The State of Corporate Welfare

Multinational Monitor, September-October 2006 | Go to article overview

The State of Corporate Welfare


A DECADE AGO in Washington, D.C., there was an interesting left-right coalition working to eliminate, or at least reduce, corporate welfare. This brought together Ralph Nader and Grover Norquist, Friends of the Earth and the Cato Institute.

From the left end of the spectrum, progressives fumed about the rip-off of public monies and public assets, and highlighted the ways that many corporate welfare programs damaged the environment. As this issue of Multinational Monitor exhibits, those problems persist--indeed, they have worsened dramatically.

Some conservatives were willing to criticize corporate welfare, either because they were legitimately concerned about husbanding taxpayer money, or because libertarian or corporatist commitments led them to oppose government expenditures.

It is entirely possible that the left-right coalition against corporate welfare can be revitalized, and perhaps this time around, score some victories.

But now a new form of corporate welfare has evolved. It is not likely to be amenable to left-tight fixes. What also remains unclear is whether the Democrats are ready to tackle it.

The Reinventing Government initiative that began under the initiative of former Vice President Al Gore was dangerous enough at the time. That initiative involved the downsizing of the federal workforce, and increased contracting out of government jobs.

Under the Bush regime, however, contracting out has mutated out of control. Under the Bush administration, federal contracts have almost doubled, to $400 billion a year. $400 billion!

Although the rationale for these contracts is that the competitive marketplace--read: corporations--is more efficient than government, now more than half of the contracts are awarded without a competitive, open-bidding process, according to a New York Times analysis.

These contracts are replete with waste and fraud. The most prominent examples include the utter failure of contractors to deliver reconstruction in Iraq or New Orleans. Instead, we have seemingly endless stories of rip-offs large and small: the U.S. Army agreeing to pay Halliburton's KBR subsidiary nearly $2 billion for work that nobody can prove ever took place; the same company charging $45 for a case of Coca-Cola.

The third prong of what might be considered the triple crown of contracting debacles is the Medicare drug benefit, as Dean Baker documents in this issue. Leave aside for the moment the gift to the pharmaceutical industry--worth tens of billions of dollars, or more--and consider the handout to the HMOs and private insurers. In adopting the program, Congress mandated that only private insurers would administer the benefit--in other words, provision of the benefit was contracted out, taken away from Medicare's efficient administrative system. …

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