How to Fight Corporate Welfare
Until progressives come up with a compelling new political approach to business, we will be playing a whack-a-mole defense with the corporate-welfare bills that pop up constantly and define the “pro-business” legislative agenda across America.
A case in point is the stupefying proposal before the Maryland General Assembly to give Lockheed Martin, a multibillion-dollar Bethesda corporation and the world’s most successful military contractor, a $450,000 tax break every year until the end of time because—well, just because. Before a storm of public opposition appeared, the bill would also have given a $1.4 million retroactive local tax break to Lockheed, which in 2012 had sales of $47 billion.
No one is even pretending this tax break would lead to greater development or more jobs in Maryland. Rather, supporters argue that it’s a matter of tax fairness: the state should excuse Lockheed from paying Montgomery County’s “room rental and transient” tax for its corporate hotel and training center guests because it is not a real hotel. True, the county has repeatedly ruled that the tax applies to the thousands of overnight guests who have stayed at Lockheed’s Center for Leadership Excellence, and the County Council has twice rejected efforts by Lockheed’s lobbyists to get the facility exempted. True, this non-hotel has 183 bedrooms, premier banquet and conference rooms, a deluxe fitness center, a restaurant and a bar. True, it receives police and fire services and other county amenities. But the key thing, according to lobbyists, is that it’s not open to the general public; only Lockheed’s 120,000 employees and thousands of contractors, vendors and invited guests may stay there. Surely everyone understands that, because it refuses to serve the general public, this hotel/conference center should be released from public taxes!
The legislation, opposed by a majority on the Montgomery County Council, originally sought to “reimburse” Lockheed for the three years of overnight lodging tax it had already paid. But here’s the kicker: federal taxpayers, who are the source of most of Lockheed’s resplendent wealth in the first place, have already reimbursed the corporation for upward of 50 to 75 percent of the cost of its guests’ hotel taxes. In other words, Lockheed wanted to be reimbursed twice for the normal lodging tax that you and I and other natural persons pay without protest: first by federal taxpayers, who pick up the tab through federal contracts for nearly everything Lockheed does, and then by local taxpayers, who must bow down before the “pro-business” idol of corporate welfare.
Not unusual in the zany world of legislative giveaways, this bill expresses beautifully the ethos of high-tech corporate feudalism in what economist James Galbraith calls the “predator state.” Money flows continuously from impoverished state and county coffers into the sparkling corporate sphere, where multimillionaire CEOs must be seduced with an ever increasing supply of public dollars to keep them from relocating operations and jobs to other desperately obsequious “pro-business” states. In Maryland, we are told that major companies unhappy with our ungenerous approach will simply move across the Potomac to Virginia. From there, they can move to Mexico and points further south. Across America, such shakedowns are standard operating procedure.
Breaking the habit of Hood-Robin corporate welfare requires progressives to recover an authentic free-market philosophy. We need to rediscover the real Adam Smith—not the Republican stick figure on a lapel pin, but the Enlightenment economist and liberal philosopher who argued that commerce must take place in the context of a well-developed moral and political community. Smith insisted that although businesses should compete against one another in the marketplace, they should never conspire in public life against efficiency or the common good. He would deplore the deliberate conflation today of his free-market philosophy of honest business competition with the statist corporate-welfare agenda. Real free-market liberalism rejects arbitrary government subsidies to large businesses and, conversely, special-interest interference by corporations in the processes of democratic government. As conservative economists Raghuram Rajan and Luigi Zingales argue, it is time to rescue open free markets from the fantastic power of self-entrenching corporations, to “save capitalism from the capitalists.” The enemy of free markets is not regulation, which all economists know is necessary, but monopolies, cartels and the political distortion of fair competition.
It’s not easy to disengage from the habits of corporate welfarism, but the formula for a progressive business strategy begins with the millions of employees and owners of hundreds of thousands of small businesses who are bypassed daily in the political economy of the predator state. Main Street small business lacks the army of lobbyists employed by Wall Street and the statist sectors like Big Energy, Big Pharma, agribusiness and the military-industrial complex. Of course, the class divide within the “business community” is obscured by the right-leaning US Chamber of Commerce, which dresses itself in the clothing of small business but works heart and soul for the big guys. We need a Chamber of Progress, made up of all the green and progressive businesses across the land.
In the wake of Wall Street’s subprime meltdown, the housing crisis and mass unemployment, most Americans have come to see that bestowing more wealth on large corporations is not going to save us. Economist Gar Alperovitz has been urging public investment in cooperatives, small businesses, credit unions, benefit corporations and the hidden economy of solidarity that exists within our democracy. Progressives need a political and public policy strategy to connect with this economy and make it thrive.