Imagine that you were at home on a weekend afternoon and the doorbell rang and a representative from Boeing stood at the door with a tin cup asking you to contribute $10 to the Fortune 100 company so it can sell more products overseas. It's a good bet you would slam the door in the lobbyist's face.
But this is, in effect, what these corporate lobbyists are doing in Washington now. Instead of panhandling door to door, they're going to one congressional office after another securing cut-rate insurance that could cost taxpayers more than $2 billion over the next decade. The program is called the Export-Import Bank. Taxpayer groups have been trying to get rid of this corporate welfare racket for 30 years. Yet Congress always seems to rush to the rescue on behalf of GE, Caterpillar, Boeing and the rest.
Now the Ex-Im Bank is in big trouble. Republican fiscal reformers are making a bid to terminate the bank. This would be a major — even unprecedented — victory in the war on corporate welfare. If Ex-Im can be defunded, other dominoes in the vast corporate welfare state could fall as well.
The Export-Import Bank holds more than $100 billion in loan guarantees, making it one of the largest banks in the world. If those loans go sour, taxpayers are on the hook for billions of dollars of losses. Supporters of the program counter that it raises money for the government. Yes, just like housing giants Fannie Mae and Freddie Mac were moneymakers — until the housing market crashed, and we taxpayers had to write one of the biggest bailout checks in history to cover $164 billion in losses.
If this insurance were a moneymaker, then private-sector banks and insurance companies would gladly underwrite these activities. But they won't. What does that tell you?
Nor is this program critical to expand U.S. exports. Some 98 percent of firms operate in international trade — with more than $1 trillion a year in exports — without a government umbilical cord. If thousands of small businesses can do it, why can't billion-dollar businesses?
Here's a much better way to help American businesses compete in international markets.
First, eliminate all corporate welfare programs. Washington has no business passing out taxpayer dollars to pick industry winners and losers. By some estimates, terminating these sweetheart deals could save nearly $100 billion a year.
Next, devote the savings from ending corporate welfare to reforming our business tax system, which now imposes the highest tax rate in the industrial world. Excessive taxation ships American jobs abroad to nations where corporate taxes are less than half as onerous. In just the last several months, major American companies like health care titans Pfizer and Medtronic have threatened to leave the U.S. and take jobs with them in order to reduce their tax bill. This newspaper recently reported that Illinois-based Walgreen may move overseas for tax reasons.
My colleagues at the Heritage Foundation have calculated that business tax reform would create 1 million new American jobs. But Congress prefers to dole out money to deep-pocketed multinational companies, because this is the way to bring in campaign contributions.
Perhaps to clean up the corporate welfare swamp, we need a federal rule that no business or individual with more than $1 million in earnings should ever qualify for a taxpayer subsidy, loan, guarantee or any other form of handout. Why provide welfare for the rich and subsidize the top 1 percent at the expense of the other 99 percent? This rule would eliminate Ex-Im Bank overnight.
Conservatives have argued for many years, and correctly, that welfare programs foster a culture of dependency that impedes the process of financial self-sufficiency. That's true of companies too. The Fortune 500 have become addicted to their subsidies. They now regard them as a political entitlement.
In other words, they feel entitled to our money. This breeds a corruption in Washington with big corporate donations paying for even bigger corporate welfare handouts. It's called pay-to-play, and it's happening now as corporate America launches a full-court blitz to save the Export-Import Bank.
As my friend from Fox News, John Stossel, puts it, this isn't capitalism, it's "crapitalism." And it must end.
- Stephen Moore is chief economist at the Heritage Foundation.
Originally appeared in The Chicago Tribune