New administration promotes same old corporate welfare

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New administration promotes same old corporate welfare

by Linn and Ari Armstrong

The following article was originally published by Grand Junction Free Press on November 12, 2007.

Meet the new boss -- same as the old boss. Republican Governor Bill Owens loved corporate welfare and fought to expand it. Now that Democrat Bill Ritter has ascended to the governorship, the Economic Development Commission (EDC) operates under a new chairman. But it continues to forcibly transfer other people's money to politically favored businesses.

We've been meaning to write about the EDC's annual report for 2006 for some time, but it's been an eventful year. However, Colorado citizens should be aware that Colorado politicians and bureaucrats engage in the immoral, unjust, and economically harmful practice of corporate welfare.

Before we review some specific examples, we'll outline our basic case against corporate welfare. The practice involves funneling money to particular businesses. Where does this money come from? Taxpayers.

The way that businesses should make money is to sell services or products to willing customers. (Nonprofit businesses should solicit voluntary contributions.) If a business sells something to willing customers for more money than it costs to produce, then the business will succeed, because it is putting resources to good use. On the other hand, if a business consistently takes a loss on sales, then that shows the business is not adding value to its inputs. The business must change its practices or quit, freeing up its resources for more productive ventures.

To fund corporate welfare, politicians and the bureaucrats they empower take money by force from some people in order to give the money to others who have not earned it. The practice is immoral because people have the right to decide how to spend their own resources. You have the right to spend your income with the business of your choice, rather than the business that politicians force you to subsidize. Each taxpayer is made a bit worse off so that the favored few can collect the extorted wealth.

Corporate welfare is unjust because the recipients did not earn the money. Instead, the money is taken away from business owners and employees in order to benefit others who did not earn the money and to whom it does not rightly belong. Corporate welfare involves forcing some business owners to subsidize their competitors. It involves forcing consumers to fund businesses that provide them with no benefit. A consumer may even be forced to finance business operations that the consumer regards as immoral.

Corporate welfare is distributed according to political favoritism. Yes, the EDC gives reasons for why it blesses some businesses (but not others), but that doesn't change the fact that the money is forcibly transferred according to the will of politicians and bureaucrats. Morally, it doesn't matter what stated reason the Commission offers for transferring wealth to some businesses over others, just as it doesn't matter why a bank robber claims to need the money. Pretexts notwithstanding, the forcible transfer of wealth is wrong.

Corporate welfare is economically harmful because it forcibly transfers resources away from businesses that consumers would voluntarily choose to fund. Every dollar of corporate welfare is a dollar out of somebody else's pocket. Popular economist Henry Hazlitt calls it the problem of the seen versus the unseen. The EDC touts all of the great things it does with the money. It ignores all the great things that it prevents from happening by taking away money from others. Because corporate welfare forcibly transfers wealth from the realm of voluntary exchange to the realm of political favoritism, it causes a net destruction of real wealth.

For 2006, the largest item of corporate welfare is $900,000 for the Lockheed Martin Orion Project Incentive, listed as "pending" in the report. (In this context, "incentive" is a euphemism for subsidy.) An additional $900,000 is listed for local and federal subsidies. The point of the corporate welfare is to subsidize jobs averaging $70,000 or more per year. In other words, part of the idea is to tax the poor and those of modest means in order to subsidize the well-off.

The EDC promises $250,000 for an Ameriquest Data Center. "Ameriquest Capital Corporation (ACC) is a privately held Delaware Corporation with various residential loan operations." So Colorado taxpayers and businesses get to subsidize a corporation based in Delaware. The EDC also lists $200,000 for a "CH2M Hill HQ Expansion." The company "is one of the world's largest engineering services firms." Apparently it is so large and successful a company that it needs welfare handouts. The report lists many other examples.

The report names Grand Junction's very own William Sisson of American National Bank as one of the members of the EDC. Sisson thus facilitates this unjust transfer of wealth. Shame on you, William Sisson.

The practice of corporate welfare is morally repugnant. It should be abolished. And the Economic Development Commission should be abolished along with it.

The Colorado Freedom Report--www.FreeColorado.com