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Politicians don’t care about small business

Follow the money: Almost all subsidies go to big business

November 12, 2015 2:00AM ET

Considering how much politicians of all stripes praise small business as the backbone of America, the crucible of job creation and heart of the economy, what a tiny Washington research group found may surprise you.

Our elected leaders have been throwing massive and growing sums of money at businesses through cash gifts, loan guarantees, property tax exemptions and countless other perks. Five years ago state and local business welfare alone came to $900 for each family of four, an astonishing $70 billion diverted from public purposes to private gain. And then there’s the much larger torrent of subsidies flowing from Washington.

But that money isn’t going to small businesses. In some states big business gets almost every dollar handed out, according to a study of those giveaways that governments disclose in the public record. Other such pork is kept hidden from public view.

The yeoman work was done by Good Jobs First, whose staff dug through mountains of paperwork, much of it written in a dialect I call bureaucratese obfuscata.

Translating the documents into plain English, the researchers scrutinized 4,288 subsidy deals in 14 states. The researchers found that small business gets scraps, while big business enjoys a sumptuous banquet. In some states for each dollar subsidizing small businesses, big businesses got $24.

No public debate

Given how incessantly politicians intone about “small business” and how much of the presidential campaign and debates have been about taxes, spending and proposals to narrowly redefine what is appropriate government policy by slashing programs for the old, poor and sick, you might think the study would have made lots of news when it was released last month.  Sadly, the diversion of tax dollars that the report “Shortchanging Small Business” documents was largely ignored by our major news organizations.

Good Jobs First tells me it reached out to more than a dozen reporters at The Associated Press, Bloomberg and Reuters news services as well as five reporters and two columnists at The New York Times, four writers at The Washington Post, two at USA Today, five at NPR and Marketplace radio and many more.           

Coverage? None from the news outlets listed above except for an AP story out of Kansas based on a report in a local business paper.

How many people know that they are being taxed to give billions of dollars to big companies from Apple and Starwood hotels to General Motors, Hyundai and Volkswagen, with bank vaults of public cash going to Alcoa and Boeing.    

Funny how the candidates hardly talk about business subsidies, especially since one of them has collected hundreds of millions of dollars in corporate welfare.

But the studied silence by the candidates, and especially the welfare-collecting Donald Trump, may reflect just who benefits these days from public money put to private benefit. Among the beneficiaries are CBS, Comcast, Disney and Fox, parent companies of the television outlets sponsoring various of the debates, leaving them open to challenge if their journalists ask questions about subsidies.

It’s not just the big businesses that benefit. It’s the politicians, too. When they leave office, those who helped give away your tax dollars often land lucrative jobs in subsidized industries.

Subsidies of all kinds enable politicians — instead of the market — to pick winners and losers.

A long history

Giving taxpayer money to support business is almost as old as the Republic, but this welfare was not always aimed at big business.

Congress enacted the first subsidy law in 1792, the subject of a fascinating short book, “The Citizen's Share: Reducing Inequality in the 21st Century,” by three business school professors.

Those 18th Century subsidies helped the American cod-fishing industry, which the British Navy was harassing. The subsidy went only to ships that paid fisherman in shares of the profits under contracts negotiated in advance, which to me sounds like modern collective bargaining. The workers got 62.5 percent of the subsidy, the owners just 37.5 percent under smart rules devised by Thomas Jefferson, then secretary of state, to make sure only well-run enterprises got help.

Early federal leaders favored grants or sales of land on favorable terms, but only to yeoman farmers, according to Rutgers professor Joseph Blasi, the book’s lead author.

Just a few decades later the policy shifted to big giveaways that Blasi says the Founders would have opposed. Among the first beneficiaries were companies digging canals and building railroads, infrastructure the nation needed. The rail companies were given vast tracts of land and paid handsomely for laying track. Still, they lied, cheated and stole on a grand scale with no prosecutions for these crimes.

The rail companies were also badly mismanaged enterprises according to Richard White, the Stanford University historian who dug through archives for his book “Railroaded: The Transcontinentals and the Making of Modern America.”

One of White’s great insights is that the railroads invented lobbying as we know it today, in which donations, favors and sowing confusion pay off with big gifts from the government and sinecures for the politicians who go along.

Government favors are often more subtle than grants of money or tax exemptions. The federal government helps existing big businesses, and holds back upstart competitors with better products, when it fails to enforce antitrust laws, as explained in journalist David Dayen’s smart piece for The American Prospect on the failure to enforce the laws of competition.

Subsidies of all kinds enable politicians — instead of the market — to pick winners and losers. These favors distort decisions, as companies pursue free money instead of sound long-term investments. And they often go to retailers such as Walmart, which being at the end of the chain of economic value added cannot promote economic growth, though they can diminish retailers not so favored with gifts from government.

Sunlight needed

There is a way to reform this: sunlight and noise.

You can make this happen, using the kind of citizen power that we just saw at the University of Missouri, where both a campus president and the system chancellor resigned under public pressure.

Demand laws at every level of government requiring full and prompt disclosure of subsidies with annual reports signed by mayors, governors and the president.

Complete details would include company names, sites where the money was used, the dates and amounts of each check or forbearance and the performance standards for those collecting the welfare, that last a policy Thomas Jefferson surely would endorse. How much receiving companies spent on lobbyists and campaign donations and any relatives of politicians they retained on contract or hired should also be disclosed.

How to make that demand? Ask the candidates through their web pages. When their fund-raisers call, tell them you want to hear first what their exact promises are about corporate welfare. And when candidates show up in your town organize people and go demanding full, prompt and transparent disclosure of gifts. Call radio talk show hosts and get them engaged. Write brief letters to the editor. And complain to the networks, major newspapers and wire services about the lack of coverage of corporate welfare.

David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, teaches business, tax and property law of the ancient world at the Syracuse University College of Law. He is the best-selling author of “Perfectly Legal,” “Free Lunch” and “The Fine Print” and the editor of the new anthology “Divided: The Perils of Our Growing Inequality.”

The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera America's editorial policy.

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