by Madis Senner


Source: From the Depths, Photograph by William Balfour Kerr, 1906, Library of Congress

Corporate Welfare.Most Americans are repulsed by the thought almost immediately. Words such as 'loathe, hate,' or 'infuriate' cannot do justice to the reaction many of us have to the 'concept' of corporate welfare. Corporate welfare is an encompassing term that means a lot of things to a lot people. But rather than saying corporate welfare is an evasive term, we would say it is a pervasive concept. Why should a corporation receive public assistance? It is not a poor person struggling to survive? Who and what is a corporation? It appears to have no face, no persona; it is an amorphous, lifeless entity, yet it is endowed with human rights. But this is an illusion. There are real live beneficiaries of corporate welfare and they are not the poor, but the wealthy.

Politicians justify corporate welfare arguing that it creates and protects jobs. But whose jobs? The lower level manual laborers or the top executives and the board of directors? If it were benefiting the lower echelon workers we would expect to see commensurate rises in their pay. But as the chart below shows beginning in the 1990's the pay for factory workers has been losing out to the pay gains of CEO's. In fact between 1960 and 1998 CEO's saw a tenfold relative increase in compensation compared to factory workers as the multiple of CEO pay to average factory worker pay increased from 41 times to 419 times.

The relative growth of executive salaries is among the reasons so many of us are infuriated about corporate welfare. It highlights the other sham justification for corporate welfare: Corporate Welfare helps corporations in need and protects fledgling industries. If corporations were in such need why would there be such disproportional growth in executive pay? Consider what private industry turn around specialists or corporate takeover artists do with top management of a company in need. They freeze executive pay, if not cut it, and make top management leaner by firing people. Is it mere coincidence that executive pay fell on a relative basis in the 1980's when takeover artists ruled Wall Street? Or consider the behavior of entrepreneurs who truly believe in their businesses but are in need? Would they first jack-up their salary, or would they funnel money where it was most vitally needed? Our government, like the old Russian Politburo, doles out favors to its friends-people who can pay back favors with favors such as 'soft money' to help finance political campaigns. When a corporation donates 'soft money' who is giving? (The corporation or the top executives?) Common Cause released a Soft Money Study May 2, 2000, finding that 'soft money' donations tripled between 1995 to 2000; Is it mere coincidence that executive pay mushroomed during this period?

But the sham that corporate welfare creates jobs does not end with the growing disparity between worker and executive compensation. Time magazine found just the opposite, that corporate welfare can actually help eliminate jobs (See table). Another hazard of over compensating executives is that it can eat into profits. New York Times reporter David Leonhardt (' Will Today's Huge Rewards Devour Tomorrow's Earnings?, Aril 2, 2000) asks whether executive stock options in a rising stock market will eat into future corporate profits. For a further discussion of the other myths surrounding Corporate welfare see Hoover Institute, 'Getting Business off the Dole' by Stephen Moore.


The justification for much of this welfare is that the U.S. government is creating jobs. Over the past six years, Congress appropriated $5 billion to run the Export-Import Bank of the United States, which subsidizes companies that sell goods abroad. James A. Harmon, president and chairman, puts it this way: "American workers...have higher-quality, better-paying jobs, thanks to Eximbank's financing." But the numbers at the bank's five biggest beneficiaries--AT&T, Bechtel, Boeing, General Electric and McDonnell Douglas (now a part of Boeing)--tell another story. At these companies, which have accounted for about 40% of all loans, grants and long-term guarantees in this decade, overall employment has fallen 38%, as more than a third of a million jobs have disappeared

After all, a corporation is a shell, an independent identity that shields its shareholders from lawsuits and gives them anonymity. But we can break this anonymity and see who really owns corporate America and is the beneficiary of corporate welfare?--The top 20%, particularly the top 10% of the wealthiest families in America-which the Jubilee Amendment would tax-are almost exclusively the beneficiary of corporate welfare. The wealthiest 20%% of American families own 90% of the financial wealth in this country. Put another way, the top 20% of the wealthiest families in America collectively share in the bounty of 90% of the corporate welfare. Which means the remaining 80% of us share what's left over. Talk about injustice and adding insult to injury!

The Percent of Total Assets Held by Wealth Class in 1998
Top 1% Next 9.0% Top 10% Bottom 90%
Stocks & Mutuals 49.4% 35.7% 85.1% 14.9%
Financial Securities 50.8% 33.2% 84.1% 15.9%
Trusts 54.0% 36.8% 90.8% 9.2%
Business Equity 67.7% 24.0% 91.7% 8.3%
Non-home Real Estate 35.8% 39.1% 74.9% 25.1%
Total for Group 54.1% 32.1% 86.2% 13.8%
Stocks, directly or indirectly owned 42.1% 36.6% 78.7% 21.3%
Source:'Recent Trends in Wealth Ownership 1983-1998, Table 6: The Percent of Total Assets Held by Wealth Class, 1998', Edward N. Wolff

The Percentage of Financial Wealth by Wealth Class in 1998
Top 1% Next 4.0% Next 5.0% Next 10.0% Top 20.0% 2nd 20.0% 3rd 20.0% Bottom 40.0%
47.3% 21.0% 11.4% 11.2% 90.9% 8.3% 1.9% -1.1%
Source:'Recent Trends in Wealth Ownership, 1983-1998; Table 2 The Size Distribution of Wealth and Income, 1983-1998', Edward N. Wolff

Robert Shapiro in "Cut and Invest', Progressive Policy Institute, argues similarly, that 'domestic subsidies, protections, and regulations cost America jobs and growth... Tens of billions of dollars a year are transferred from taxpayers and consumers to the shareholders of companies in subsidized industries.' How can we stop the rip-off of tens of billion of dollars a year to subsidized industries and the other criminal aspects of corporate welfare?

The Jubilee Amendment is the solution. Think of the Jubilee amendment as a lawsuit, a legal remedy to sue those who have disproportionately benefited from corporate welfare-the richest families in America. It is our right as Americans to seek legal redress when we have been wronged. And there is no denying the fact that we have been wronged! Corporate welfare has unjustly profited the rich. And although we cannot associate individual egregious acts with specific individuals we can collectively make assumptions. The fact is that corporations have unjustly benefited from government largesse and we must look to the owners who have benefited from their earnings. Certainly some industries have benefited more than others have from corporate welfare. But, as we are about to see, corporate welfare is so pervasive that almost no corporations or industry is excluded.

"Kevin Hassett, a resident scholar at the American Enterprise Institute", "Hey, Mr. Greenspan: Wealth Creation Isn't A Problem.' Wall Street Journal, June 26, 2000, tells us that the wealthy really do own corporate America: 'Most stock is owned by fairly wealthy individuals--the top 1% of equity owners hold about 50% of all corporate stock. The top 5% own 80% of all stock."

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