DOGE and Congress Should Take a Chainsaw to Corporate Welfare
Handouts to corporations distort the market, breed corruption, and politicize the economy.
Last month, Department of Government Efficiency (DOGE) founder Elon Musk swung a chainsaw at a gathering of the Conservative Political Action Conference to dedicate his commitment to slashing federal spending. The prop was a gift from Argentina's libertarian President Javier Milei and represented the two men's shared vision of smaller, leaner government. The DOGE is off to a respectable start, but there's a lot more wasteful and damaging spending that could benefit from a dose of chainsaw. Consider, for example, the grants, subsidies, and tax breaks that fall under the umbrella of corporate welfare.
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Throwing Gold Bars Off the Titanic
"We're just trying to get the money out as fast as possible before they come in and stop it all," Brent Efron of the Environmental Protection Agency (EPA) told an undercover interviewer after last year's election. "It truly feels like we're on the Titanic. We're throwing gold bars off the edge."
Those "gold bars," Efron explained, went out the door to fund the Biden administration's environmental policies and efforts to shape the economy after the former president left office by placing money beyond the reach of the new Trump administration. According to new EPA Administrator Lee Zeldin, "roughly 20 billion of your tax dollars were parked at an outside financial institution" as part of the plan. But really, that's only the tip of the iceberg.
"The government spends $181 billion a year on aid to businesses," writes the Cato Institute's Chris Edwards in a new study, Corporate Welfare in the Federal Budget. "That figure is based on a broad definition of corporate welfare, which includes direct cash subsidies and indirect industry support." The study points out that among the biggest sources of such spending in recent years were the Infrastructure Investment and Jobs Act of 2021, which included $254 billion in corporate welfare spread over multiple years; the CHIPS and Science Act of 2022 ($54 billion in corporate welfare); and the Inflation Reduction Act (IRA) of 2022, which was crafted to affect such a large swath of the economy over time that "cost estimates for the bill have ranged from $390 billion to $1.2 trillion over 10 years."
The money goes to activist groups, local governments friendly to proposed policies, flat-out grifters, and even American farmers, as we've seen with the United States Agency for International Development (USAID). Worse, though, is that billions upon billions of taxpayer dollars go to corporations that should be in the business of turning a profit by competing with other firms to deliver what consumers want to purchase. Instead, the government shovels money in the direction of favored businesses to reward friends and to mold the economy into a shape desired by whoever currently holds power in government.
Industries Driven by Federal Money and Politics
"More industries are becoming dependent on the federal government and driven by politics, which is a dangerous move toward central planning in the economy," adds Edwards. "Cutting corporate welfare would free markets, boost growth, and trim alarmingly high federal budget deficits."
As you might expect, the dispensing of billions of dollars by government officials to corporate executives can be a very cozy project. Last June, the A.P.'s Brian Slodysko reported that First Solar, a large U.S. solar panel manufacturer, was a major beneficiary of the Inflation Reduction Act. After the company "donated at least $2 million to Democrats in 2020, including $1.5 million to Biden's successful bid for the White House" and then millions more lobbying the then-new administration, it found itself on the receiving end of government largesse. "First Solar's stock price has doubled and its profits have soared thanks to new federal subsidies that could be worth as much as $10 billion over a decade," wrote Slodysko.
But those billions in subsidies to companies don't guarantee success in the marketplace.
Consider Intel, the once-dominant computer chip maker that has since faltered and now may be acquired—perhaps in pieces—by Taiwan Semiconductor Manufacturing Co. (TSMC) and Broadcom. As Reason's Joe Lancaster recently noted, Intel received $7.865 billion in subsidies under the CHIPS Act on the condition that it build manufacturing facilities in the U.S. TSMC received "up to $6.6 billion in direct funding" and "up to $5 billion of proposed loans," also to encourage manufacturing chips in the U.S. Those billions didn't improve Intel's prospects, and the much-diminished company's purchase by another firm may itself be partially funded by U.S. taxpayers.
The CHIPS Act subsidies weren't just conditioned on domestic manufacturing ventures that, in some cases, were already in the works. They also, as I wrote in 2023, included provisions "requiring the use of U.S.-sourced construction materials, childcare provisions, and workforce 'equity' targets." The subsidies included strings that government officials pulled to shape how companies do business.
Money With Strings, and Bureaucracy, Attached
And who makes sure subsidy recipients abide by the various conditions under which they receive corporate welfare? Of course, the system requires armies of corporate regulatory compliance officers and government officials to look over their shoulders. "The regulations for corporate welfare programs are complex, and they require public- and private-sector bureaucracies to administer," adds Cato's Edwards. "These bureaucracies of lawyers and accountants are an overhead cost of corporate welfare."
While the Biden administration was especially generous with taxpayer money in terms of subsidizing its friends in favored industries such as technology and renewable energy, it was an outlier only in terms of the magnitude of its corporate welfare. Rewarding friends and attempting to shape the economy is a favorite pastime of politicians from both major parties. The fossil fuel industry has been a traditional recipient of Republican largesse, and it's an open question whether DOGE and the Trump administration will take on the challenge of corporate welfare for their own friends.
"We're the pro-business party. So anytime an entity has made a significant investment, you don't pull the rug out from underneath their feet," Sen. Bill Cassidy (R–La.) told Politico's E&E News when asked about government subsidies to oil companies for carbon removal technology. "The technology being invested in has the ability to bring a lot of jobs to my state, a good Republican state."
The article added that, as with so many other industries that receive subsidies, some companies developing carbon-removal technology do just fine on their own, without taxpayer support.
And that's the whole point. A functioning, healthy economy is one in which businesses compete to be the best at providing what customers want at competitive prices. They don't need taxpayer money to do well—such money only distorts the market, breeds corruption, and politicizes the economy. Corporate welfare could use a good dose of the chainsaw treatment from DOGE and Congress.
