Welfare State

The United States has turned into a welfare state, though not in the way you would typically think. Much of the welfare argument has to do with social spending on individuals through programs such as social security Medicare/Medicaid, food stamps, etc. However, a new type of welfare has grown over the past few decades that receives little attention; corporate welfare.

 

So what is corporate welfare? Corporate welfare is any combination of money grants, tax subsidies or other favorable treatment of corporations by the government. Furthermore, and perhaps more explicitly, it is the guarantee of existence provided to institutions that are considered “too big to fail” as we saw in 2008. If a small mom and pop shop goes bankrupt, there isn’t a bailout waiting for them, they go out of business. This is not true for most of the largest and most profitable corporations in the world, who have been estimated to collectively receive around $125 billion in government aide annually. In fact, Facebook just recently paid $0 in state and federal income taxes while receiving a $429 million refund from the government, while other corporations such as General Electric have had years of $0 in taxes paid. Why are we subsidizing corporations like this?

 

My thought is that the genesis for this policy came from an attempt to combat the globalization of the global economy. With the United States having to increasingly compete with other nations that can provide labor at much lower wages, corporations have been torn between maintaining the status quo and moving their work forces to cut costs and improve margins. The United States’ response to this is to provide tax incentives and breaks to these corporations in order to keep jobs States-side

 

What does this mean for the U.S.? Increasingly, the work force is moving toward service sector jobs with lower wages while coveted manufacturing jobs are shifting toward countries with cheaper labor costs, with a recent study by Elliott Morss putting the figure at a 29 percent decline in manufacturing jobs since 1978. While the wages for most Americans have declined over the course of the past few decades, billions of the taxes those same individuals pay are going to the very corporations that are moving these jobs overseas. It’s a failed attempt to combat globalization and is seriously beginning to threaten the high standard of living we regard ourselves as having in what truly is the richest nation on earth.

 

I don’t know the solution to the issue globalization presents our economy and I’m not going to pretend that I do. However, the fiery debate about social spending on individuals I believe is greatly misplaced. If we can afford to give corporations such as General Electric, Exxon Mobile, Facebook, and others billions in subsidies every year, then we should also be able to fund programs that ensure that kids across the United States don’t go to sleep hungry or wondering where their next meal will come from.

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