Take The Rich Off Welfare

by Mark Zepezauer &
Arthur Naiman
191 pp., Paperback $9.00
1996, Odian Press

Reviewed by Marc Oliver

T his hot little book is chock-full of straight talk on who gets how much subsidy from our government, mostly based upon 1996 fiscal year figures. As the title telegraphs, the already well-off corporations and rich citizens get a lot of it-they have the best lobbyists! Wealthfare (also known as Corporate Welfare) costs at least $448 billion annually, 3.5 times the $130 billion spent on welfare for the poor.
But the subsidy the 1996 Welfare "Reform" Bill reduced was that for the poor! Why was the bigger wealthfare not pruned? The authors postulate the entire deficit could be wiped out by cutting wealthfare by about 26%.
The nation's debt of $5.1 trillion is too high, and is still growing at a slowed rate of only $117 billion for 1996. The budget needs to come into balance; and it would be prudent to use any surplus to pay down some debt, which would then decrease the vulnerability were treasury bond interest rates to balloon. (Interest payments on the debt exceed $200 billion annually at the current low interest rates.) The heart of the nation's #1 priority issue is: How do we do this?

Wealthfare Cut Opportunities
Wealthfare Categories:$ Billions
Military Waste and Fraud
Social Security Tax Inequities
Accelerated Depreciation
Lower Taxes on Capital Gains
(not counting home sales)
The S&L Bailout
(every year for 30 years)
Homeowners' Tax Breaks
Agribusiness Subsidies
Tax Avoidance by Transnationals
Tax-Free Muni Bonds
Media Handouts
Excessive Government Pensions
Insurance Loopholes
Nuclear Subsidies
Aviation Subsidies
Business Meals & Entertainment
Mining Subsidies
Oil & Gas Tax Breaks
Export Subsidies
Synfuel Tax Credits
Timber Subsidies
(not counting tax breaks)
Ozone Tax Exemptions
Wealthfare Total Per Year





The authors note the foregoing estimates for wealthfare categories are likely underestimated. They state that, due to time and space limitations, they were forced to leave out many major categories of wealthfare. Furthermore, they do not identify state and local government wealthfare. What might the real total be?
The authors claim they think there's nothing wrong with being rich, in and of itself. "All this book says is that it's not fair for people to get rich--and stay rich--by defrauding people who are poorer than they are." Further, they document how stealing from the poor, directly or indirectly, has become standard operating procedure in this country.

"But doesn't it help the economy?"

The authors refute the notion that corporate welfare benefits society. They explain that welfare for the poor pays for itself many times over in future savings in healthcare, prisons and welfare payments. They cite Head Start as an example-according to conservative estimates, $1 invested in Head Start saves $3 in future costs to society.
In contrast, they contend corporate welfare tends to finance industries that pollute, so we end up paying even more for clean-up later-with both our money and our health. Corporate welfare is also unfair to competitors who aren't subsidized, and stifles incentives for subsidized businesses to innovate. Corporate welfare practices foster corruption; it pays to have high-roller lobbyists with big expense accounts!
Another unknown cost to this is the unproductive misdirection of creative professionals, who are bent to the task of getting tax breaks and taking maximum benefit from our labyrinthine tax code. They could have had productive lives-what is the cost to society that they did not?

Some Examples of Waste, Fraud and Abuse

Military Waste & Fraud ($172 billion)-Waste beyond your wildest nightmare

The Pentagon has no peer for wasting money. Their budget for fiscal year 1996 was $265 billion ($7 billion more than it requested). Using that uncorrected figure, the Pentagon accounts for 37% of all military spending on the planet.
But that isn't the total figure. There is more military spending in the Department of Energy for making nuclear fuel, in the NASA budget, in the VA, etc. The Center for Defense Information (CDI), a Washington think tank run by retired generals and admirals, has estimated we spend an additional $62 billion for the military from these associated budgets, making an actual total of $327 billion.
But wait! The CDI and others have estimated that the military portion of the national debt and its share of the interest payment on that debt amounts to an additional $167 billion annually, using figures from 1941 forward to the present. (Other groups estimate the military's portion of debt interest to be higher than CDI figures.)
So that makes a total annual outlay of $494 billion ($265 + $62 + $167), which translates to $9.5 billion per week, or $55 million per hour, or over $916,666 every minute. Stunning, isn't it? Why has this opportunity for budget cutting gone unpruned? The scale of the Pentagon's budget together with its world-class incompetence numbs the mind.
Below are two of the many scandals in the book, to give you the flavor:
1) "According to a recent U.S. Senate hearing, $13 billion [that] the Pentagon handed to weapons contractors between 1985 and 1995 was simply `lost.' Another $15 billion remains unaccounted for because of `financial management troubles'." Together, that's $28 billion.
2) "According to the General Accounting Office (GAO), 80% on the Navy's purchase orders are inaccurate."
The book also includes an accounting of audits and uncovered fraud, the lawsuits and puny settlements. These settlements are so forgiving that they actually support corrupt practices. Mergers resulting in fewer (and giant) defense contractors have the hidden benefit that damage awards will be lighter rather than tougher, since there will be fewer alternative contractors.

How did the authors arrive at the total fraud and abuse of $172 billion for the Pentagon?
The authors took the average of three expert estimates of a more rational Pentagon budget and subtracted their average ($155 billion) from the current $327 billion (which is the sum of defense-contributing budgets not counting attributed debt interest burden), giving the figure for current military waste and fraud of $172 billion a year-almost $500 million a day-virtually all of which goes to very large and profitable corporations and super-rich individuals.

Social Security Tax Inequities ($53 billion)
"Reagan did reduce taxes... for the rich," say the authors. "For everybody else, he signed the largest tax increase in history (adjusted for inflation), which far exceeded his tax cuts. How did he manage that? By raising Social Security tax rates while he lowered income tax rates."
They continue, "Social Security tax is a major technique for transferring the tax burden away from the rich.... Between 1971 and 1991, families making the median income saw their combined Social Security and income taxes go up 329%, while the combined tax bill of families making more than $1 million a year dropped 34%. As a result, most working people today pay more Social Security tax than they do income tax."
People have been told the `trust fund' must rack up huge surpluses or it will go bankrupt when the baby boom generation begins to retire. But extra money doesn't go into the trust fund; it hasn't for almost 30 years when President Johnson wanted the so-called "unified budget" to disguise that the U.S. was being bled dry by the Vietnam War. Since 1969, the government has "borrowed" the extra Social Security revenue to pay for other things, like military waste and corporate welfare.
"The government borrows money from itself to disguise the fact that it's spending more than it takes in," the authors point out.
"... Over a trillion dollars, plus interest, will have to be repaid in order for Social Security, and other trust funds like Medicare, to meet their obligations in the next century. Can you guess who's going to repay it?"

How Do the authors arrive at $53 billion for Social Security Tax Inequities?
The authors propose we remove the ceiling (or cap) on Social Security so the wealthy contribute on all their earned income, which continues the investment income exclusion. For fiscal year 1996 such a change would have increased receipts by $53 billion. The fact that the wealthy get less of a return on what they contribute isn't worth discussing. That they have shirked their social and fiscal responsibility is worth talking about....

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This story was published on January 3, 1997.