Backgrounder: Welfare for the Rich
by Paul Harvey and Lisa Conyers
Our book, “Welfare for the Rich,” is designed to inform Americans — especially taxpayers who are footing most of the bill — about the massive movement of money from millions of middle- and lower-income Americans to much wealthier people and corporations that do not need and should not be entitled to these favors.
What’s most remarkable about these policies is their variety and ubiquity. While today’s politicians — especially those vying for the presidential contest in 2020 — are proposing ways that the government should act to reduce income and wealth inequality, we ask, at the least, that the government stop making inequality worse. Ironically, this is one area of economic policy that the vast majority of Americans of all political persuasions are likely to agree upon.
The ways by which government policies transfer taxpayer funds to the wealthy break down into four basic categories:
- Cash and in-kind payments directly to wealthy individuals and companies. The U.S. farm program is the most egregious example of this. Originally designed during the New Deal to assure adequate food supplies to the poor and to help struggling farmers, the farm program hasn’t truly served those purposes for decades. The U.S. today is a major food exporter, and farmers as a group are no longer needy. Indeed, according to the Environmental Working Group, which tracks farm subsidies and crop insurance payments, 50 billionaire members of the Forbes 400 got over $6.3 million in farm subsidies between 1995 and 2014. A report issued by Oklahoma Sen. Tom Coburn in 2011 reveals that 1,617 millionaires received $16.9 million in farm payments in 2006 alone, an average of more than $10,000 each going to individuals whose incomes exceeded $2.5 million that year.
- Regulations that favor large companies and investors over smaller, less wealthy ones. An example: Mattel, a toy maker with revenue of $1.79 billion in 2016, lobbied in support of a 2008 federal regulation that imposed strict compliance standards on materials and processes used to make children’s furniture and toys. This regulation, the Consumer Product Safety Improvement Act, was justified on the basis of product safety, but the act went well beyond that standard, requiring complex and costly tests and inspections that only big companies like Mattel could afford. It ended up destroying the livelihoods of thousands of at-home small furniture crafts persons and toy makers whose toys and chairs were perfectly safe.
- Tax laws and targeted subsidies that favor the rich. Our tax code is riddled with loopholes only the rich can slip through. “Carried interest,” for example, is a special tax privilege that allows hedge fund managers and private equity executives to classify the income they receive on investment gains as low-tax capital gains. Exxon Mobil’s 2011 upgrades to its Baton Rouge refinery in Louisiana, for example, are still generating benefits from a $119-million state subsidy, according to an investigative report in The Guardian.
- Government policies that provide favors to the rich for which American consumers must pay. The sugar program is the biggest offender in this category. A combination of tariffs, guarantees, and import quotas force the cost of sugar in the United States up to nearly double the world price. As a result, everyone who buys sugar-containing products, from ketchup to candy to bread, pays more, benefiting wealthy sugar growers.
How do these public payoffs to the wealthiest people and companies happen? It’s no secret. Special interests line up at the trough in Washington, where the big guys have loud voices. In a recent study, the Sunlight Foundation, a nonprofit that promotes government accountability, found that “between 2007 and 2012, 200 of America’s most politically active corporations spent a combined $5.8 billion on federal lobbying and campaign contributions. Those same corporations got $4.4 trillion in federal business and support” during those five years, including subsidies, tax breaks and favored government contracts. “After examining 14 million records,” Sunlight concluded, “we found that, on average, for every dollar spent on influencing politics, the nation’s most politically active corporations received $760 from the government.”
The amount of talent and energy that goes into these efforts is staggering. There are 20 registered lobbyists for each of the 535 members of Congress, and they work hard. The stated rationales for these political maneuvers range from protecting vulnerable family farms to promoting useful industries to enhancing public safety. So rich farmers get more money, wealthy individuals enjoy more arcane tax breaks, and big companies get even bigger subsidies. Meanwhile, middle- and low-income taxpayers get pinched, including entrepreneurs and small businesses that are being stymied by regulations and tax levies that don’t affect the big boys. The process exacerbates income inequality in America, which is both unnecessary and wrong.
Lisa Conyers, an adjunct scholar of the Indiana Policy Review, is the co-author with Paul Harvey of “Welfare for the Rich,” to be released Aug. 4, 2020. Conyers has led a foundation seminar in Fort Wayne on how the poor are hurt by social welfare. Contact her at www.welfarefortherich.com and @PostHillPress.
Robert Coleman. “The Rich Get Richer: 50 Billionaires Got Federal Farm Subsidies,” Environmental Working Group AgMag, April 18, 2016, https://www.ewg.org/agmag/ 2016/04/rich-get-richer-50-billionaires-got-federal-farm-subsidies
Tom A. Colburn, M.D. “Subsidies of the Rich and Famous,” November 2011, http:// big.assets.huffingtonpost.com/SubsidiesoftheRichandFamous.pdf
Yvonne Zipp. “A New Law Hurts Small Toy Stores and Toymakers,” The Christian Science Monitor, January 9, 2009, https://www.csmonitor.com/The-Culture/The-Home- Forum/2009/0109/p25s23-hfgn.html
M. Garside. “U.S. Gas and Oil Industry Annual Revenue 2010-2017,” Statista, September 26, 2019, https://www.statista.com/statistics/294614/revenue-of-the-gas-and- oil-industry-in-the-us/
Damian Carrington and Harry Davies. “US Taxpayers Subsidising World’s Biggest Fossil Fuel Companies,” The Guardian, May 12, 2015, https://www.theguardian.com/ environment/2015/may/12/us-taxpayers-subsidising-worlds-biggest-fossil-fuel-companies
Erin Duffin.“Total Lobbying Spending in the U.S. 1998-2018,” Statista, April 29, 2019, https://www.statista.com/statistics/257337/total-lobbying-spending-in-the-us/
Bill Allison and Sarah Harkins. “Fixed Fortunes: Biggest Corporate Political Interests Spend Billions, Get Trillions,” Sunlight Foundation, November 17, 2014, https:// sunlightfoundation.com/2014/11/17/fixed-fortunes-biggest-corporate-political-interests- spend-billions-get-trillions/