Phantom Welfare: Public Relief for Corporate America

By Huff, Daniel D.; Johnson, David A. | Social Work, May 1993 | Go to article overview

Phantom Welfare: Public Relief for Corporate America


Huff, Daniel D., Johnson, David A., Social Work


British sociologist Richard Titmus (1965) exhorted students of welfare policy to broaden their definition of social welfare to include more than programs designed for the poor population. Some policy analysts in social work have advocated for a broad definition of social welfare, one that includes redistributive schemes such as business subsidies (Abramovitz, 1983; Rein, 1977). In spite of this urging, few attempts have been made to describe and quantify the profusion of programs, subsidies, and other devices used to redistribute income to the U.S. business community.

Although the "phantom welfare state" for business may not neatly fit into conventional definitions of social welfare, knowledge of these programs is important to social workers for a number of reasons. First, continued avoidance of nonpoverty welfare programs puts social work in a poor position from which to advocate for fundamental reform of current budget priorities. The dollars shunted into corporate welfare schemes have diverted billions of dollars that might have been more reasonably spent on programs that benefit the poor. Tullock (1983) estimated that if corporate welfare dollars were distributed to the poorest 10 percent of U.S. families, each family would receive an additional yearly income of $47,000.

Second, the corporate welfare system is at least partly responsible for the growing economic imbalance between the poor and rich populations that accelerated during the 1980s. The poorest segments of the United States now receive a smaller share of national income than at any time since the late 1940s (Levy, 1987). This imbalance trend helps explain why in the past decade the United States is losing the battle against poverty even with large social welfare budgets.

Third, the nation cannot continue to ignore this fiscal colossus, which is estimated by some analysts as totalling more than $500 billion a year (Anton, 1989). The phantom welfare state represents a vast redistribution of U.S. national wealth and is simply too large to ignore during a period when traditional welfare programs for the poor population are under constant attack.

Corporate Welfare

Five major vehicles are used to distribute benefits from various federal sources to U.S. businesses: (1) direct expenditures, (2) credit subsidies, (3) tax expenditures, (4) subsidized services, and (5) trade restrictions (Table 1).

Direct Expenditures

The simplest and most straightforward of all corporate welfare vehicles are those that send money. Businesses from airlines to gold mines receive direct expenditures. The largest single recipient of this type of aid is the agriculture industry, which receives subsidies from the Commodity Credit Corporation (CCC). The CCC provides farmers with a guaranteed minimum income, paying the difference between the market price and the target price, or guaranteed price, of selected commodities. These payments totaled more than $11 billion in 1988 (Office of Management and Budget, 1989).

Table 1
Government Spending for Corporate Welfare in the 1980s
Type                        Amount ($ billions)
Direct expenditures(a)              17
Credit subsidies(b)                 15
Tax expenditures(c)                 79
Subsidized services(a,d)            10
Trade restrictions(e)               60
Total                              181
a SOURCE: Congressional Budget Office. (1984). Federal support
of U.S. business. Washington, DC: U.S. Government Printing
Office.
b SOURCE: Congressional Budget Office. (1989). Special analysis
of the 1990 budget. Washington, DC: U.S. Government Printing
Office.
c SOURCE: Peachman, J. (1987). Federal tax policy. Washington,
DC: Brookings Institution.
d SOURCE: Culhane, P. (1981). Public land politics. Baltimore:
Johns Hopkins University Press.
e SOURCE: Consumers for World Trade. (1989). The economic
effects of significant import restraints (statement before the
International Trade Commission investigation). … 

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