Currently, one of the greatest economic problems we face is Corporate Welfare. This is where the government literally gives money to businesses. The most egregious example is outright grants. That is why the picture is of Elon Musk with President Obama. Mr. Musk is an expert at getting grants from the government. His electric car (Tesla) and space businesses (Space X) are utterly dependent on them.
One of the longest programs going is agricultural subsidies. Originally this money was intended to tide over poor farmers during the Dust Bowl and the Great Depression. Now, the vast majority of this money goes to corporations who own and operate the vast majority of farmland in the country. Other industries also receive various levels of subsidies, most notably Energy and Housing
The government does more than just “give” money to businesses. Most of the financial support is actually through tax reductions. These are usually called “tax incentives” to mask the reality of what is going on. The government makes it so that businesses don’t have to pay taxes on certain activities or property. For example, when Donald Trump built the Trump Tower in New York, he was given a 40 year “tax abatement” for the property. This meant he paid no property tax or other city taxes on the tower for 40 years. This tax break was worth more than what the Tower cost to build! And this is just a small case in point.
The government also erects barriers to prevent new competitors from “disturbing” the activities of those it wishes to so protect. Corporate lobbyists regularly influence governments at all levels to pass laws that are beneficial for their firms, while detrimental to the competition.
During the last financial crisis, the Government went all out to provide money to banks and corporations it deemed “too big to fail”. A lot of this was done to protect the investments of Goldman Sachs, the investment bank formerly headed by the Treasury Secretary of the time, Henry Paulson. Other massive government investments were made in General Motors, which is arguably the worst run company in the country.
What has happened is that Free Markets and true Capitalism have been grossly distorted. One of the core principles of Capitalism is that businesses that consistently lose money should fail. That means that they go bankrupt, and the owners and investors lose what they had put into the business. The government has now intervened, and has protected those that should have lost, at the expense of the common taxpayer!
What to Do
Corporate subsidies need to end. Businesses should succeed or fail based on their own merit and profitability. Taxpayer money has no business being given to business.
We need to let things fail. Propping up failed businesses only prolongs and increases the economic pain.
Tax codes should be as simple as possible, eliminating “incentives” and “abatements”. Taxes should be a percentage of a person’s or a corporation’s gain. This is how a lot of government favoritism could be eliminated.
We need to insist that our representatives in government adopt these principles. Unfortunately, too many want to keep their own “tax breaks” while taking away those going to others. We all need to be willing to do what in the end will benefit us all.