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STUDY: U.S. Spends $59 Billion on Social Welfare…$92 Billion on Corporate Welfare

A recent blog post by Mike Sinn for Think by Numbers questions if the government spends more on social welfare or corporate welfare. The GOP has attempted to turn the political discussion surrounding the upcoming election into a debate about President Obama and social welfare, while progressives have done the same with Mitt Romney and corporate welfare. But who is right!? There have got to be…facts…haven’t there!?

Accorsing to Sinn, the numbers clearly show that corporations are “mooching” off the government at a much higher rate than 47% of citizens.

According to analyzed numbers from the year 2006, the government spends $59 billion (3% of its total budget) on social welfare and $92 billion (5% of total budget) on corporate welfare. Perhaps more interesting is that in 1996, when new welfare reforms were signed into law by President Bill Clinton, both caseloads AND child poverty significantly dropped, saving the government gobs of money:

in 1996, Congress passed a bill enacting limited welfare reform, replacing the Aid to Families with Dependent Children (AFDC) program with the new Temporary Aid to Needy Families (TANF) program. One key aspect of this reform required recipients to engage in job searches, on the job training, community service work, or other constructive behaviors as a condition for receiving aid….

…Caseloads were cut nearly in half. Once individuals were required to work or undertake constructive activities as a condition of receiving aid they left welfare rapidly. Another surprising result was a drop in the child poverty rate. Employment of single mothers increased substantially and the child poverty rate fell sharply from 20.8 percent in 1995 to 16.3 percent in 2000.

Reforms are needed all around, but social welfare as political scapegoat is simply a dangerous myth. Abuse is bound to occur, but the abuses in this space are nothing compared to the abuses of corporations who receive mass subsidies while boosting CEO take-home and hoarding profits to the detriment of the many.

In this study, corporate welfare is classified as a corporation taking money from the government and not returning a service or good. While there are potential positive effects from this type of action — such as “job creation” — there are far more negative effects. The numbers used in this study only pertain to financial handouts directly to companies. According to Sinn, nearly 40% of corporate welfare spending flows through the Department of Agriculture:

The largest fraction of corporate welfare spending, about 40%, went through the Department of Agriculture, most of it in the form of farm subsidies. (Edwards, Corporate Welfare, 2003) Well, that sounds OK. Someone’s got to help struggling family farms stay afloat, right? But in reality, farm subsidies actually tilt the cotton field in favor of the largest industrial farming operations. When it comes to deciding how to dole out the money, the agricultural subsidy system utilizes a process that is essentially the opposite of that used in the social welfare system’s welfare system. In the corporate welfare system, the more money and assets you have, the more government assistance you get. Conversely, social welfare programs are set up so that the more money and assets you have, the less government assistance you get. The result is that the absolute largest 7% of corporate farming operations receive 45% of all subsidies. (Edwards, Downsizing the Federal Government, 2004) So instead of protecting family farms, these subsidies actually enhance the ability of large industrial operations to shut them out of the market.

Sinn uses Wal-Mart as an example of a company that drives small businesses out of the market while regularly looking to the government for subsidies:

If, in the court of public opinion, Wal-Mart has been tried and convicted for the murder of main street, mom-and-pop America, then the government could easily be found guilty as a willing accomplice. Wal-Mart receives hundreds of millions of dollars of subsidization by local governments throughout the country. These subsidies take the form of bribes by local politicians trying to convince Wal-Mart to come to their town with the dream of significant job creation. Of course, from that follows a larger tax base. For example, a distribution center in Macclenny, Florida received $9 million in government subsidies in the form of free land, government-funded recruitment and training of employees, targeted tax breaks, and housing subsidies for employees allowing them to be paid significantly lower wages. A study by Good Jobs First found that 244 Wal-Marts around the country had received over $1 billion in government favors.

As November, nears listen closely to what politicians say about “welfare” and how they define it. Those who want to end welfare for the neediest working families often have no trouble with the richest corporations milking the same system for all it’s worth. The need for reform is indisputable, but the clear mission of many in power or in pursuit of power to allow corporations to practice welfare queenery is more dangerous (and more costly, on paper!) than food stamps could ever be.


4 Comments on “STUDY: U.S. Spends $59 Billion on Social Welfare…$92 Billion on Corporate Welfare”

  1. “in 1996, when new welfare reforms were signed into law by President Bill Clinton, both caseloads AND child poverty significantly dropped, saving the government gobs of money”

    Ya, and increasing poverty rates, child homelessness, social instability and inequality. Thanks Bill Clinton.

  2. “Employment of single mothers increased substantially and the child poverty rate fell sharply from 20.8 percent in 1995 to 16.3 percent in 2000.”

    I should point out the only gains made after welfare reform weren’t caused by welfare reform, they were caused by the economic bubble Clinton and his Republican friends set up. The dotcom bubble burst in 2000, and much of the supposed gains from welfare reform with it.

    And forcing women with children to “get a job,” the point of the welfare reforms, is astoundingly sexist. It implies that raising children isn’t work or is taken for granted, as if all that labor flows freely from everyone with a vagina.

    Another point of Clinton’s welfare “reforms” was to destroy low-wage unions. Why would anyone on welfare organize and fight for higher wages if that meant their aid would be cut off?

  3. thanks for posting this, as well as some background information on TANF and the walmart disease. there are some sharp looking graphs on the think by numbers website if anyone is interested as well.

  4. Why arent the hundreds of billions in bailouts included on here for the companies that still went under? Yet it is all the GOPs fault…
    Also, if you take your stat that 40% of the corporate welfare goes towards agriculture, you have to consider it drastically cuts down the cost of food which helps the poor more than the rich and could almost be considered social welfare.

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