the 1960's, the idea that the government was responsible for the economy or for creating jobs, did not have a lot of currency.   Then the recession of 1979 struck.  Jimmy Carter was President, and the price of Gold shot through the roof.

Of course, a lot of the crap Carter is blamed for was brewing for the last decade.  Nixon presided over "wage and price controls" (no really, a Republican President told us that the government's job was to set prices) because inflation was roaring to a record 4-6% (OK, you can stop laughing now, and no, that wasn't a joke, it actually happened.  Oh, for such simpler times!).

Gerald Ford decided that the way to "Whip Inflation Now" was for everyone to wear a "WIN" button.   Gerald Ford was an awfully nice and decent guy, but not the brightest bulb in the chandler.  I once went to his old house in Alexandria, to a party.  He lived very modestly, as a Congressman, and was probably one of the few honest politicians in Washington.  But, the WIN buttons didn't work, I'm afraid.

So when Carter became President, he was handed shit-on-a-stick, sort of like a certain contemporary President.  And then we had our third gas crises of the 1970's - and gas was actually rationed on even and odd gas days - another one of those odd things that actually happened but no one seems to remember, except perhaps me.

People were laid off and the economy was in the shits.   And suddenly, people looked to government for answers.   "Where are all the jobs?" they asked.   And Ronald Reagan promised them that if he was elected, he would get all their jobs back, by eliminating "unnecessary regulation."

Of course Jimmy Carter was way ahead of him - de-regulation of the airlines and the trucking industry was already underway when he was President.  But the GOP takes credit for this today, as the "Great Communicator" deregulated everything, and dontchuforgetit!

And actually, Reagan presided over a horrible recession in the first few years of his Presidency, causing his party to lose a lot of mid-term elections and making his re-election look shaky.   But after eight years, even the worst of recessions ends, just as this one will.  Whoever is in office will take credit for it and be a hero, which is why Romney wants it so badly.

So this whole "jobs" thing really started back then, and while I have digressed (this should have been a separate posting), it points out why so many subsidies and gimmies and swag is thrown at major corporations like Wal-Mart, as if they were indigent or something.

The list goes on and on.  On 4th and D Streets, in Washington, D.C., is an government agency called the International Trade Commission, which a lot of folks think is some sort of International Agency, but is in fact a U.S. Government body.   If you are selling products in the USA, such as lumber, and think that perhaps your competitors in Canada are selling too cheaply, you can go to the ITC and ask them to slap them with a tariff, as the ITC did a few years back.   Or if you think Chinese Tires are a threat to your company, you can get the ITC to slap a 35% tariff on them.

And of course, the government provides a lot of "seed money" for research projects that end up becoming entire industries - or sets standards for such industries.   Your GPS is a nice toy, but without the massive investment in satellites, courtesy of Uncle Sugar, it would be as useful as a brick.   GPS device makers can make a boatload of dough selling portable GPS devices for cars, boats, and airplanes, without having to pay for a single rocket launch.   And those rocket launches aren't cheap.  Ask the folks who built the Iridium system sometime.

And government standards often end up creating markets and setting level playing fields for industry.   You can't have television without the FCC assigning channels and bandwidth (probably the biggest piece of government giveaway in the history of mankind) and creating standards, such as NTSC.

And speaking of giveaways, let's talk about grazing rights and mining rights that the government leases to ranchers and oil explorers, often for a pittance.

But hey, as Jon Stewart put it, "To be fair, at least Exxon/Mobil and AT&T give us back cheap gas and reliable cell phone service".

So yea, we do get that, don't we?

Again, the point of this posting, unlike many who address the subject, is not to paint one group of people as "bad" and another as "good".   The point is, all sorts of folks benefit from government programs, giveaways, subsidies, tax credits, tax deductions, contracts, research, infrastructure, and whatever else you can think of.

To say that our entire "problems" are the result of one group suckling at the government teat more than another is disingenuous.  And to pick on the one group is the one that has the least amount of money in the first place and the least amount of money to lobby on their behalf and fund Billion-dollar Political PACs, is, well, a bit obscene.

Because what the folks who are selling you this are doing is lying, plain and simple.   They want you, the middle class, to blame your problems on a scapegoat.  We already did Jews - so that's out.  But Blacks?  They've been a favorite American "whipping boy" - often quite literally - since 1776.  Blame them for your problems!   Aunt Hattie's $300-a-month SSI check is what is bankrupting this country, not to mention Shantrell's $150 a month in food stamps.

And the solution, of course, is to cut your Social Security and your Home Mortgage Interest Deduction.

Makes sense to me.  I'd vote for that!  If I had a lobotomy, that is....

We need to address our budget problems (which are not as dire as people make them out to be) in a rational manner.  But in today's political discourse, the Right wants to scapegoat the poor, and the Left wants to scapegoat the "big corporations".   Both, of course, are wrong.