5

Get Corporations Off Welfare

When President Bill Clinton proudly joined with House Speaker Newt Gingrich in 1996 to enact their reforms of welfare for the poor—you know, those pesky single moms receiving three hundred dollars a month—I wrote a letter to Clinton, urging him to follow the move with a much more important encore: ending the hundreds of billions of undeserved dollars regularly doled out by Uncle Sam in direct and indirect corporate welfare to just about every large company in America. Clinton never responded. No surprise: unlike single moms, corporations that feed off the taxpayers are important contributors to political campaigns, including his own.

For decades, I’ve been calling on Americans to recognize the phenomenon of corporate welfare as the poster boy for both the exploitation of taxpayers and the hypocrisy of free-market anti–big government ideologues. As early as 1971, I denounced giveaways like the Surface Transportation Act, which handed an open-ended $5 billion in financial assistance to the railroads and trucking companies, and a $250 million loan guarantee to the Lockheed Corporation, which narrowly passed Congress despite extensive public hearings and an uproar of opposition. And yet today, consider how quaintly modest this Lockheed sum was compared with the humongous taxpayer subsidies and trillion-dollar guarantees during the speculative Wall Street crash of 2008–9. But corporate entitlements have been trending sharply upward that way for decades.

A specific comparison illustrates both the gigantic escalation of corporate welfare and its descent into secrecy. One weekend in October 2008, Robert Rubin, former secretary of the Treasury and deregulation advocate for Bill Clinton, went to Washington in his capacity as chairman of the giant but teetering Citigroup for a supersecret meeting with Treasury secretary and former Goldman Sachs chair Henry Paulson and Federal Reserve chair Ben Bernanke. By Monday morning, American taxpayers awoke to the news that their government—without congressional approval—was purchasing $45 billion in Citigroup preferred stock and guaranteeing $365 billion of Citigroup’s shaky paper. Just like that. Could a dictatorship have taken such unilateral action more swiftly and unaccountably? It was the corporate state in action.

Corporate welfare is the business of Washington, D.C., these days. The government has devised literally hundreds of programs giving out taxpayer money to corporations—in the form of credits and exemptions, grants, subsidies, and loan guarantees. The government offers free access to taxpayer-funded R&D assets, natural resources on our public lands, and our public airwaves to corporations; these companies offer no return on their profits to Uncle Sam, whether in royalties or by fulfilling the promises on jobs they made to get the giveaways. There are many ways to deliver corporate welfare: the energy, timber, mineral, and agribusiness industries benefit from complex, backdoor, over-time transfers through the Treasury Department through the Departments of Interior or Agriculture, for instance, while technology companies profit from inflated contracts through NASA and the Pentagon, and the medical industry receives almost clinic-ready medicine and hardware from the NIH. Uncle Sam’s sugar daddy largesse is so rampant that no one has managed to compile a comprehensive survey of even a single department’s or agency’s giveaways.

In public, at least, no one approves of corporate welfare. Politicians from right and left fall over themselves to say how much they dislike it and the sleaze that goes with it. Yet when it comes to bringing the bacon back to their own district or state—or enlarging their campaign coffers—they’re all for it, especially when the corporate giveaways can be readily camouflaged as job-creating measures. Dependent on corporate donations to fund their reelection campaigns, these politicians support these giveaways even when they lend corporations an unfair competitive advantage over other companies in the same region. This imbalance tends to hurt small businesses, which pay their property taxes even as new competitors, such as Walmart megastores, are given lengthy abatements.

This kind of government favoritism has been going on for years. After Ronald Reagan lost his bid for the Republican presidential nomination in 1976, I participated in a public discussion on the government-business relationship with Reagan and Senator Hubert Humphrey. At one point, I challenged Reagan, the self-proclaimed champion of business and foe of government spending, to make good on his rhetoric. “If you make that your campaign theme next year,” I told him, “you’ll be making a major contribution to the American dialogue.” I urged Reagan to “speak out against corporate socialism, government subsidies of big business, corporations that are so big they can’t be allowed to fail so only small business can go bankrupt. A company that is big, like Lockheed Martin and those other giants, can go to Washington instead of going out of business. And you are absolutely right that in that situation there is massive outflow of the taxpayers’ revenue into the coffers of the giant corporations. It certainly doesn’t make them more efficient.”

Reagan insisted he agreed with me. “Mr. Nader, I’ve been speaking out against this for a long time,” he said. “I often tell my business friends not to put their hand in the Washington trough. . . . I’ve been addressing business groups and asking them if they believe in free enterprise—because I believe that we should return as much as possible to the marketplace.” Yet, sure enough, once Reagan became president in 1981, he never lifted a hand to stop the accelerating corporate welfare train; indeed, he supported it. Critique in theory, surrender in practice: that’s how the money keeps flowing from Washington to hypocritical corporate capitalists, thanks to their ideological apologists. Only the lonely libertarians have been brave enough to address the contradiction.

Of course it’s not just Washington that sends these rivers of taxpayer funds into corporate coffers. In 2000, in one of the most foolish and cruelly ironic urban policy moves ever, New York governor George Pataki and New York City mayor Rudy Giuliani collaborated to provide a clutch of state and local subsidies, amounting to more than $1 billion, to construct a new building for the growing New York Stock Exchange (NYSE). In December of that year, Giuliani signed a letter of intent to acquire land for the new exchange building and to join the state to construct a new trading floor for the NYSE. The plan also involved exempting the NYSE from the facility tax and providing it with subsidized energy benefits—while charging it only a nominal annual rent, for appearances’ sake.

Can you imagine a more potent symbol of free-market global capitalism than the NYSE? And there it was, shamelessly putting its hand in the taxpayers’ trough. The sole purported rationale for this bonanza was to keep the stock exchange in New York City and out of New Jersey. This is a time-tested strategy, one whose flames are often fanned by specialized consulting firms: pit state against state, city against city, forcing them to submit their most profligate bids to keep important businesses from migrating or to attract new businesses to their area. Such standoffs create no new jobs for the country as a whole—yet they inflict a huge cost per job for the taxpayers.

There was never a chance that the stock exchange would leave New York City for Hoboken. Around that time, I visited the NYSE trading floor and asked veteran traders about the possibility of the exchange moving across the Hudson River to Jersey. They laughed, dismissing it out of hand. The very reputation and identity of the NYSE—not to mention the personal connections between its members and the Wall Street banks and brokerage firms—were too wound up in its New York location to make the threat credible. And the Pataki/Giuliani offer was mooted in any event, a short time later, by a combination of space-saving automation and the 9/11 disaster in lower Manhattan. The deal dissolved from its own overreaching greed and recklessness.

Still, this spectacle has not stopped one large financial firm after another from trying to cut its taxes and gain other advantages by floating unwritten threats to move their operations to New Jersey or Connecticut. The mayors of New York have all played along with the ruse; it has become routine for the big guys to get these breaks, with no public hearings, while the thousands of brick-and-mortar small businesses that line New York’s streets pay full fare.

The corporate welfare state exists because we allow it to exist.

In November 1998, Time magazine unleashed its star reporters Donald L. Barlett and James B. Steele on the corporate welfare kings—including the magazine’s own parent company, Time Warner Inc., which has received millions of dollars in tax exemptions and free public services from federal, state, and local governments. Barlett and Steele had a knack for exposing the complex system of corporate favoritism by comparing it with the budgets of working families: “How would you like to pay only a quarter of the real estate taxes you owe on your home? And buy everything for the next 10 years without spending a single penny in sales tax? Keep a chunk of your paycheck free of income taxes? Have the city in which you live lend you money at rates cheaper than any bank charges. Then have the same city install free water and sewer lines to your office, offer you a perpetual discount on utility bills—and top it all off by landscaping your front yard at no charge?”¹

They could have gone further with their questions: How would you like the taxes corporations pay to your state be rerouted to your bank account? Such was the outlandish agreement the state of New Jersey struck in 1996, when the new cable network MSNBC pitted New York against New Jersey to bid for the location of the cable network with jobs. New Jersey won the contest with a bevy of goodies, including this astonishing giveaway: the state government agreed that all state taxes paid by MSNBC employees would be reimbursed to the coffers of the network’s two parent companies: the superprofitable Microsoft and General Electric. Corporate attorneys and the consulting firms that specialize in getting states or localities to engage in this kind of bidding frenzy are always thinking of creative new ways to game the system. As Time reported: “It’s a game in which governments large and small subsidize corporations large and small, usually at the expense of another state or town and almost always at the expense of individual and other corporate taxpayers. . . . It has turned politicians into bribery specialists, and smart businesspeople into con artists. And most surprising of all, it has rarely created any new jobs”—because the jobs in question were being created anyway. Only the location, and the jobs’ surprising cost to taxpayers, was up for grabs.

Barlett and Steele came up with a simple definition of corporate welfare: “any action by local, state or federal government that gives a corporation or an entire industry a benefit not offered to others. It can be an outright subsidy, a grant, real estate, a low-interest loan or a government service. It can also be a tax break—a credit, exemption, deferral or deduction, or a tax rate lower than the one others pay.” But there are even more forms of corporate welfare. Governments have exercised eminent domain—as in Detroit’s Poletown area, where it condemned four hundred homes, dozens of businesses, twelve churches, a hospital, and schools in the early 1980s to clear four hundred acres for a GM plant promising six thousand jobs. GM also demanded and received $350 million in national, state, and local subsidies. Among the casualties of the move was a beautiful Polish-American Catholic church, lovingly built by Polish immigrants earlier in the century, torn down to provide space for shrubbery in the corner of a parking lot. The priest, Father Joseph Karasiewicz, said this would never have happened in Communist Poland. He died a short time later, his heart broken. GM needed less than two hundred acres for the plant and staging areas. But with the city fathers falling all over themselves to keep the plant from being built over the city border in Hamtramck, they were happy to grab twice the space, forcing the expulsion of four thousand residents. The new GM plant employed only three thousand workers, and the auto giant failed to give back a proportionate share of the subsidies.

For years, the practice of eminent domain has been used in similar fashion: to seize a small factory to allow the expansion of a larger one in Pittsburgh, to seize land for a casino parking lot in Atlantic City, New Jersey; and to seize other private holdings around the country. In the 2005 case Kelo v. City of New London, the Supreme Court ruled 5–4 that such seizures could not be challenged by the dispossessed. This verdict was so outrageous that it did lead to a rare setback for corporate welfare kings, after public indignation at Kelo sparked new laws in numerous states banning the local government taking from private property for purposes of private business.

It is difficult to overstate how many tactics the government uses to support corporate activity here and abroad—from subsidizing sellers to paying buyers; from setting agricultural market quotas to absorbing nuclear power insurance risks; from offering taxpayer support for overseas marketing campaigns for corporate giants (such as McDonald’s) to giving corporations free access to immensely valuable inventions and assets that were developed with taxpayer dollars. You may not be aware of these tactics—no one involved is eager to call attention to them, and they are often cloaked in contracts that are difficult to retrieve for public examination—but the government has used them to send your tax dollars to Hollywood filmmakers, corporate prisons, profitable computer chip factories, and biotech facilities.

In their Time investigation, Barlett and Steele touched on a wide array of profitable corporations that engaged in such windfalls—including Intel, General Motors, Mercedes-Benz, UPS, PepsiCo’s Frito-Lay subsidiary, Caterpillar, Union Carbide, Chrysler, R.J. Reynolds, and Georgia-Pacific. Also on the dole were AlliedSignal, Microsoft, Bechtel, Boeing, Hughes Aircraft (now owned by Raytheon), AT&T, General Electric, Archer Daniels Midland, Monsanto’s Searle subsidiary, and Exxon. Polluting companies are paid to try not to pollute. Large sugar producers, even assorted foreign corporations, are given welfare. The list went on and on, often with the color photograph of each CEO: the corporate welfare boss at the top.

The Time investigation was responding to a growing momentum for change. Conservative think tanks like the Cato Institute and the Heritage Foundation were issuing reports denouncing corporate welfare, as were liberal/progressive groups such as Good Jobs First, Common Cause, and Public Citizen. Public opinion was rising in that same direction, provoked by billionaire sports owners who were demanding more and more money from city taxpayers to build their stadiums and ballparks, lest they move their beloved franchises away. John McCain and other senators were pressing for an independent federal commission to eliminate “unnecessary and inequitable federal subsidies” to private companies. The national TV networks reported on case after case on such shows as the ABC News segment “It’s Your Money” and CBS News’s 60 Minutes.

Seven months after the Time report, the first congressional hearing entirely on “Unnecessary Business Subsidies” was called by the House Budget Committee, chaired by Republican John Kasich, now governor of Ohio. In a long opening statement, Kasich expressed the view, shared by millions of small-business owners, that corporate welfare went mostly to the big companies and thus constituted an unfair form of competition. He referred to “millions of small businesses that pay taxes that do not participate in these special programs” and called the hearing “a matter of fairness.”²

Witnesses from opposite poles of the political spectrum—from conservative economist Grover Norquist to myself, from the Cato Institute’s Stephen Moore to the Citizens for Tax Justice’s Robert McIntyre—were largely unanimous in condemning corporate welfare. The entire text of the Time series was read into the record, as was an impassioned statement by T. J. Rodgers, CEO of Cypress Semiconductor Corporation. His tough-worded “Declaration of Independence: End Corporate Welfare” was signed by the CEOs of leading technology companies including Applied Materials, Xilinx, Seagate Technology, and Sun Microsystems, who signed on to the document’s principles “even if it meant funding cuts to my own company.” Indeed, many of the signatories presided over companies that had received forms of corporate welfare, such as R&D tax credits.

So all in all, for a moment, it looked like the tide was turning against the corporate welfare state. But it wasn’t. The forces, both economic and political, were too organized, too powerful, and often too cleverly hidden to be brought down by a few investigations and a governmental hearing. The courts remained inhospitable to reform—often to the extent of throwing out citizens who challenged these handouts, deferring to their respective legislatures or asserting that the petitioners had no standing to sue. Worse yet, beyond a handful of smaller groups and political parties—including the Green Party and Libertarians—existing institutions like the Republican and Democratic Parties were silent on the issue.

The same is true today. The major-party candidates, their campaigns, and their parties’ platforms all refuse to recognize the problem—and it’s a rare candidate indeed who challenges any opponent on the issue. Foundations rarely provide grants to the kinds of civic groups that might lead such reform movements—even if the group is trying to fight, say, a move to take important funds intended for recreational facilities in urban neighborhoods and use them instead to fund a professional sports stadium. John McCain’s commission proposal went nowhere in Congress, and he hasn’t reintroduced it since. Governor Kasich himself has failed to follow up on the many ways Ohio puts companies on the dole at the local and state levels; these days, he spends his time pushing deep cuts in social services.

And yet there are individual stories of citizen groups and public movements turning the tide by focusing public opinion on the issue of corporate welfare. In 1998, Robert Kraft, the owner of the New England Patriots, sparked a public outcry when he drove from Boston to Hartford, Connecticut, to present his “request” for $500 million from Connecticut’s taxpayers as an incentive to move his team to a new stadium on the banks of the Connecticut River. He met with state legislators, the governor, and the fawning media. The local TV network affiliates interrupted their afternoon shows to report on the story. After allowing protesting citizens just one minute each to express their disapproval, the legislature met until midnight and finally passed the bill. Polls in the Nutmeg State showed a 3–1 margin of approval for the deal. That was in December. The state was gripped with euphoria at the prospect of getting its first big-league team. Never mind that a team that plays less than a dozen days per year doesn’t generate many jobs—even those selling hot dogs and soda. Never mind that sports economists repeatedly point out that taxpayer-funded pro sports facilities cannot be justified as creating jobs, much less decent-paying jobs, other than the already-employed players.

In their rush to ink the Patriots deal, the lawmakers failed to inform the public about the costs of the deal—or its lack of benefits for the state. Within days after the signing ceremony, civic groups from left and right began a statewide drive to spread the truth about what the deal entailed. Connecticut is a small state; between radio and TV appearances and town meetings, it took about three months to turn public opinion around and convince state residents that they were being taken for a ride. In addition to the stadium, taxpayers would be forced to spend $50 million on a practice field. The site chosen for their new stadium was soaked with toxic chemicals, potentially endangering construction workers. The promises about jobs were revealed to be baseless. Before long, an embarrassed Robert Kraft drove back to Hartford for a press conference, this time announcing he was pulling out of Connecticut and housing his Patriots in a privately funded stadium near a Boston suburb. This gigantic potential freeloading came to an end because of organized and effective civic opposition, which turned public sentiment around just in time.

The insidious thing about most corporate welfare is that, once enacted, it does not have to go through any annual review and approval process the way normal budget appropriations do. Once granted, a tax abatement remains in effect indefinitely. When a huge agribusiness purchases a public water license for a pittance, it remains in possession of that license without having to be reviewed by Congress or even the licensing agency. And countless new giveaways occur every year. In the Telecommunications Act of 1996, our digital television spectrum—worth an estimated $70 billion—was authorized to be handed over to existing broadcasters. The deed was enacted by the Federal Communications Commission on April 7, 1997—but not before Bob Dole, the Senate majority leader, objected, saying that there was no conceivable reason that the incumbent broadcasters should be given exclusive rights to our public airwaves year after year. “The airwaves are the Nation’s most valuable natural resource and are worth billions and billions of dollars,” Dole said. “They do not belong to the broadcasters. They do not belong to the phone companies. They do not belong to the newspapers. Each and every wave belongs to the American people, the American taxpayers. Our airwaves are just as much a national resource as our national parks.” Despite a move from competing businesses eager to participate in a public auction for the rights, the National Association of Broadcasters prevailed.

When the government fails to collect certain taxes because of what are known as “tax expenditures”—that is, tax credits and exemptions—it is basically spending our money. And when the government fails to collect taxes because of legal preferences it extends to certain corporations, it is subsidizing those firms as surely as if it were making direct payments to them. When drug companies like Eli Lilly or Bristol-Myers Squibb, or tech companies like Microsoft, Cisco, or Intel, receive billions in tax credits to support their R&D programs—work they should be doing anyway for their own business interests—that’s exactly like the U.S. Treasury writing them checks for those billions of dollars. Except, that is, for one prohibited deduction: for lobbying expenses and campaign contributions, which ensure that the privileges of power are not disrupted.

Another area not often publicized is the underpayment of federal income tax by foreign corporations. A Government Accountability Office (GAO) report concluded that foreign-controlled companies doing business in the United States pay roughly half as much in taxes, as a percentage of their sales, as U.S. companies pay. Former senator Byron Dorgan (D-ND) pointed to this as evidence of manipulative “transfer pricing” by foreign multinationals. Transfer pricing refers to a conscious practice of paying too little, or charging too much, in paper transactions between the United States and foreign affiliates in order to artificially lower the income of the U.S. affiliate. In short, these foreign corporations game the governmental tax systems more than their U.S. counterparts do on their U.S. sales—and they get away with it.

This kind of multinational tax avoidance takes many forms. One reform group, the Citizens for Tax Justice, has decried a kind of shell game that occurs when companies pay interest to nontaxable offshore subsidiaries, deduct the interest payments against their worldwide taxable income—and yet claim an exemption from U.S. antitax haven laws by asserting that, for U.S. tax purposes, the interest earned by the offshore subsidiaries does not exist. The Treasury Department has nowhere near enough auditors to police such schemes, assuming they would even be allowed to by Congress.

More than forty years ago, I founded the Public Citizen Tax Reform Research Group to help call attention to how politicians conspire with corporations to game the federal tax system. At the end of each year, before Congress adjourned, our public interest attorneys would spot an array of obscure special “Christmas tree” tax breaks for specific companies and industries. Each amendment usually could be traced to the lawmakers who were pushing to get it through in the frantic last days or hours before Congress went home for the holidays. Our legal eagles would search and spot millions of dollars’ worth of these escape hatches, connect them to campaign contributions to their congressional sponsors, and then release them to the media. Many a gross loophole was plucked out and defeated by the glare of public opinion, especially when reporters like the New York Times’s Eileen Shanahan picked up on our leads. This kind of activism worked then—and it could work now, if the press were to uphold its former sense of newsworthiness.

The large multinationals have also taken extraordinary measures to limit the liability of their companies, not just of their shareholders, in the case of catastrophe. As the saying goes, they privatize their profits and socialize their risks. The nuclear power industry, entirely born out of U.S. government R&D after World War II, has managed to lay the risks of nuclear meltdown almost entirely at the feet of the government under the Price-Anderson Nuclear Industries Indemnity Act, which holds that the federal government—in other words, we the taxpayers—assume the vast proportion of liability for any meltdown or disaster at a nuclear reactor.

This is no abstract theoretical threat, as recent history tells us. In March 2011, when the Fukushima Daiichi complex of six reactors in northeast Japan was overwhelmed by the earthquake-tsunami, the disaster caused three reactors to melt down and the rest to collapse in various stages of dysfunction. More than a year later, the costs of the Fukushima disaster continue to accumulate as contaminated soil, food, water, and air spreads far and wide, upsetting lives within a growing circumference. The disaster wreaked havoc with Japan’s supply chains, disrupting exports to the rest of the world. Apart from the human tragedies as the only society struck so severely by both the wartime atom and the peacetime atom, the immediate economic cost of the disaster is already estimated to top $257 billion (U.S.).

Among the more than one hundred reactors currently operating in the United States, several are similar in design to the Fukushima Daiichi plant. These aging facilities are vulnerable not just to earthquake risks but to sabotage, to erosion, and to human error. Although the Price-Anderson Act requires a two-tier pool of insurance coverage totaling $375 million (private insurance) and $12.6 billion (self-insurance) for catastrophic claims resulting from a large nuclear accident, just think: How large could the affected area be? As early as 1957, the U.S. Atomic Energy Commission was estimating that such an accident could affect an area the size of Pennsylvania. Who would bear the cost—economic, social, and human—of dealing with the deaths, injuries, horrific illnesses, relocations, dispossession, and physical and emotional trauma that would result from such an accident? We the People.

If an industry, whose profitability is guaranteed by virtue of a legal monopoly it has enjoyed for forty-five years, is too risky to qualify for private insurance, what are we to conclude? That the industry should be closed, that’s what. This is one case where corporate welfare is endangering not only our pocketbooks but also the very habitability of our land.

That’s what corporate welfare often does: by protecting corporations from accountability, it tempts them to assume more and more risk in exchange for greater and greater rewards for the top executives and their rubber-stamp boards of directors.

Fannie Mae and Freddie Mac, the mortgage agencies created by the federal government (and later privatized) to buy mortgages from banks, were initially conceived to free the banks up to offer mortgages for more homeowners. This is known as the secondary mortgage market. Fannie and Freddie made their stockholders rich as their soaring profiles—helped by the U.S. government’s implicit guarantee, exemption from state and local taxation, and other advantages over their competitors—kept rising. In just ten years, their stock appreciated more than 1,000 percent. Then, in the first decade of the twenty-first century, greed overtook caution. The companies inflated their accounting records to boost executive stock options, leading to scandals in 2004 and the departure of several top officers of Fannie and Freddie. But untamed greed tends to endure from one executive team to the next. In the few years before 2008, the banks and mortgage brokers sold Fannie and Freddie securitized packages of subprime mortgages that carried distinctly greater risk than the companies were used to guaranteeing. Even as the inevitable collapse loomed overhead, from April to July 2008 government officials offered a chorus of sickening reassurances about their viability. While their stocks were gradually falling, Freddie and Fannie were “adequately capitalized,” said their regulator, James Lockhart. Federal Reserve chairman Ben Bernanke and Treasury secretary Henry Paulson assured the investment community—small and large institutional shareholders alike—that their companies were “adequately capitalized.” Within weeks, Fannie and Freddie had collapsed, along with their share values. The companies were placed in a federal conservatorship, where they received regular doses of bailout money.

Obviously, the existing protections were inadequate to prevent the Fannie and Freddie disasters. Their government overseers engaged in knowingly deceptive assurances. Innocent shareholders, assured by their advisers that Fannie and Freddie shares were the safest investments after Treasury bonds, lost everything. Congress, garnished with large campaign contributions and lobbied by many of their former staff, turned a deaf ear to the few warnings from their unconvinced colleagues. As the sweet music played on, the essential question was ignored: namely, what was the real motive guiding Fannie’s and Freddie’s directors in these years? Helping middle- and lower-income people become homeowners, or playing the market in outlandish and unneeded arbitrage games? How much of their government subsidy was used to benefit consumers, and how much was siphoned into shareholder assets and staggeringly bloated executive compensation arrangements? Such questions would have been unnecessary if the firms had been held to rigorous standards of transparency and trust.

Even when the government appears to be investing responsibly in our future, the real beneficiaries may be lurking behind the scenes. Such was the case with the government’s “Supercar” initiative, a plan to devise “an environmentally friendly car with up to triple the fuel efficiency” of contemporary cars “without sacrificing affordability, performance, or safety” announced in September 1993 by President Bill Clinton, Vice President Al Gore, and the CEOs of GM, Ford, and Chrysler. The program was called the Partnership for a New Generation of Vehicles (PNGV), and if you were paying taxes at that time, you and other taxpayers paid for it.

The partnership included seven federal agencies, twenty federal laboratories (such as the Oak Ridge National Laboratory), and the Big Three automakers. According to the Department of Commerce, the PNGV aimed “to strengthen America’s competitiveness by developing technologies for a new generation of vehicles”—drawing on taxpayer funds to do so at a time when these well-capitalized auto companies were making record profits year after year.

So what did you get out of this ten-year effort? Worse than nothing. You funded a decade holiday for GM, Ford, and Chrysler from competing with one another. The main accomplishment of this partnership with the government was to exempt the Big Three from both the antitrust laws and regulatory fuel efficiency upgrades, allowing them to pool their resources in the interest of automotive progress.

Instead they colluded to do nothing.

This giveaway—this license for stagnation—broke new ground in pillaging taxpayer-funded R&D. Under the PNGV contract, all taxpayer-funded intellectual property developed by government scientists and engineers was transferred to Ford, Chrysler, GM, and some other large private firms. These agreements were arrived at with Clinton and Gore in secrecy, with no public comment.

The initiative also served as a smoke screen behind which the automakers protected themselves from higher air quality standards. The PNGV agreement did not require the Big Three to mass-produce the technologies it purportedly sought to develop. In the years since, the leading innovators in fuel efficiency have been Toyota and Honda—companies that did not participate in PNGV.

Alerted to the forthcoming Clinton-Gore announcement in 1993, I wrote a letter objecting to the deal and predicted that its structure was made to provide the domestic industry with the mechanisms for doing nothing and getting away with it. Before PNGV collapsed in 2001, the taxpayers had been billed $1.5 billion and gotten nothing in return but continued low gas mileage and increased air pollution. A lost decade! Corporate welfare at its destructively innovative best. Sixteen years later, Chrysler and a smug GM, relying on SUVs and more powerful gas-guzzling engines, transformed their stagnant mismanagement into a bailout bankruptcy and welfare rebirth—compliments of more than $60 billion in taxpayer dollars. Corporate welfare is a national and local problem. Corporate freeloaders make brazen threats to move away and object to paying taxes to fund schools and other essential local services.

What can be done about such unfairness, such profiteering, such reckless behavior—all of it carried on the backs of taxpayers?

The first step in ending this kind of rapacious corporate welfare is to advocate for a better alternative: a more equitable partnership between government and corporations, one that is open, publicly deliberated, nonexclusive to its recipients, and requires the corporations to pay back the government’s investment wherever possible. There is a place in our society for taxpayer-funded projects that fulfill urgent public goals not being met by the market, to the benefit of consumers and workers and always subject to periodic review and renewal. For example, life-saving drugs, worker safety inventions, and energy-saving technologies developed by the NIH, National Institute for Occupational Safety and Health (NIOSH), and NASA could be made available under nonexclusive licenses to promote competition, paying royalties back to the U.S. Treasury or, better yet, directly back to the programs that developed them, to help underwrite expansion of their life-saving missions. Obviously, corporations vying for such licenses would be doing so to make a profit, but along the way they would be serving the public, not pillaging its coffers. The key is reciprocity: any such agreement must pave a two-way street between the company and the taxpayers.

Any program that fails this test—any program in which the government gives more to private companies than it gets back—should be challenged as undesirable corporate welfare.

Of course, to the average citizen, corporate welfare must look like one of the most intransigent social scourges. As American taxpayers, though, we must remember that what’s at stake are our own taxpayer dollars—the money we earn each year with our hard work, money that for years has been siphoned out of our pockets, “laundered” through the arcana of government programs, and deposited in the coffers of the biggest, most megaprofitable corporations. It’s time for us to liberate these resources, which belong to We the People for our own use and that of our descendants. How revealing that unlike health and safety regulations to save lives, corporate welfare has been under no obligation to register a public cost-benefit justification that is challengeable in court.

The American people have never been shy about fighting for their rights when their own interests—and their own savings—are at stake. The successful public opposition to the Patriots stadium in Connecticut demonstrates that we can still mobilize to defeat an undesirable plan. But the current governmental system tends to discourage us from thinking we can make real changes to policy through personal activism.

The practice of corporate welfare is so insidious that it points to how badly we need to correct this shared sense of disempowerment. We need new strategies, new processes, through which everyday Americans can air their grievances and call for change.

For a lesson in effective citizen empowerment, we can look to Sweden. When the Swedish people are confronted by a major decision that requires more than the participation of its Parliament, the government announces national town meetings to address the issue. The government provides ample budgets to maximize citizen engagement across the country to help ensure that a national consensus can be reached.

In the 1980s, this process was engaged as the Swedish people weighed whether to continue building nuclear power plants. The people’s consensus? No.

The American people should start pushing for a similar process to help insert our voices back into the political process. Such meetings could be funded by our government—but they could also be funded by foundations or individual wealthy philanthropists, and could reach tens of millions of viewers through the internet.

Knowing is the first step to doing. The feedback from these meetings would stimulate congressional hearings to review any program that smacks of corporate welfare and make it prove itself anew—sector by sector—under public scrutiny. Those programs that cannot pass the test would be ended; those that do would be subject to rigorous annual review in the normal congressional appropriations process, ending the practice of extending unlimited subsidy to such giveaways as tax expenditures or corn ethanol subsidies. Many of these programs thrive in the dark and cannot survive the illumination of sunlight.

It’s impossible to imagine our politicians passing a comprehensive bill to end corporate welfare outright. But the next best thing—and a more realistic goal—would be a bill to make any existing corporate subsidy subject to congressional review and renewal, modification, or rejection after three years. Congress should support this by calling for annual agency corporate welfare reports, listing every program under its purview that confers below-cost or below-market-rate goods, services, or other benefits on corporations. The Securities and Exchange Commission (SEC) could require publicly traded corporations to disclose the subsidies they receive, by both type and amount received, by publishing the information in their annual reports and on their websites.

Pending these major changes, there are intermediate ways to police the conduct of corporate bosses who want to continue to receive these windfalls. Congress should prevent any corporations from receiving subsidies if its chief officers are convicted of criminal wrongdoing. It should call for corporate welfare beneficiaries to agree to return the favor through nonmonetary actions. When the government saved GM and Chrysler through its 2009 bailout, for instance, it should have required the corporations to adhere to higher fuel efficiency and safety standards—and extend fairer contracts to the consumers whose tax dollars saved them. Instead, GM and Chrysler lobbied against energy and safety proposals from the Obama administration, while using the bailout to shrug off a raft of pending liability suits from injured motorists. Government subsidies should be seen as a tool to promote competition—by requiring competitive bidding, nonexclusive licensing, and market-based prices for any government assets being sold, leased, or rented to the corporations. Such measures would establish, once and for all, that the free lunches are over for the nation’s corporate welfare kings. The taxpayers are coming to town.

There is one final tool taxpayers need in order to set these changes in motion, without having to beg for their congressional representatives to act. That tool is called “standing to sue.”

At the federal level, the courts routinely reject taxpayer suits not on the merits but on the procedural premise that the plaintiffs have no standing to bring the suit. The courts have decided, in essence, that no individual taxpayer—not one of the 150 million taxpayers in the United States—has a specific enough interest to allow such a suit. It’s a notion held over from the common law of medieval England, but one that’s desperately outdated today.

We need new legislation that can give a taxpayer standing by awarding a $10,000 “bounty” (plus reasonable attorneys’ fees) to anyone who successfully challenges unlawful agency action in doling out corporate welfare. We should also reward plaintiffs in such successful suits by giving them a percentage of the money recovered and saved through such suits. This has worked since the 1986 passage of the False Claims Act, which allows whistle-blowers to report corporate fraud ripping off government programs like Medicare and defense contracting and operations. If the Justice Department agrees and pursues the culpable company to a resolution, the whistle-blower gets a percentage of the recovery. In the ensuing twenty-five years, more than $30 billion in taxpayer money has been recovered this way—and probably much more saved as a result of the deterrent effect on corporate contractors.

Finally, beyond what we can all do as individual advocates, we should be working to create a national coalition of taxpayers, workers, and small-business owners as a countervailing force against the corporate state, which has devoted such massive effort to seizing taxpayer dollars and assets for private profit. For too long corporate welfare has been undercutting our political process, using the financial power of the corporations—through campaign contributions, ultimatums, and the like—to influence public policy far more directly than we possibly can as individuals. This effect of corporate welfare only heightens the disparities of wealth, influence, and power in American society—making it increasingly difficult to realize our ideals of self-governance and national sovereignty. The sentinels of our democracy—our lawmakers, regulators, and judges—have all failed to stem this continual raid on the Treasury. When the sentinels fail, the people themselves must make them act.