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Welfare for the Rich?

Lisa Conyers on the New Welfare Kings

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During the 1960s, images of Cadillac-driving “Welfare Queens” were conjured up in the popular imagination to highlight abuses of the government dole. Despite the eventual welfare reform of the 1990s, both Congress and the American people continue to have a huge blindspot for a different kind of welfare that has made true kings and queens out of those who were not even poor to begin with — who might instead have already been classified as the nobility.

Call it the revolving door, corporate welfare, or cronyism — this Welfare for the Rich is alive and well, as Phil Harvey and Lisa Conyers document in their book of the same name.

Lisa Conyers joined me for the full hour to discuss the new face of welfare kings and queens (and their enablers), from “sugar daddies” to sports stadiums.

Transcript

Bob Zadek: Welcome to the Bob Zadek Show, the longest running live libertarian talk radio show in all of radio.

Hearken back to the Presidency of Ronald Reagan, one of my true heroes. I was quite taken by his approach during his campaign. In the early days of his administration, he and others railed against a mythical character called the “welfare queen,” where allegedly, the welfare recipients were making so much money they were driving around in Cadillacs and thumbing their noses at the system. Reagan and others got lots of mileage on calling attention to that. We have a passing of the scepter, if you will.

We now have a welfare king. The queen is dead. She passed quietly in the night at the end of the 20th century with welfare reform, so we no longer have any reference to the welfare queen. Elon Musk is the welfare king. He has found a way to legitimately and legally game the system. To build a business empire which lives off welfare. This is a special kind of welfare for the rich. The amount of welfare that flows to the rich is staggering compared to the amount of welfare that allegedly improperly flowed to the poor 50 or so years ago.

“We now have a welfare king. The queen is dead.”

To help us draw our attention to the newest welfare problem, I welcome to the show Lisa Conyers. Lisa has written with her co-author Phil Harvey, a must-read book: “Welfare for the Rich” points out a good deal of some of the most glaring and easily understood governmental programs which provide welfare to those who, in Lisa and Phil’s opinion, do not really deserve it, and which represents a failure of governmental policy.

Lisa, welcome to the show this morning.

Lisa Conyers: Well, thank you so much for having me back. I’m looking forward to the conversation.

Bob Zadek: Tell us, in the broadest sense, what you mean by welfare and what do you mean by “the rich?”

Lisa Conyers: The book is all about the many ways that your tax dollars end up in the pockets of wealthy people. All of us ordinary Americans pay our taxes every year, and we’d like to believe that those taxes are going to fund basic services. What we found is that many times that money that goes out of our pockets goes to public coffers and gets distributed to wealthy people for various projects, whether it’s farmers or stadium owners, or technology company owners. It is an enormous problem in this country. And it touches on so many different industries.

We really wanted to look at how that happens and why it happens, and expose what is going on. I think most Americans are might be aware of one or two issues, some people maybe in the Midwest know about agricultural subsidies, and maybe people on the West Coast know more about tech companies getting public money, but we wanted to really take as big look as we could in one book at all the ways that it happens.

Some are obvious. Agricultural subsidies are pretty easy to understand.

Others are a little bit more complicated, like tariffs or regulatory overreach, or things like that. So we did the best we could. As you mentioned, if we were going to touch on every topic, we’d be writing an encyclopedia. We did start the book thinking we’d have about five chapters, and we ended up with 10. We kept running across subjects that we felt deserved to be included in the book. We do hope the book will serve to educate people and maybe get them a bit riled up about the situation and take it on as something that they want to fix.

Welfare for the Sugar Industry and Hidden Taxes

Bob Zadek: When I first learned about your book, and I saw you being interviewed in discussing the book, I kind of knew you would cover some of the welfare policies for the rich. I’ll just pick an egregious example, simply by way of getting us warmed up. You mentioned sugar subsidies. Sugar is an ingredient in a great number of food products, which means that the price of sugar affects the price of most foods that we purchase.

When you buy a candy bar, sugar is an element of the cost. Therefore, if the price of sugar goes up, the cost of living of every American goes up, and therefore the amount of money they have available to spend on other things goes down. Therefore, when the government artificially increases the cost of sugar, it is in effect imposing tax on every consumer in America, with the benefit going to a very few. Tell us about why you have picked sugar as an example of welfare to the rich.

Lisa Conyers: We pay 20 cents per pound and in other parts of the world you pay 10 cents. The reason for that is because we subsidize the sugar industry and we pay the people who make sugar for us, primarily in Florida and the Dominican Republic price supports in order to grow the sugar. And if we didn’t have to pay this price, support is the price for us as consumers would go way down. And the reason we chose sugar is because it’s such an egregious example, because the people who are involved in producing it are extremely wealthy people.

They’re these two brothers down in Florida, Alfie and Teppei Fanjul, who basically have a corner on the sugar industry. They are billionaires, and they have built their fortune on providing sugar to America. Sugar is in probably way more products than it should be. We certainly don’t need to be consuming as much as we are.

But the fact remains that they’re providing it and they’re getting $570 million in price support to provide it for us. You know, everybody eats sugar every day, so it adds up. Each consumer could save hundreds of dollars a year if they didn’t have that artificial price support. Here are people who don’t need the money, and they can certainly afford to forego the subsidy, and it’s the ordinary consumer who pays for it.

Bob Zadek: In 2016, in the Republican primary, Marco Rubio was very much in the hunt. He allegedly campaigned on smaller government, lower taxes and the like. Because the Fanjul brothers are in Florida, and no doubt large campaign contributors, he found himself defending the subsidy, which he had to do.

But it shows how corrupting these wealth transfers are to the wealthy. Was there ever a time when you studied the sugar subsidies that price support for sugar made sense?

Tell us how a thing like that, that wealth transfer to two wealthy Cuban emigres managed to corner the market and get so much government money. Was there ever a time when it was a good idea?

Lisa Conyers: The sugar program actually got it started in the 17th century as a way to generate federal revenue. Back in the day, when we were trying to create a budget for our country there were tariffs and import taxes and all kinds of things that we used to raise revenue.

The funny thing about government programs is that once they’re there it is really hard to get rid of them. So here we are 100 years later and we still have sugar subsidies. But it doesn’t really matter who it is who is asking for these subsidies, they always make these arguments that they are providing so many jobs to the state of Florida or enhancing the economy of the area.

My stance on this is that they don’t need our money. We taxpayers could certainly make better use of the money by providing basic public services to ourselves rather than lining the pockets of rich people. So you will hear throughout the book some of the justifications that people will give you for wanting these kinds of special favors, and that is my answer to all of them as well. We don’t think you need taxpayer help. Going back to Elon Musk and Bill Gates, they love to tell people that they built their company on their own. Pull back the curtain and you find out that they’re getting massive public support. They aren’t these brilliant entrepreneurs that they’d like to have you think they are. They’re getting tons of our tax dollars to be so successful.

Bob Zadek: I would say Musk is a brilliant entrepreneur, except his skill is in gaming the system, not necessarily in building a product per se. He has very skillfully accumulated lots of money lawfully, although not doing precisely the activity that he would like to claim credit for. He was able to amass a fortune as a result. We don’t have to discuss the morality of Elon Musk. You mention some surprising industries that have also benefited from government largesse.

The Massive Government Subsidization of Silicon Valley

Bob Zadek: What surprised me is that you picked the tech industry. My understanding of the tech industry was that it was kind of made in the garage in Silicon Valley. They went on the strength of the brilliance of their concept. It surprised me how much they benefit from welfare from the government. How is tech the beneficiary of welfare to the rich?

Lisa Conyers: The tech industry is an interesting one. It is another one where the public image isn’t necessarily what it is cracked up to be when you start looking into them. And yes, indeed, there were many smart people in Silicon Valley that created a lot of products and built up an industry out of nothing and provided us with all the tech we have on our smartphones now and all of that.

But at the same time, as they grew, they hopped on the gravy train like everybody else. Since 2013, they have gotten almost $9 billion in state and federal subsidies. It’s not necessarily to create the product at data centers in Phoenix, Arizona, which is one of the places that has hundreds of data centers that store all of our data for the products that we use.

They get all kinds of support and incentives to go to MIT to build in Arizona and they subsidize energy to run their data centers which all have to be connected to certain temperatures in order to keep all the technology running. If you look at the big giants, they basically ask the cities how much they’ll pay to get them to move there.

I like to believe that all those guys in their basements in Silicon Valley did wonderful things. But now, because tech is so insidious and we need it for everything, it has also become a heavily subsidized industry.

What is interesting about the Amazon story is that New York City was one of the two places that they chose along with Northern California. New York kind of woke up and said, “Wait a minute, we’re not going to subsidize you guys.”

Amazon quietly decided to move to New York anyway. So I think that that is an important lesson to learn as we look at these kinds of situations. Just because they tell you they can’t possibly build a new facility without taxpayer help, sometimes they might do so anyways.

Bob Zadek: I’m so glad you picked the Amazon attempt to build a huge second campus in Long Island City, a lower middle-class neighborhood with the promise of gajillion jobs, a boon to the economy which could help that part of NYC. AOC was leading the charge opposing Amazon. So I guess AOC becomes your libertarian queen, because she successfully fought off Amazon’s attempt.

Are Tax Abatements Really Bad Per Se?

Bob Zadek: I’d like to drill down just a bit on that wonderful example that you have picked One of the issues that you focus upon in discussing Amazon, I wonder whether or not the bidding war that states and localities get involved in to induce corporations to move jobs to their jurisdiction, is in effect transferring tax dollars by waiving taxes imposed upon Amazon.

Public funds being used to subsidize Amazon owned primarily by Jeff Bezos, the richest man in the world, sort of strikes everybody as being just plain wrong. Well, I guess it’s wrong if you focus on whether Amazon as a company or Bezos as the major shareholder needs the money.

But Lisa, isn’t there another side to it? Couldn’t you imagine the city making a calculation. You could be hired by the city to negotiate a tax abatement with Amazon, where the city would be assured of getting a benefit more than the tax dollars they have given up. It is not bad per se if Amazon is in fact, bringing jobs, bringing tax revenue, and increasing real estate values. If the city says, “If you meet these performance standards, we will give you a tax break.”

In that case is the arrangement bad per se, or only bad if the city does a bad job negotiating?

Lisa Conyers: Well, first of all, I don’t want to work for the city of New York, because then I’d have to live there, and it’s cold there. These contracts, if you look at them on their face, they often are very advantageous to cities. I’ve looked at contracts for all kinds of projects all over the country. Every town likes to believe that they negotiated a really good contract with whoever they’re giving all these favors to. The problem isn’t that these contracts don’t have great promises in them. The problem is that when the promises are broken, nothing happens.

There’s no consequence. If you look at whether it’s film subsidies for stadiums or data centers, or Amazon, they promise jobs, jobs, jobs. Always jobs, jobs, jobs. And then when you look back 10 years later at the job promises they made, I’ve yet to find a situation where the job promise was met. Oftentimes, less than half the jobs are produced. The only way you could really change it is to put some ironclad legal ramifications for non compliance. But that’s not how these contracts are negotiated.

There are many examples in the book where job contracts were promised. And then when they do the math 10 years down the line or five years down the line, they find out that they paid half a million dollars for every job that was provided. It would have been cheaper to just not go down that road. There are books that have been written about how bad stadiums are as a financial investment for cities. Cities go into debt because of these and keep giving money. So yeah, I don’t think that the contracts are the answer.

Bob Zadek: I would say I agree with you that the city never gets the performance standards in writing in a way that they are protected. But they could have. So I would just say, to me, the stadium contracts are just badly done. I take less issue than you do with a concept. A city has a rare commodity. There is only one Las Vegas. If you want to play in Las Vegas, we expect something in return. The city could have done a better job.

And if they wouldn’t have gotten what they wanted, they could have simply said no. But the city is negotiating with somebody else’s money – they just want to be around long enough to cut the red ribbon at the photo op. They always do a very, very bad job.

More Welfare for the Rich: The Energy Sector

Bob Zadek: You have written a lot about the energy area, which has so many subsidies. You point out in the book that once the government starts subsidizing one segment of energy, then it has no reason not to subsidize other segments. You have subsidies and cross subsidies and subsidies, and you’re in a rat hole that you cannot escape from.

Give us the big picture about how much money the government spends subsidizing one segment of the energy sector, and then subsidizing another sector, when it’s all a big wash and it could subsidize none of them at all and let the market dictate prices.

Lisa Conyers: I don’t think I have a total number of the subsidies in the energy industry, but it’s in the billions, if not trillions. What’s crazy about the energy industry is that it is the second best performing sector of our economy. Revenues were $238 billion in 2018. This is not an industry that is suffering in any way or in need of support, or it’ll go out of business.

We Americans love energy. We’re only 5% of the world’s population, and we use 25% of the energy on the planet. Energy companies are doing just fine. They certainly don’t need our money in order to be successful. Their profit margins are just enormous. The energy industry is one that I found really interesting in terms of what people do and don’t know about it.

If you talk to most people, they’ll complain about Solyndra. Remember the solar company that got hundreds of millions of dollars in subsidies that went out of business? They think that solar and wind are getting government support. They rail about renewable energy and why those guys get special treatment.

Believe it or not, every single kind of energy we use, whether it’s oil, or gas, or coal, or solar, or wind, are getting subsidized. To me, it just doesn’t make any sense. I mean, they’re all doing fine on their own. Although wind and solar probably would not be where they are today, without government support. That’s true. The same could be said of the coal industry which keeps getting propped up by the federal government. That’s one that is super frustrating to me, because of the fact that they don’t need the money.

We all pay for these already with our energy bills and are enjoying putting gas in our tanks. We shouldn’t also be sort of paying a second time when we pay our taxes.

Bob Zadek: As a free marketeer Lisa, besides the wealth transfer, the billions, if not trillions of dollars of wealth transfer for no real purpose, distorts the market. Capital, seeking an investment home, is confused. You do not know where to invest your money, because you can’t really tell the true value of a commodity–of a product of a good or a service — if it’s receiving a subsidy, or if the competition is receiving a subsidy. Therefore, we end up with a misallocation of capital. Therefore, productivity in the country is harmed.

We are less productive, because capital can’t figure out what industries will produce the greatest return. The market distortion is overwhelming and it means the economic engine itself has a lot of sand in the gears. That’s my issue with all of these subsidies. It mucks everything up. You don’t get a clear price message about where capital will produce the greatest good.

A Final Analysis of Agricultural Subsidies

Bob Zadek: The other area we have to talk about, because it is so large, is the farm industry. Tell us about the farm industry and how that got a lot of attention in your book. Tell us about the big picture of farm subsidies and the powerful farm lobby.

Lisa Conyers: So I also have friends who were farmers and I also met a lot of farmers while I was writing this book, and you can certainly get into all kinds of interesting discussions with your friends and family about this issue. But our point on subsidies as well as any federal program of wealth transfer is just that we don’t believe that America’s tax dollars need to go to wealthy farmers. I certainly offended some farmers in the Midwest and in various states that I visited when I brought this up. The farm bill has been around since 1933.

We first started subsidizing farmers just after the Great Depression because we felt like we really needed them to be growing the food for Americans and that it was important to give them some help during that time. But as I mentioned earlier, it seems like any government program is impossible to stop. And today we have a farm bill passed every four years to the tune of almost a trillion dollars, and it’s going to farmers who really don’t need it. There are numerous examples in the book of millionaires and billionaires who are classified as farmers, so they have land that is classified as farmland, and are getting subsidies from the government. I personally don’t like my tax dollars going to these wealthy people.

The farm program has a big section in it on the insurance side of things where we insure crops. We insure crops in such a way that the farmer gets paid whether he has a good season or not. It disincentivizes farmers from being good at their job. The Farm Bill covers farmers to not farm at all on some land. We paid farmers to put land into conservation easements. They put land that otherwise would be put to use for growing food and set it aside. We do crazy things like that.

One of the most frustrating things is that we subsidize corn and wheat and sorghum and these big giant industries, but we don’t subsidize small farmers who are growing food that is actually healthy for us. In fact, I came across a study when I was writing this book that said, the more subsidized food you eat, the more likely you are to be unhealthy and suffer from obesity and heart disease and all these other things.

If we want to argue that we want to help support the people who grow our food, then I think the next argument should be we should only be supporting farmers who grow healthy food for us. In fact, the opposite is true. We’re not supporting farmers who grow fruits and vegetables and nuts, berries and things that are good for us. We’re instead supporting farmers who have massive 100,000 acre corn fields in Kansas and things like that. So there’s just a lot that is wrong with the industry.

Their argument is that I’m at the mercy of the weather and I never know from year to year how the crops are going to go. But we all have problems like that in our jobs. I mean, I’m at the mercy of my clients, you know, retail is at the mercy of lots of things. So, I think that is not really a fair argument, either. But it’s complicated. Farmers make double what the average American makes in terms of income on average.

Bob Zadek: It is impossible to get rid of. Either the farmer is producing a product that people want, or the farmer is bad at being a farmer. If you have a lawyer who can’t make a living,because he’s a bad lawyer, then does that lawyer deserve a subsidy because he needs it?

In the subject of welfare for the rich, the issue of need is never relevant in a business context. If you need the money, find some other way to earn a living. You have no right to be a farmer or to be a lawyer. You have only a birthright to be free to choose how you’re going to earn a living. I just wanted to mention that just so I can share my point of view.

We believe we have a need to preserve farming in the form that it is now, even if it requires a subsidy. I say, absolutely not. If farming doesn’t make any sense, it means we have too many farmers. Those farmers who cannot survive in the economic climate without subsidy shouldn’t be farmers. Farming is a large source of wealth transfers.

As to farm subsidies we have this fantasy in our country, that somehow rural farming as a way of life has to be preserved, per se. That style of living, that rural small town American Gothic standard, has to be preserved even if it’s preserved at a cost to our country. It kind of reminds me of what I understand the French do with a lot of the wine growing regions where the French are very protective of that lifestyle. It’s part of what it means to be French.

“[W]e have this fantasy in our country, that somehow rural farming as a way of life has to be preserved, per se.”

They have made an economic decision to preserve that lifestyle that bucolic winegrowing light lifestyle. So that seems to me what we are doing with this fantasy, unreal image of the small farmers.

Lisa Conyers: That’s what the farmers will tell you. It is interesting. If you go out to farm country, if you go out to the Midwest, and you go into small towns farming town.

I was in John Deere tractor stores where they would tell me they know exactly when those subsidy checks are coming in. That’s when we sell all our equipment for the years. The grocery store would tell me “Oh, yeah, I mean, we know when the checks come in, and everybody comes in and stocked up.” Same with the car dealership. The unintended consequences of the entire economies of these small towns are dependent on the subsidies coming in.

As you said before, it’ll be impossible to get rid of the Farm Bill. The main reason for that is because the farm bill includes all the money for the food stamp program. That’s the way the farm bill gets passed every four years, because the minute you start questioning farm subsidies to farmers, everybody says, “Wait a minute, we can’t get rid of the Farm Bill, because then nobody will have food stamps, and we can’t feed the poor.” Until we separate those two things in the Farm Bill, they’ll continue to be passed every year.

Bob Zadek: One of the areas of the farm bill that is below the radar is the government supporting the price of butter and cheese and milk by buying up “surplus” cheese, milk and butter in order to create a sufficient demand to meet the supply, kind of perverse. We have these huge butter and cheese warehouses where then we give it away to third world countries or destroy it. I wonder if you have had occasion to observe that activity as part of the indirect welfare to the dairy industry.

Lisa Conners: The dairy industry will argue that they don’t get farm subsidies. People who raised cows and horses will tell you that they don’t get any subsidies, but all of their feed is subsidized. You bring up a really good point about food being shipped to other countries.

Another argument for the farm bill is that we need to support the farmers who are feeding our country. It turns out that 40% of our food is wasted and never makes it to market, and a good bit of it is shipped abroad. We’re feeding China and India, and we are shipping a lot of the food that we grow out of the country.

So to suggest that we need the farmers to be growing our food or we go hungry… well we’re not eating most of it. It makes no sense. There are even subsidies for certain kinds of grasses that race horses eat in Saudi Arabia eat, and we subsidize farms in Nevada to grow that grass and then ship it to Saudi Arabia.

Success Stories: An Example in Louisiana

Bob Zadek: The last chapter of your book mentions “success stories.” Your book alerts people to how much of what they pay in taxes is just being used in will by wealth transfers, and any wealth transfer is bad, per se, but this is wealth transfers to people who need it less than you, which is really offensive. You have pointed out in the book that there are ways citizens can fight back and fight big business. What happened in Louisiana when citizens became active?

Lisa Conners: In Louisiana, the Gulf Coast is just littered with Exxon and Mobil and all these other companies that are doing business in the oil industry and chemical industries. There were some people in Louisiana who were active in various causes and they noticed that the USA Today ranking of the state always finds Louisiana at the bottom of the pile in terms of education, in terms of income, and in terms of health outcomes.

They started to say, “How can that be? We are such a rich state in terms of natural resources, we have all the major corporations or major headquarters here, what is going on? Why are we so poor?”

What they discovered is that there was a small committee of five people in the legislature that was tasked with giving out property tax abatements to companies that were in their state. This committee was started back in the 1930s. Another program that never went away. Basically, they would rubber stamp property tax abatement requests from all these big companies.

So all those giant oil fields and giant oil refineries and all have routinely gone to the legislature and gone to this small committee that nobody ever heard of and got passes on property taxes, and this has been going on for decades. So all their public services were suffering. They mounted a public information and education campaign and began to show up to public meetings, and demanded the companies pay a fair share, and there was a change in the law. As a result the companies would have to make their case to local school boards and actually make their case.

I love that story, it is probably the most exciting story I ran across while I was writing the book. There are others. The great thing about the last chapter is we talked about the ways people can get involved in changing policy. We also talk about some of the organizations that are providing so much data, that it’s a lot easier now to see where your spending is going. There are some excellent organizations, including Open thebooks.gov and the Sunlight Foundation, which are basically putting all spending online so you can look up what’s happening at the federal level.

Bob Zadek: Lisa, the reason I’m so delighted, having you share the story of Louisiana is the lesson to me was that all it takes is people to care. When you have government officials doing nothing other than spending somebody else’s money, they don’t care. And when they are watched, when citizens become only a tiny bit active, they can affect the change which will affect everybody and effect and cause governments to care about your money, the way you care about your money.

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http://bobzadek.com • host of The Bob Zadek Show on 860AM – The Answer.

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Bob Zadek

Bob Zadek

http://bobzadek.com • host of The Bob Zadek Show on 860AM – The Answer.

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