Corporate Welfare - For it or against it?

Corporate Welfare - any financial benefit purposely granted by the government to a specific business or class of businesses and that is not generally available to all businesses and taxpayers.

I've never heard a political candidate campaign on support of crony-capitalism or corporate welfare. Both democrats and republicans seem to agree, in theory, that corporate welfare is bad. A quick search of the internet will find statements made by the CATO Institute, a conservative think-tank, calling for the end of corporate welfare. In that same Google search you will also find extreme-liberal Robert B. Reich writing about how “Corporate Welfare Hurts You”. So if we all agree that corporate welfare is bad, why do politicians continue to take millions from you to transfer to their corporate buddies?

I doubt many are aware that corporate welfare was invented in Mississippi. Maybe that is why Mississippi seems so good at giving away our money.

In 1936 Governor Hugh White expanded a local program he had devised as mayor of Columbia. His Balance Agriculture with Industry (BAWI) plan was the first in the nation to use state funds to recruit industry. To overcome the hurdle of the Mississippi Constitution explicitly prohibiting the state from using credit to finance industrial development, Gov. White organized a team of politicians and attorneys to devise his plan.

The BAWI plan only lasted three years before it was abandoned. It became evident that the 12 industries and approximately 2700 jobs it recruited did not accomplish what many expected. Those in state government concluded that jobs were not actually created but simply moved from one industry to another. They also concluded that the money spent by the state to recruit was not offset by any benefit to the state.

Years later despite overwhelming evidence that these programs cost taxpayers much more than they produce, other states followed Mississippi’s lead down the path of state-funded incentives to draw businesses to their state. These politicians proved once again that they never let negative results for citizens stand in their way.

Now we find states in a race to provide ever increasing incentives, tax relief and even direct payments to businesses who have the connections needed to lobby the politicians for their special deals.

Mississippi has now re-entered the corporate welfare race. The Mississippi Development Authority (MDA) is the lead state government agency that “works to recruit new business to the state and retain and expand existing Mississippi industry and business.” The MDA has provided billions of taxpayer-funded tax breaks, grants, and loans to hundreds of businesses. Proponents point to jobs created but neglect to consider the total cost to the state. In addition, the idea of the state choosing winners and losers in business in contrary to the basic free market principles held by Republicans.

The Mississippi GOP platform states;

We believe that free enterprise will thrive, flourish and benefit more people through a framework of low taxes and sensible but not overburdening regulations, which both encourages the expansion of existing businesses while also attracts new companies to locate in Mississippi. 

That does not sound like a policy of tax breaks, tax incentives, and special treatment for chosen businesses.

John Stossel reported when Memphis, TN gave IKEA $9.5 million in tax breaks because of a promise to hire 175 people, locally owned furniture store owners protested. “What about us?” asks Ron Becker, owner of The Great American Home Store. “We pay taxes here. Where is our financial incentive?”

So why do politicians campaign against corporate welfare but continue to subsidize it once elected? The answer is simple. It gives the local and state politicians opportunities to gain favor with large industry leaders, which relates to campaign donations, and it gives them the opportunity to claim credit for new jobs. Politicians love ribbon-cutting ceremonies, they provide them with occasions where the press puts their picture on the front page of the local newspaper.

Mississippi has remained in last place economically for decades and will not move forward until it’s citizens demand we do something different. Old, out-dated, unsuccessful programs like the MDA and its predecessor the BAWI have proven to be harmful to the citizens of Mississippi.

Its time to make a change.