Mitt Romney once seemed like a moderate technocrat. But, as the Republican Convention and the video leak of his comments about the “forty-seven per cent” of Americans who “believe that they are victims” made clear, Romney now seems to fancy himself a small-government zealot, who promises the end of the culture of entitlement. Yet even as he assails people on Medicaid and Social Security, and those who receive the earned-income tax credit, for being “dependent upon government,” Romney has had strikingly little to say about another prominent group that’s “dependent upon government”: the many American companies whose profits rely, in one form or another, on government assistance.
In other cases, the government offers direct subsidies, like those which have helped keep many renewable-energy projects afloat. Farmers, despite food prices at record highs, still get almost five billion dollars annually in direct payments, along with billions more in crop insurance and drought aid. U.S. sugar companies benefit from the sweetest boondoggle in business: an import quota keeps American sugar prices roughly twice as high as they otherwise would be, handing the industry guaranteed profits.
The tax code, too, is a useful tool for helping businesses. Domestic manufacturers collectively get a tax break of around twenty billion dollars a year. State and local governments give away seventy billion dollars annually in tax breaks and subsidies in order to lure (or keep) companies. The strategies make sense for local communities keen to generate new jobs, but, from a national perspective, since they usually just reward companies moving from one state to another, they’re simply giveaways.
Perhaps the biggest boon that the government offers business is the benefit of copyright and patent protection. As the economist Dean Baker shows in his book “The End of Loser Liberalism,” patent protection is worth hundreds of billions of dollars a year to the drug industry alone. And while most of us would find it hard to imagine doing without copyrights and patents, that doesn’t justify the huge expansion of intellectual-property rights we’ve seen of late: the length of copyright has been expanded eleven times since 1962, and the range of things that can be patented has increased hugely, even in areas where, as Judge Richard Posner recently argued, there’s little or no economic benefit to society.
Corporate welfare isn’t necessarily a bad thing. Some of these giveaways arguably do a lot of good. But companies that benefit from these policies are just as dependent on the government as the guy who gets the earned-income tax credit. And, when Romney concentrates his fire on the latter rather than on the former, it makes you wonder if his problem isn’t with government assistance per se, but only with government assistance to poor and working people. Romney may say that he wants small government, but what he’s pushing for is a government that’s small when it comes to helping people and big when it comes to helping business.
-James Surowiecki October 8, 2012