Congress recently passed legislation that will slam both low income families who receive public assistance and the states that have to administer the programs. But the real welfare scandal continues unabated.
Contrary to stereotypes, the real abusers of the country's "welfare" programs aren't poor people. Rather, they are corporations that cash in on economic development grants, tax breaks, and other subsidies from state and local governments. In many cases, companies have pitted states, cities, and counties against each other in costly bidding wars where each tries to outdo the other in giving away the store. It's another example of socialism for the rich and free enterprise for the poor.
RACING TO THE BOTTOM. The result is a race to the bottom where the real building blocks of quality economic development--like public investments in infrastructure and education--are sacrificed for bogus benefits that never come. In many cases, the companies that cash in have failed to create good jobs or actually laid off workers. In others, they simply move on to the next victim when the giveaways stop.
Often, the employers who benefit from corporate welfare programs pay their employees such low wages that workers have to depend on public assistance programs such as food stamps, the Earned Income Tax Credit, Medicaid, and the Children's Health Insurance Program.
According to Greg LeRoy, director of Good Jobs First (www.goodjobsfirst.org) and author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation, "This system costs taxpayers an estimated $50 billion a year in total spending by states and cities."
We've seen this happen many times in West Virginia, the classical example being the super tax credit program, which a number of coal companies used in order to automate and eliminate mining jobs.
SOLUTIONS. The United States Supreme Court is about to consider a case in which citizens in Ohio are challenging the constitutionality of a $300 million incentive package to DaimlerChrysler.
In West Virginia, Governor Joe Manchin has terminated state economic development grants and promised an approach to economic development focused on accountability and the creation of good jobs with benefits. In order to achieve this goal, however, public economic development policies need to have clear job quality standards and means to ensure that companies don't take the money and run.
According to LeRoy, "We must eradicate the subsidy scams that have grown up around the corrupted definition of competition and replace them with a healthy new form of competition in which places compete based on their assets--their skilled labor base, their infrastructure, their schools and universities, their entrepreneurial culture, their quality of life--which are made equally available to all employees."
Bottom line: welfare benefits should go to the truly needy, not the truly greedy.
GOAT ROPE ADVISORY LEVEL: ELEVATED