Corporate Welfare and Corruption
President-elect
Donald Trump says that he will cut wasteful spending and “drain the
swamp” in Washington. The first thing he should target is business
subsidies in the federal budget. Such “corporate welfare” spending
attracts corruption like garbage dumps attract rats.
A Cato study estimated
that there is $100 billion of corporate welfare in the budget. That
spending harms the economy, but the incoming administration should be
aware that such spending also spawns damaging scandals. That pattern
goes all the way back to the 19th century. Federal subsidies for the
first transcontinental railroad led to the Credit Mobilier scandal of
the 1870s, which involved dozens of members of Congress.
More recently, corporate welfare has spawned these scandals:- HUD Subsidies under Reagan. President Ronald Reagan’s Department of Housing and Urban Development overflowed with corruption in the 1980s under Secretary Sam Pierce. Pierce routinely dished out grants, loans, and other subsidies to friends, business associates, and Republican Party contributors.
- Commerce Subsidies under Clinton. President Bill Clinton’s Commerce Secretary, Ron Brown, used business subsidies as a fund-raising tool for the Democratic Party in the 1990s. Corporate executives who played the game were given access to export promotion trips and federal export loans. In his investigations, U.S. District Judge Royce Lamberth determined that Commerce officials concealed and destroyed documents relating to the trade mission scandal, and he compared officials to “con artists.”
- Enron Subsidies under Clinton and Bush. Enron Corporation lobbied federal officials to expand export subsidy programs, and it received billions of dollars in aid for its risky foreign schemes. During the Clinton and Bush administrations, high-level officials went to great lengths to aid Enron on an Indian power plant deal. Federal aid induced Enron to make misguided foreign investments, and the resulting losses helped cause the company’s implosion.
- Green Subsidies under Obama. The Washington Post found that “Obama’s green-technology program was infused with politics at every level.” The $535 million loan guarantee for the failed Solyndra is a prime example. The Department of Energy approved the loan after pressure from the White House. A main Solyndra investor was a billionaire Obama fundraiser. The New York Times found that Solyndra “spent nearly $1.8 million on Washington lobbyists, employing six firms with ties to members of Congress and officials of the Obama White House.”
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