Which party opposes corporate welfare?

Mitt Romney takes a tough line on welfare. In 2008 Republicans cheered when he said that America’s culture was threatened by welfare payments to poor people. Asked how tax reform plan would help Americans on low incomes he said his plan was "primarily based on trying to create jobs, not handing out cash to individuals."

But while Romney opposes cash handouts to individuals, he seems relaxed about cash handouts to business. In the early 1990s his private equity firm Bain Capital helped finance a company called Steel Dynamics. According to a report in the Los Angeles Times:

Bain Capital began looking at investing in the steel start-up in late 1993. At the time, Steel Dynamics was weighing where to locate its first plant, based in part on which region offered the best tax incentives. In June 1994, Bain put $18.2 million into Steel Dynamics, making it the largest domestic equity holder. It sold its stake five years later for $104 million, a return of more than $85 million.

As Bain made its investment, the state and county pledged $37 million in subsidies and grants for the $385-million plant project. The county also levied a new income tax to finance infrastructure improvements to benefit the steel mill over the heated objections of some county residents.

"I’m very pro-business, but I’m not pro-business-welfare," said DeKalb County resident Suzanne Beaman, 58, who fought the incentives. Steel Dynamics "would have done fine without our tax dollars, I have no doubt."

Another steel company in which Bain invested, GS Industries, went bankrupt in 2001, causing more than 700 workers to lose their jobs, health insurance and a part of their pensions. Before going under, the company paid large dividends to Bain partners and expanded its Kansas City plant with the help of tax subsidies. It also sought a $50-million federal loan guarantee.

Is this what Romney meant when he spoke about providing "incentives to help companies to be creating new jobs"?

According to Kenneth Thomas, the author of Investment Incentives and the Global Competition for Capital: "investment incentives tend to be economically inefficient and make income distributions more unequal (by transferring funds from average taxpayers to owners of capital)."

Thomas argues that cutting subsidies to business would help state and local governments reduce deficits and avoid making cuts in areas such as health and education. He estimates that state and local governments hand out almost $50 billion in tax incentives and other subsidies. In most cases, state subsidies "are enacted in order to compete with other states, and they largely offset each other without having much effect on the national distribution of investment."

13 thoughts on “Which party opposes corporate welfare?

  1. I’m not very good at lefty in-speak.

    What point are you trying to make? Do you mean that he (still) believes in corporate subsidisies? It isn’t actually obvious that he ever did, certainly the evidence presented here is pretty weak as to any belief of Romney’s.

    Perhaps you are just trying to reassure lefties that he is not that bad after all since he might actually believe in wasting government money too?

    When he was governor of Massachusets, for example, what did he do?

  2. Patrick – I think the US Republican party has a poor record as a supporter of economic liberalism. And I’m not just talking about George W Bush.

    As Governor of Massachusetts Romney proposed targeted tax rebates to companies that added 25 or more manufacturing jobs in in the biotechnology, life science, and medical device industries. This is the kind of practice Kenneth Thomas criticises.

    When other Republicans attack Romney, they generally don’t do it by defending the creative destruction of free markets, they do it by accusing him of being a ‘vulture capitalist‘. For example, see the King of Bain video produced by Republican strategist Barry Bennett and distributed by Winning Our Future. (a pro-Gingrich super PAC).

    Many Republicans aren’t willing to defend economic liberalism honestly. Free markets destroy jobs as well as creating them. In 2008 when John McCain stated the obvious, that some of the jobs lost in Michigan weren’t coming back, Romney went into reality denial: "I’m not willing to accept defeat like that," Romney said.

  3. A real ‘Man of Steal’ to challenge the talking suit. Is it any wonder Ron Paul is making the punters sit up and take notice?

  4. Patrick – I think the US Republican party has a poor record as a supporter of economic liberalism. And I’m not just talking about George W Bush.
    And the Democratic Party does better? Or are you just peeved at the Republicans? IIRC Sarah Palin is reasonably strong on ending energy subsidies and much of corporate welfare (although less so on free trade), but you don’t seem to think this is a point in her favour.

    After all it wasn’t a Democrat that Romney was responding to in your Michigan example, it was the successful candidate for the Republican party’s nomination as presidential candidate.

    I’ll put it that this is a very subsidiary issue for you except when it is convenient to attack people you don’t like? Which basically puts you in the same boat as the current alternative Republican candidates.

  5. Patrick – This post is an extension of the ‘Why is there no liberal party’ post’.

    If you’re looking for a party that’s both economically and socially liberal you’re out of luck.

    Too many conservatives are embarrassed by how markets work. Adam Smith was upfront when he wrote: “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest”.

    Free markets generate wealth but an essential part of the process is the destruction of industries, businesses and people’s jobs. People who’ve worked hard all there lives and done everything that was expected of them get thrown on the trash heap. That’s how it works.

    If conservatives would own up to this we could have a conversation about how to protect individuals and help them adjust to change while freeing up markets. But because they won’t own up to it, we get desperate attempts by governments to prop up dying businesses and the vilification of people who end up without jobs.

    How does it make sense to talk about entrenched welfare dependency in deindustrialised American cities if you refuse to talk about structural change and its effect on families?

  6. wow, Don. I agree with your underlying point, quite strongly. I think that there is an urgent need to reconceptualise the ‘welfare state’ around helping workers adapt to changing circumstances and careers without unecessary suffering.

    But I’m flabbergasted that you seem to think that the lack of necessary debate on this is the ‘fault’ of conservatives – or is that you think that only conservatives are capable of having this debate??

    I suspect that Romney is far more likely to contribute to such a debate than near any ‘progressive’ candidate. After all Obama didn’t give every worker in Michigan 50,000 to re-train and re-establish themselves, did he? IIRC he gave two completely ratshit companies ran by monkeys with baboon staff unions making lemons several tens of billions to keep on being ratshit. Oh, whilst still letting go a few thousands of their employees.

  7. “Patrick – This post is an extension of the ‘Why is there no liberal party’ post’.

    If you’re looking for a party that’s both economically and socially liberal you’re out of luck.”

    Actually the US libertarian party is both, and their presidential candidate, Gary Johnson, has an impeccable record as governor of New Mexico in cutting spending, cutting taxes and implenting socially liberal policies such as Marijuana decriminalisation.

  8. Not sure what your point is, Don. Romney’s obligations then were to his employer not the public interest. Should he have turned down whatever carrots idiotic governments were willing to give? If I was an employer and he did, I’d have sacked him, no question about it.

    Anyone who turns down free money is an idiot. That’s the problem with corporate welfare. It corrupts everyone.

  9. Jason@12 is right. When Mitt Romney was employed in the capacity of nasty capitalist, he acted like a nasty captalist. If Mitt Romney is employed in the capacity of President…?

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