Knowledge Fight Interactive Search Tool

Dec. 28, 2015 - Freedomain Radio - Stefan Molyneux

24:33

3163 The Rise of Crony Capitalism and Corporate Welfare

Do you think welfare is only for the poor? Think again! Stefan Molyneux looks at the rise of crony capitalism and corporate welfare at the expense of the average tax payer. At this point who isn't being paid off by big government? Freedomain Radio is 100% funded by viewers like you. Please support the show by signing up for a monthly subscription or making a one time donation at: http://www.freedomainradio.com/donate

Large

Audio Only |

Scroll

Time	Text
	Hi everybody, it's Stefan Molyneux from Freedom Aid Radio.
	I hope you're doing well.
	Yes, today we are going to take aim at the giant monoliths of economic soul-sucking, currently resting themselves and nestling themselves like vampires over the cribs of the next generation.
	Yes, I'm talking to you, corporate America and a little bit of the corporate UK reality.
	So corporate welfare and what's called crony capitalism, we'll call it crapitalism for short, We're good to go.
	Loan guarantees.
	I'm good.
	I'll back you up on that loan that you don't quite have the money to make.
	Technical assistance programs.
	There are really narrow tax credits that benefit certain industries.
	There are favorable regulations and trade barriers.
	And congressional and presidential earmarks that help reward their political friends.
	I know.
	It's really easy to pick on the corporations, and we're going to do it, but I do want to say something up front, which is that if you are running a corporation, this is a big part of your job.
	Something called fiduciary responsibility is kind of like a legal thing you have to do.
	So if the government offers you a big benefit, or if by lobbying the government you can gain A big benefit.
	And you don't do it.
	You actually might end up in pretty hot water.
	You have to do that which is going to benefit the shareholders, that which is going to benefit the bottom line.
	And if this is the way the game is played, then you have to do it.
	So think of it like this.
	So hitting...
	Not allowed in bicycle races.
	It is allowed in boxing.
	So are we really surprised that boxers hit each other and bicycle racers don't?
	Well, no, because no point lecturing boxers and saying, hey man, that's so violent, you should take drugs rather than just hit people.
	Well, what's the point of lecturing boxers or about hitting people when that's how the game is played and that's how they make their money?
	If you want boxers to stop hitting boxers, then you should change the rules of boxing.
	So I just really wanted to point it out.
	It doesn't mean that the corporations have no moral responsibility, but it's the old hate the game, don't hate the player.
	Now, of course, big corporations, other media as well, and Hollywood and so on all rely on a lot of government favors and tax breaks and good relationship with government-protected unions.
	So who the hell actually speaks for the free market?
	Me, you, and everyone who's ever been on the show, for the most part.
	Very few people are actually speaking for the free market.
	You know, the poor are often dependent on government power.
	The rich use government power for their own advantage at your expense and the expense of your children.
	Who's speaking for the free market?
	It's really hard to know.
	Most people who are out there being entrepreneurs are kind of busy and so don't have all of that time.
	Now, every dollar that the government spends for the benefit of some well-heeled, deep-pocketed, well-connected interest group, well, that's a dollar that is no longer available to you, to your family, to your business to spend and invest as you See fit.
	So you can't be left with your own money because you might spend it on something you want, including charity.
	So we can't have that.
	The government's got to take it away, give it to corporations, because, well, that's just how it works, is how this horrible system works.
	Of course, the corporate welfare spending is really, really vile.
	Of course, the government is spending resources that don't even exist.
	They're borrowing from the future, pillaging the next generation of Americans.
	So, you know, one person holds you down while the other drains your blood when you're a baby.
	One person would be the government, the other would be the corporation.
	So let's dive into a few details.
	According to Oil Change International...
	The US government spends somewhere between, and it's kind of chilly, they don't have this narrowed down anymore, somewhere between $10 billion and $52 billion a year on corporate welfare for...
	That's right, the fossil fuel industry.
	And that is, of course, one of the wealthiest industries in the entire world.
	They estimated the total combined subsidies to big oil approached $37.5 billion in 2014, and that's about $21 billion on production and exploration.
	I actually may have benefited from these way back in the day.
	After high school, I didn't have any money to go to college, so I ended up gold panning and prospecting, and in hindsight, the company that did that might have done it partly because of tax breaks.
	So, obviously, I'm completely in favor of them now, and that's the end of the presentation.
	Well, important to be honest.
	U.S. Uncut has previously reported about the lovely, life-saving, child-eating pharmaceutical industry.
	Now, the pharmaceutical industry costs taxpayers a little over a quarter of a trillion dollars a year, 270 billion dollars a year.
	Now, this is costs paid for life-saving drugs that the patents have been bought up by Big Pharma.
	Now, that's a lot of money.
	This is almost $2,000 a household in corporate welfare.
	Now, these high costs are partly due to the fact that the Medicare Part D for destruction bill that George W. Bush signed into law in 2003 It prevents Medicare from negotiating drug prices with pharmaceutical companies.
	Medicare buys a lot of drugs.
	When you buy a lot of stuff, you have good negotiating leverage, not allowed to do it because government and capitalism.
	And the biggest drug companies, you know, they're not doing too badly.
	Between 2003 and 2012, the biggest drug companies made over $711 billion in profits.
	And they did that just by buying patents for drugs that were largely developed with taxpayer-funded research.
	And then after they corner the market, and there's no cornering the market, like having these kind of patents, then they jack up the prices.
	So, you know, you get some taxpayer-funded research lab, perhaps in a university, to develop a drug, and then it's bought up by a pharma company who gets the monopoly and makes a lot of money.
	But, on the other hand, destroys a lot of lives.
	So, you know, obviously, balance is out.
	Now, capital gains is a bit of a complicated topic, but fundamentally, capital gains, so you make money off selling off your investments, that's capital gains, and they're taxed at a lower rate than labor, like actual, I shouldn't say actual work, because, you know, it's work to make investments and so on, right?
	So your labor, your salary is taxed at about 35% as of 2012, capital gains are taxed at a lower rate, 20%.
	Now, to be fair, the money that people often invest, they work, they save, so it's already been taxed once.
	But it's still pretty favorable to the rich.
	Pew Research found that 53% of Americans own no stock at all.
	And out of the 47% who have stocks, the richest 5% own two-thirds of that stock.
	A little, little top, top-heavy.
	Only about 10% of Americans have pensions, so stock market gains or losses don't really affect the incomes of most of the retirees.
	So I'm not sort of making a case for increasing taxes on that.
	I'd like to see lower taxes elsewhere.
	But that is an important consideration, that the rich people who have the ear of the government like it when their income, which often comes from investment, is taxed at a lower rate than people who sort of get up and do the 9 to 5.
	Ah, the gnarly farmers.
	Yes, the rednecks, the people with leathery skin.
	So there's crop insurance, which was originally intended to help farmers recover from the dust bowls of the 1930s.
	Hey, look, a government program that outlasted its utility.
	Well, it's basically turned into a giant slush fund for wealthy corporate farmers who've become fabulous at manipulating the system for their own fun and profit.
	Bloomberg has reported the median income of commercial farm households, farming is more than 50% of the household income, is almost $85,000 as of 2011.
	That's 70% more than the average American household.
	And farmers have figured out that if they grow crops on land they know will be unproductive, then they make their money from the insurance claims rather than the actual crops.
	In 2011-26 farmers each got an annual subsidy of over a million dollars.
	One tomato farmer in Florida who got almost a two million dollar subsidy.
	And also these kinds of tariff walls around America are very destructive to public health in some instances.
	There's a big sugar tariff that drives up the price of sugar in America.
	This is one of the reasons why manufacturers of sweetened drinks and foods switch to fructose glucose to save money because sugar was driven up in price by corporate, by all of these tariff walls around America.
	And, you know, a strong case to be made, as far as I understand it, that fructose glucose is just a little bit worse for you than sugar itself.
	So...
	Lots of different ways you can measure this.
	You know, $18 billion in particular categories of corporate welfare.
	That's actually more than NASA's annual budget since 2009.
	That's hovered around $17 billion.
	Now, you can't really talk about corporate welfare without talking about banks.
	Banks!
	Ah, the giant claw that comes in and takes out your brain and cash.
	Now, the biggest banks, remember they were too big to fail in the 2008 financial meltdown, so the government had to fire hose liquid gold up their butts.
	Well, the biggest banks have now grown even bigger than they were just before the financial meltdown.
	And it's perceived that their demise would spell doom for the U.S. financial sector as a whole.
	Let's take a moment, shall we?
	So these banks grow bigger, and the Federal Reserve allows them to borrow at lower interest rates than other big banks.
	So if you get into this too-big-to-fail category, you get a big reduction on your interest rates.
	So they're subsidizing the continued growth.
	Hey, you're too-big-to-fail.
	Let's figure out how we can make you even bigger.
	In 2013, Bloomberg estimated that the 10 biggest too-big-to-fail banks Hosed $83 billion a year in corporate welfare.
	That's a lot.
	This isn't even counted.
	The Troubled Asset Relief Program, the giant bailouts, which were $700 billion plus, and the giant loans that the Federal Reserve made that came out when it was audited recently.
	It's really, really important that the Bank of Scotland do really well.
	I wake up every morning wondering how the Bank of Scotland doing.
	Thanks for the Federal Reserve.
	It's doing okay.
	Now, the House of Representatives recently voted to revive, back from the dead, the Export-Import Bank.
	And it's viewed or has been criticized by some as a giant slush fund for large multinational corporations.
	So recently, the Export-Import Bank had a portfolio of $112 billion.
	$90 billion went to multinational corporations.
	A huge portion of that money went to just 10 wealthy corporations.
	For those who don't know, who've had more of a life than I have, the Export-Import Bank is a government agency, and it subsidizes American exports by foreign firms with taxpayer backing of its loans.
	So they say, oh, you know, we'll...
	It aids small business.
	It creates jobs and levels the playing field in global trade, according to its defenders.
	Basically, it's corporate welfare.
	Provides overseas corporations with billions of dollars of loans and financing at favorable rates.
	And that's not very fair.
	So, for instance, American airline companies are negative.
	They come out negatively in this because the Export-Import Bank subsidizes foreign buyers of American aircraft.
	So domestic buyers are in big trouble when it comes to Competing.
	And this is another reason why jobs are going overseas.
	Now, if we just look at the biggest 200 corporations, they have a ridiculously unfair advantage because of their influence and power in Washington.
	According to the Sunlight Foundation, here's some numbers for you that should help blow your mind right here.
	Cup your ears, people.
	Princess Leia time, because it's going to get crazy.
	The top 200 companies spent about $5.8 billion lobbying Congress between 2007 and 2012.
	So, $5.8 billion.
	Hold that.
	See, that seems like a lot.
	It's really not.
	$5.8 billion lobbying Congress.
	Now, in those same years, these top 200 companies received $4.4 trillion in federal contracts.
	Um...
	That's really quite something.
	You spend $5.8 billion lobbying and you get $4.4 trillion in federal contracts.
	And this is what I mean when I talk about fiduciary responsibility.
	If you have a big corporation and you don't do this, then you're like a boxer trying to win a boxing match with a tricycle around the boxing ring, which is square.
	$4.4 trillion, that's actually $100 billion more than what the US government spent on the nation's social security recipients, about 50 million of them, so that's quite a lot.
	Jumping across the pond in the UK, well, taxpayers are, well, £93 billion about a year.
	Are being extracted from taxpayers and given to big corporations and businesses as a whole.
	That's a little more than £3,500 from every single household in the United Kingdom.
	So that's not great.
	2013, Washington State.
	Ah, mid-November.
	Monday.
	Washington Governor Jay Inslee, who is a Democrat, he signed into law the very largest corporate tax break in any state's history.
	This is a corporate tax break with an estimated long-term value of $8.7 billion.
	That's quite a refund check to be getting in the mail.
	And this was supposed to entice Boeing to build its plane in the state.
	And it wasn't just that day.
	Boeing, the aerospace giant, has received more state and local subsidy dollars than any other corporation in America.
	So since 2000, federal government has spread the love, spread the cookie dough, $68 billion in grants and special tax credits to businesses, two-thirds of that, of course, going to large corporations.
	Six corporations alone have received a billion dollars or more, while 21 have got about $500 million or more.
	Federal agencies, of course, during that same time period has given the private sector hundreds of billions of dollars in loans, loan guarantees, bailout assistance, TARP, the largest share going to major US, of course, and foreign banks.
	So, of course, the Federal Reserve in 2008 wanted to buy up the toxic securities, right?
	So they made all these bad mortgage loans, they bundled them into other financial instruments, sold them around the world.
	And then, because they were really leveraged, like some of these big financial houses in 2007 were leveraged like 30 to 1, which means if they lose 4% of the value, they get wiped out completely.
	They bought on margin, so to speak, or they were exposed on margin.
	And so the Federal Reserve bought up all this stuff, propping up the price and thus pretending that the zombies were really great for people to have financial sex with.
	It's kinky, but whatever floats your boat.
	And...
	So this was mainly driven by these, by buying toxic securities programs Federal Reserve started in 2008.
	The total value of loans and guarantees, bailouts, assistance, literally runs into the trillions of dollars.
	Bank of America, gross borrowing, just under $3.5 trillion.
	And this is including amounts for Merrill Lynch and Countrywide Financial Acquisitions.
	They did repay some of this, so it's $3.5 trillion.
	Citigroup got $2.6 trillion in support, Morgan Stanley $2.1 trillion, JPMorgan Chase $1.3 trillion, including Bear Stearns and Washington Mutual.
	The largest recipient of federal grants and tax credits was a Spanish energy company company.
	Iberdrola, which received the federal subsidies by, quote, investing heavily in U.S. power generation facilities.
	Really important to make sure that the Spanish energy companies do really, really well.
	The top five hall of future shame of state and local subsidy recipients.
	Boeing got $13.4 billion.
	The sources for all this will be below.
	Intel, Intel Inside, your children's pockets, got $5.9 billion.
	Alcoa, $5.6 billion.
	General Motors, $3.7 billion.
	Ford Motor, $2.5 billion.
	Some of these big corporations, they're double and triple dippers.
	They go into federal and state funds.
	There are five corporations who've done the magic triangle of doom.
	They are among the 50 largest recipients of three kinds of funds.
	State subsidies, federal grants, and tax credits, and federal loans, loan guarantees, and bailout assistance.
	Because sometimes it's really, really hard to work for a living.
	And these businesses which have been defined as the most successful at obtaining subsidies from all level of governments are Boeing, Ford Motor, General Electric, General Motors, and JPMorgan Chase.
	Now, the amount of these kinds of subsidies is layers and layers and layers and layers.
	Now, we've talked about that income assistance to poor people runs at about a trillion dollars a year.
	It's really hard to compare where corporate welfare lands with regards to this.
	And so I really want to point out, I don't know whether it's larger or it's smaller, but it's something that really needs to be focused on.
	See, there are people who have a lot of power in the government because they vote a lot, right?
	A lot of poor people who are on welfare are going to vote for the continuation of those welfare programs.
	And then there are people who have a lot of power in government because they have a lot of And they like to hand that money to politicians or arrange fundraisers or set up super PACs or whatever to make sure that their guy gets into power.
	Now, once their guy gets into power, then they get all these benefits flowing back.
	You could call it bribery, but it's called lobbying because the word bribery, kind of an ugly taste to it.
	But lobbying just sounds like you're really enthusiastic for particular programs.
	And this goes on all over the place.
	It looks like Amtrak, right?
	The train.
	Amtrak is just a giant money pit addicted to corporate welfare subsidies.
	You know, it's not fully private.
	It's not fully public.
	It's one of these weird fascist ghosts with one leg on the dock and one leg on the boat.
	It's a managerial disaster, a money loser from here to eternity, and continues to get subsidies for even the most ridiculous routes.
	Last year, Amtrak's net losses were almost $1.4 billion.
	There was an operating loss of almost $227 million.
	And again, I won't go through all of the details of everything that's going on in all these programs.
	It would take a long time.
	It's not that fascinating, and I think you kind of get the pattern.
	But it's really hard to get ahead because these corporations have the ear of government and they have the taxpayers' money.
	And there's a weird imbalance.
	Why does this stuff continue to grow and expand?
	Because, let's say that there's some program that is like, I don't know, $130.
	$130 million on them, and it goes to 10 companies, right?
	The government's going to spend $130 million on 10 companies.
	Well, each of those companies has a $13 million incentive to make sure that goes ahead, especially if it's a repetitive thing, like if it's something that's not just a one-time deal, but a repetitive thing.
	Well, that is a lot of incentive.
	You're going to spend quite a bit of that $30 million to make sure this happens.
	However, there are $130 million is about a dollar for every household in America.
	And so you have like less than a dollar's worth of incentive to push back against these, whereas companies have millions and millions of dollars incentive to try and make this go ahead.
	And that imbalance is really, really crazy.
	Now, the government and business are an unholy combination.
	There's an objectivist argument that says that the separation of the state and the economy is necessary and essential for the same reason that the separation of church and state was essential to human liberty.
	And the reason is that to set up a tariff, like to say, let's say you're some sweater manufacturer in Cincinnati, you can go to your government, your government can say, oh, you can go to your government and say, stop these foreign sweaters from coming in.
	And if they do, then you can raise the price of your sweaters.
	But if you actually had to fund people going around and opening ships and you had to fund your own customs agency or whatever, it wouldn't make any sense.
	The fact is that the costs of enforcement are socialized.
	The cost of enforcement of tariffs that drive up the price of your goods you pay for as a taxpayer does not accrue directly to the individual company.
	So the costs of enforcing all of these rules are socialized, but the profits are privatized, and that is really essential to understand.
	When you give the government this kind of power, the power not to be a referee but to pick winners and losers in the economy, it's going to go to their friends.
	You know, political power is basically the ability to punish your enemies and reward your friends and force everyone to pay for your preferences.
	It's always going to happen.
	Of corporations.
	If the corporations are so powerful, why are they so demonized?
	Well, because what happens is when corporations are demonized, people run to the government for more protection against corporations, which allows the government to create more rules that are supposed to control corporations, which the corporations then, through a phenomenon called regulatory capture, I mean, Wall Street writes the regulations for Wall Street and it's designed to make the big firms with the most political pull and clout even bigger and to punish the smaller firms and drive other people out of the business.
	So when you create these ogres called corporations, everybody runs for the government to protect Which corporations love, because they then get to control the government and write the rules to punish their competitors and reward themselves.
	So there's no particular way out of this, which is why I'm for a free market.
	It simply can't work that you can create some sort of monopoly in a free market.
	Monopolies always and forever result from Government control and power exercised for the benefit of particular corporations.
	And there's no way to get around this at all.
	Once you set this system up, then it's like you're saying to people, go into a ring and hit each other in the face or wherever, and whoever knocks the other person out wins, and they get a million dollars, and then saying, well, we've got to find some way to control violence in that ring.
	Well, you can.
	You just have to change the rules of the game to the point where the government does not have the power To privatize, to allow corporations to privatize profits while socializing the costs of regulations and enforcement.
	It has to be voluntary.
	It has to be society-wide.
	Political power, what is it?
	It allows you to punish your enemies and reward your friends.
	And if you speak for freedom, I really think you know where you're going to end up.
	This is Stefan Molyneux for Freedom Aid Radio.
	Thank you so much for watching.
	Hey, just a little note.
	If you want to go and buy some stuff, you can go to FDRURL.com slash Amazon.
	To help us out.
	It won't cost you anything and we get a little bit of coin because you can go through our Amazon affiliate link.
	Freedomainradio.com slash donate to help out the show.
	Thank you so much for watching.
	Please like, subscribe, and share.
	There, I did it.
	I made it.
	And have yourselves a wonderful day.

▲