Welfare for the Rich?
2021-01-03 · Guest: Lisa Conyers (Co-author of Welfare for the Rich) · 52:31
Government subsidies and tax breaks for the wealthy
Bob Zadek interviews Lisa Conyers, co-author of Welfare for the Rich, about how government subsidies and tax breaks benefit the wealthy and large corporations at the expense of ordinary taxpayers. They discuss specific examples in the sugar, tech, energy, and agriculture industries, highlighting the economic distortions and “rent-seeking” behavior these programs encourage.
Topics: Corporate Welfare, Subsidies, Sugar Industry, Tech Industry, Energy Policy, Farm Bill, Rent Seeking, Economic Distortions
Speakers: Bob Zadek, Lisa Conyers
The New Welfare King [00:00]
Bob Zadek: Hello everyone, welcome to the Bob Zadek Show, the longest-running live libertarian talk radio show in all of radio. The show this Sunday and always, the show of ideas, never once the show of attitude. Thank you so much for listening.
Harken back to the presidency of Ronald Reagan, one of my true heroes. I was quite taken by his presidency, by his approach to government and the like. During his campaign and in the early days of his administration, he and others railed against a mythical character called the “welfare queen.” Allegedly, the welfare recipients who were making so much money on welfare, they were driving around in Cadillacs and thumbing their nose at the system. Reagan and others got lots of mileage on calling attention to that made-up figure, that theoretical, that combination character.
Well, we have a passing of the scepter, if you will. We now have a welfare king. So the queen is dead, the welfare queen is dead. She passed quietly in the night in the end of the 20th century with welfare reform. So we no longer have any reference to the welfare queen, but we do have: long live the welfare king. Who is this welfare king? Not a mythical figure, but a real figure. It is Elon Musk. Elon Musk has found a way, quite legitimately, quite legally, and I’ll say to his credit, to game the system and to build a business empire of sorts which lives off welfare. Now, not welfare of the type that President Reagan and others referred to, but this is a special kind of welfare: welfare for the rich. And man, the amount of welfare that flows to the rich is staggering compared to the amount of welfare that allegedly and improperly flowed to the poor 50 or so years ago.
Defining Welfare for the Rich [02:11]
Bob Zadek: To help us draw our attention to the newest welfare problem, the new monarch of welfare to the rich, I’m happy to welcome to the show Lisa Conyers. Lisa has written with her co-author Phil Harvey a must-read book, a book written for every American who cares about economic policy in this country. Her book with Phil Harvey, Welfare for the Rich, points out a good deal of—but it cannot be all of, because the book would be an enormous volume, many volumes—but she highlights 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 and thank you for calling our attention to the new monarch of the welfare state, Elon Musk, which we’ll talk about very briefly during the show. Lisa, welcome to the show this morning.
Lisa Conyers: Well, thank you so much for having me, Bob. I’m looking forward to the conversation.
Bob Zadek: Now, Lisa, Welfare for the Rich. The book itself, tell us first in a very broad sense—we’ll drill down, of course, we have lots of time to cover it—but in the broadest sense, what is the thesis of the book? What do you mean by welfare and what do you mean by the rich?
Lisa Conyers: So the book is all about the many ways that your tax dollars end up in the pockets of wealthy people. And what we were looking at is how 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, things that we all agree we need. But what we found in looking at not only the federal budget but state budgets and local budgets as well, is that many times that money that goes out of our pockets that we’ve earned goes into public coffers and gets distributed to wealthy people for various projects, whether it’s farmers or stadium owners or technology company owners. And it’s just an enormous problem in this country and it touches on so many different industries.
And so we really wanted to look at how that happens and why it happens and expose what is going on. Because I think most Americans might be aware of one or two issues. Some people maybe in the Midwest know about agricultural subsidies, maybe people on the West Coast know more about tech companies getting public money. But we wanted to really take as big a look as we could in one book at how this happens and all the different ways that it happens. And some are obvious—you know, 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, but we did start the book thinking we’d have about five chapters and we ended up with ten. So we kept running across subjects that we felt deserved to be included in the book and we do hope that 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.
The Sugar Subsidy Scandal [03:01]
Bob Zadek: Now, what I first learned about your book and I saw you being interviewed discussing the book, I kind of knew you would cover some of the welfare policies for the rich. I kind of knew you would cover them, and you didn’t let me down. And I’ll just pick somewhat arbitrarily, just because it is so egregious, simply by way of getting us warmed up. You mention in the book sugar subsidies. Now, sugar is an ingredient in a great number of food products, which means the price of sugar affects the price of most foods that we purchase. And it’s indirect. When you buy a candy bar, you’re not told of this candy bar X percent of the price goes for sugar. It’s just an element of the cost. Therefore, if the price of sugar goes up, in effect, 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 government artificially increases the cost of sugar, it is in effect imposing a tax, a buried tax on every consumer in America with the benefit going to very, very few. So just to get us started, not because it is the largest, but in my opinion, I get angry even thinking about it. Tell us about why you have picked sugar as an example of welfare to the rich. Tell us what’s going on.
Lisa Conyers: Well, so Americans pay more for sugar than any other country in the world. So we pay 20 cents a pound and in other parts of the world you pay 10 cents. And 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 those price supports, the price to 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 billionaires. There’s these two brothers down in Florida, Alfy and Pepe Fanjul, who basically have a corner on the sugar industry. And they’re billionaires. And they have built their fortune on providing sugar to America. And as you mentioned, sugar is in probably way more products than it should be and 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 $560 million a year in price supports to provide it for us. So to me, it was just a way of something that everybody, as you mentioned, can think of something that they eat with sugar in it every day, probably several things. And it’s just a drip and a drip here and there, pennies on a candy bar, pennies on a cookie, pennies on a soda, pennies on a piece of bread, but it all adds up. And we could, each consumer could save hundreds of dollars a year if they didn’t have that artificial price support. So that’s the kind of example where here are people who don’t need the money, they could certainly afford to forgo the subsidy, but as you said, it’s legal, so they’re going to take the subsidies and it’s the ordinary consumer, the ordinary taxpayer who’s paying for it.
Bob Zadek: The reason I like to start with that is I still remember back to the 2016 Republican primary. Remember those 17 candidates, one of whom was President Trump? Marco Rubio was very much in the hunt. And he allegedly campaigned—he’s a classic RINO—he allegedly campaigned on smaller government, lower taxes and the like. And he found himself because the Fanjul brothers are in Florida and no doubt large campaign contributors, he found himself, and I was kind of embarrassed for him, in defending the subsidy, which he had to do. But it shows how corrupting these wealth transfers are to the wealthy.
Now, was there ever a time when you study the sugar subsidies—now we’ll go on to lots of other egregious examples—was there ever a time that in your opinion that price support for sugar made sense? When the first price subsidy for sugar was enacted, somebody had to think it was a good idea at the time. Was it a good idea then and it became just no longer important but you can’t get it off the books? Tell us how, if you happen to know or how you may recall, how a thing like that, that wealth transfer to two wealthy, I think they were Cuban emigre brothers, managed to corner the market and get so much government money. Was there ever a time when it was a good idea?
Lisa Conyers: Well, it’s funny you mention that because we mention in the book that the sugar program actually got its start in the 1700s and it was a way to generate federal revenue back in the day when we were trying to create a budget for our country and all that. So there were tariffs and import taxes and all kinds of things that we tried to raise revenue. But the funny thing about government programs is that once they’re there, it’s really hard to get rid of them. So here we are, hundreds of years later, and we still have sugar subsidies.
But I think the Fanjuls and it doesn’t really matter who it is who’s asking for these subsidies, they always make these arguments that, “Oh, well, you know, we’re providing so many jobs to the state of Florida,” or “We’re enhancing the economy of the area.” And they can use whatever arguments they like. My stance on this is they don’t need our money. We taxpayers could certainly make better use of the money by providing basic public services to ourselves than lining the pockets of rich people. So you’ll hear throughout the book some of the justifications that people will give you for wanting these kinds of special favors. And my answer to all of them is, well, we don’t think you need it. Make your way on your own without asking for taxpayer help.
Corporate Welfare in the Tech Industry [05:21]
Lisa Conyers: And just briefly going back to Elon Musk, Elon Musk and many others who are in the book, including Bill Gates, love to tell people that they built their company on their own, they’re entrepreneurs and they’re really, really good businessmen and that’s why they’re so wealthy. But you pull back the curtain and you find out that they’re getting massive public support. So they aren’t these stellar, brilliant entrepreneurs that they’d like to have you think they are. They’re getting tons of our tax dollars to be so successful. So don’t be afraid to question the wealth just because they tell you that they’ve done it all on their own. The Fanjul brothers have not built their empire on their own; they’ve built it on the back of American taxpayers.
Bob Zadek: So although you said Elon Musk doesn’t deserve credit for being a brilliant, creative, forward-thinking entrepreneur, I would in a minor way with a big smile on my face disagree with you, Lisa. I would say he is a brilliant entrepreneur, except his skill is in gaming the system, not necessarily in building a product per se. But he’s good at what he does, for sure, because he has gotten more money—perhaps Bill Gates is another exception which we may have time to discuss—but he has very skillfully accumulated lots of money lawfully, although not doing precisely the activity that he would like to claim credit for. So I’m not quick to deny him credit. After all, he didn’t break any laws, he was quite clever about it, and he was able to amass a fortune as a result.
But we don’t have to discuss the morality of Elon Musk. There’s so much more juicy stuff in your book that we can cover. Now, you mentioned in the book some surprising industries that have also benefited by governmental largesse. And what surprised me is you picked the tech industry. Now, my understanding of the tech industry was it was kind of made in the classic garage in Silicon Valley. The product was invented, they discovered a need, they created a need when even nobody even knew the product could exist, and off they went on the strength of the brilliance of their concept. And that struck me as being—that surprised me that you explained how much they benefited from welfare to the rich from the government. So since it’s a little stealthy and it helps us understand how you identify recipients, the rich who are benefiting from welfare, tell us how tech is the beneficiary of welfare to the rich.
Lisa Conyers: Well, the tech industry is an interesting one and it’s another one where the public image isn’t necessarily what it’s 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 tech products and built up an industry out of nothing and provide us with all the tech we all have on our smartphones now and all of that. But at the same time, they also, as they grew, hopped on the gravy train like everybody else. And since 2013, they’ve gotten almost $9 billion in state and federal subsidies.
And it’s not necessarily to create the product, but it’s, for example, data centers in Phoenix, Arizona, which is one of the places that has hundreds of data centers that store all of our data for all of these products that we use. They get all kinds of supports and incentives to build in Arizona and they get subsidized energy to run their data centers, which all have to be kept at certain temperatures in order to keep all the technology running. And then if you look at the big, the giants now, the Amazons and the Googles and the Facebooks who go to cities and basically say, “Hey, tell us how much you’re going to give us to move here.” And if you remember the Amazon choice of their second campus year before last where they had cities in just a massive bidding war to get them to come.
And so we’d like to believe—I mean, I like to believe that all those guys in their basements in Silicon Valley did wonderful things, but now because tech is so insidious in all of our lives and we need it for everything, it’s also become a big, heavily subsidized industry. And what’s interesting about the Amazon story is that if you recall, New York City was one of the two places that they chose along with Northern Virginia. And then New York kind of woke up and said, “Wait a minute, we’re not going to subsidize you guys. Forget it. This deal’s off the table.” And Amazon quietly decided to move to New York anyway. So I think that that’s an important lesson to learn as we look at these kinds of situations is that just because they tell you that they won’t come unless you pay for them, or just because they tell you, “Oh, they couldn’t possibly build a new whatever it is facility without taxpayer help,” surprisingly, they’ll go ahead and do it if you don’t give them the money. So I think that that’s a very important lesson for cities around the country to learn is that they don’t have to give away the company store or rather taxpayer dollars in order to get people to come to their city or open a new outlet in their town.
The Amazon HQ2 Bidding War [06:41]
Bob Zadek: Lisa, I’m so glad you picked the Amazon Long Island City, which is on the other side of the East River from Manhattan, the Amazon attempt to build a huge second campus, the classic second corporate campus in Long Island City, a middle-class or lower-middle-class neighborhood with the promise of gadillion jobs, a boon to the economy and in that part of New York City, it kind of could use all the help it could get. And AOC was leading the charge opposing Amazon’s attempt. So I guess AOC becomes your libertarian queen because she successfully fought off Amazon’s attempt.
But 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—and we’ll get to the stadiums in a moment, friends, so all the sports fans out there while you’re waiting for the NFL to start playing today, we’re going to get to talk about stadiums in a moment, so please stay tuned—but getting back to Amazon, I, in a very soft way, in a way almost to invite a conversation, I wonder whether or not the bidding war that states and localities get involved in to induce corporations to move jobs to their jurisdiction. Your complaint is that’s in effect transferring tax dollars by waving taxes imposed upon Amazon or giving Amazon free land or free service or free roads, whatever the issue is. Public funds being used to subsidize Amazon, owned primarily by Jeff Bezos, the richest man in the world. And that 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, whether he needs the money. Of course, it flunks the test and therefore the use of the word welfare kind of makes the argument very clear.
But, Lisa, isn’t there another side to it? Couldn’t you imagine the city making a calculation—and you have, you’re of course a trained economist, so you could lead the charge, you could be hired by the city to negotiate a tax abatement with Amazon in their aborted move to Long Island City where the city would be assured of getting a benefit more than the tax dollars they are giving up. That is, it’s not bad per se if Amazon is in fact bringing jobs, bringing tax revenue, increasing real estate values, if they are doing all of that which would not happen without Amazon, and the city says, “If you meet these performance standards, we will give you a tax break and if you don’t, we will not.” So is it the case that those arrangements are bad per se or only the city does a very bad job of negotiating because they’re not skillful at it and therefore they always end up losing or can’t those contracts be advantageous if done right?
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. I don’t want to live in cold New York City. But, sorry, that’s just a personal preference. But these contracts, if you look at them on their face, they often are very advantageous to cities. I mean, I’ve looked at contracts for all kinds of projects all over the country and every town likes to believe that they negotiated a really good contract with whoever they’re giving all these favors to. And 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 or stadiums or data centers or Amazon, they promise jobs, jobs, jobs. It’s 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 there’s either less than half the jobs they promised or a third or a quarter. It’s just absurd. And I think the only way you could really change it is to put some ironclad legal ramification for non-compliance, some huge fine that would be more than the value of the project or something. But that’s not how these contracts are negotiated. And so there’s many examples in the book of job contracts that 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. So it would have been cheaper to just not go down that road.
So I don’t think that the issue is that the promises aren’t there. It’s just that they’ll promise you the moon in order to get the tax breaks and then they just don’t perform. And I’m sure if we could find a way to make the punishment really severe, but I just don’t see that happening. And in some of these cases—I mean, we have a chapter on stadiums, but there are books that have been written about how bad stadiums are as a financial investment for cities and where they go in-depth into this. And yet people keep giving these folks money. So, yeah, I don’t think that the contract’s the answer. I think the answer is just a big fat no. No, we will not give you money. If you want to come here, great. If you don’t, that’s okay. We’ll find somebody else.
Bob Zadek: And 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 Amazon or the stadiums, which we’ll get into in a moment, the stadium contracts are just badly done. I take less issue than you do with the concept because I say a city has a rare commodity. There’s only one Las Vegas. And if you want to play in Las Vegas, well, then we expect something in return. So the city, Las Vegas in this case, who took the Raiders from Oakland, the city could have done a better job and if they wouldn’t have gotten what they want, they could have simply said no. But the city just in general, since they are negotiating with somebody else’s money—the danger sign—since cities, governments in general are negotiating with somebody else’s money and they just want to be around long enough to cut the red ribbon at the photo op and then they get re-elected. Since they are negotiating with somebody else’s money, they always do a very, very bad job.
Energy Subsidies and Market Distortions [08:21]
Bob Zadek: Now, other areas where you have really pointed out something which I learned a lot from is in the energy area, which for some reason, maybe because it’s so large, is really has so many subsidies. And what you point out in the book is once government starts subsidizing one segment of energy—let’s say coal—then it has no reason not to subsidize other segments. And then there it is in the trap. And you have subsidies and cross-subsidies and subsidies and you’re in a rat hole that you cannot escape from. So give us the big picture, because we could spend an hour just on energy, but give us the big picture, the headlines if you will, about how much money government spends subsidizing one segment of the energy segment and then subsidizing another segment 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. And what’s crazy about the energy industry is that it’s the second most best-performing sector of our economy. And 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. I mean, we Americans just love energy. We are only 5% of the world’s population and we use 25% of the energy on the planet. I mean, energy companies are doing just fine and they certainly don’t need our money in order to be successful. And their profit margins are just enormous.
And the energy industry is one that I found really interesting in terms of what people do and don’t know about it and what people think they know about energy subsidies. If you talk to most people, they’ll complain about Solyndra. Remember the solar company that got hundreds of millions of dollars in subsidies and then went out of business? And they think that only solar and wind are getting government support and they rail about renewable energy and why do 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 or you name it, all of them are getting subsidized, as you said. And 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. But then the same could be said of the coal industry, which was slowly dying and just keeps getting propped up by the federal government, especially President Trump said he has a love affair with coal. And these industries should either be able to function on their own or go away. That’s one that just is super frustrating to me because of the fact that they don’t need the money and it’s something that we all use and we all pay for already with our energy bills and when we put gas in our tanks and when we run our electronics, and we shouldn’t also be sort of paying a second time when we pay our taxes and those tax dollars go to these massive companies.
Bob Zadek: And the real distortion, as a free marketeer, I’ll make this observation and Lisa, you as well, the real besides the wealth transfer, the irrational in the billions if not trillions of dollars of wealth transfer for no real purpose—not that any wealth transfer could ever have a valid purpose, another’s for another show—but the problem is it distorts the market. And therefore capital seeking an investment home, you don’t 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 and therefore productivity in the country is harmed and we are less productive because capital can’t figure out what industries will produce the greatest return, which means the greatest good for the greatest number of people. So the market distortion is overwhelming and it means the economic engine itself has a lot of sand in the gears. And that’s my issue with all of these subsidies. It mucks everything up and you don’t get a clear price message about where capital will produce the greatest good.
The Perpetual Farm Bill [11:16]
Bob Zadek: Now, the other area we have to talk about because it is so large and so misunderstood—and I’ll make an apology in a second—is the farm industry. My apology is because I have a dear friend who I believe is a loyal listener to the show who benefits from farm subsidy, although he may not quite need the money. He is one of the subjects of your book, not specifically, but in terms of generics. So tell us about the farm industry and how that got a lot of attention in your book and how many people it affects. It affects everybody who buys food. Tell us about the big picture of farm subsidies and the powerful farm lobby.
Lisa Conyers: Right. So I also have friends who are 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 ag subsidies as well as any other federal program of wealth transfer is just that we don’t believe that America’s tax dollars need to go to wealthy farmers. So I just start with that. I certainly offended some farmers in the Midwest and in various states that I visited when I brought this up, but we still stand by our opinion on that.
But the farm bill’s been around since 1933 and it first started subsidizing farmers during 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 once started is impossible to stop. And today we have a farm bill that’s passed every four years to the tune of almost a trillion dollars. And it’s going to farmers who really don’t need it. And there are numerous examples in the book of millionaires and billionaires who are classified as farmers or they have land that’s classified as farmland and are getting subsidies from the government. And I personally don’t like my tax dollars going to these wealthy people. They’re doing just fine without it and I’m sure my tax dollars could be better spent.
So it is an interesting thing because it’s not just we pay for their farm program. The farm program has a big section in it on the insurance side of things where we insure crops. So we insure crops in such a way that the farmer gets paid whether he has a good season or not. So it’s an incentive not to be as good of a farmer as you might be because if you know you’re going to get paid for your crop whether you raise a good healthy crop that season or not, it just sort of distorts how you do business. And we also pay part of the farm bill covers farmers to not farm at all on some land. We pay farmers to put land into conservation easements and so they put land that otherwise could be put to use growing food and set it aside. And we do just crazy things like that that to me don’t make any sense.
And then to me, one of the most frustrating things is that we subsidize crops—we only subsidize big ag. We subsidize corn and wheat and sorghum and these big giant industries, basically industrial agriculture, but we don’t subsidize small farmers who are growing the food that’s 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—so the more food you eat that is being subsidized by your tax dollars—the more likely you are to be unhealthy and suffer from obesity and heart disease and all these other things. So 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. But in fact, the opposite is true. So we’re not supporting farmers who grow fruits and vegetables and nuts and berries and things that are good for us. We’re instead supporting farmers who are, you know, have these massive hundred-thousand-acre cornfields in Kansas and things like that. So there’s just a lot that’s wrong with the industry and their argument—a farmer’s argument is, “Oh, well, you know, 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, retail’s at the mercy of—well, as we’ve seen with the pandemic—can be at the mercy of lots of things. So I think that that’s not really a fair argument either. But it’s complicated. I mean, everybody knows a farmer and they’ll tell you that they really need the money, but I just—farmers make double what the average American makes in terms of income on average. So they’re not—they don’t need the money in order to be successful. They’ve just gotten very comfortable with that income coming in. And it’s a hard program to get rid of.
Bob Zadek: Lisa, it’s not hard, it’s impossible. It’s impossible to get rid of. Lisa, I will just mildly, gently take issue with one part of one sentence that you made. You said something like, “We give money to farmers whether they need it or not.” I would submit that the “need” part of it is irrelevant. If a farmer “needs” the money, then the farmer perhaps shouldn’t be a farmer. Either the farmer is producing a product that nobody wants, at least at the price the farmer can afford to pay for it, or else the farmer is bad at being a farmer. So I say “need” in this context is totally irrelevant. That’s no different than saying if you have a lawyer who can’t make a living because he’s a bad lawyer, that lawyer deserves a subsidy because he needs it. I say in the subject of Welfare for the Rich, the topic of your book which you cover so beautifully and so thoroughly, the issue of need is never relevant in a business context. Because if you need the money, find some other way to earn a living. You have no right, a birthright 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. So I just would take issue with the “need” part of it. It’s a very soft difference of opinion that perhaps we have, but I just wanted to mention that so I could share my point of view.
So as to need, we sort of have in this country, we sort of believe we have a need to preserve farming in the form that it is now, even if it requires a subsidy. And I say absolutely not. If farming doesn’t make any sense, it means we have too many farmers and those farmers who cannot survive in the economic climate without subsidy, it’s a market message: they shouldn’t be farming.
Distorting the Dairy Market [17:31]
Bob Zadek: So farming is a large source of wealth transfers. And you also mention in the book, and perhaps as an anecdote, you single out the Pritzker family. So tell us why you single them out and why that is, while it’s an anecdote, it’s an example of something that is very common in this country. 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 is, 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 in a lot of the wine-growing regions where the French are very protective of that lifestyle and it’s part of what it means to be French. And they have made an economic decision to preserve that lifestyle, that bucolic wine-growing lifestyle. So that seems to me what we are doing with this fantasy, unreal image of the small farmers.
Lisa, I was just observing as a comment that you mentioned welfare to farmers whether they need it or not. And I was just observing, I didn’t think that need was part of the equation. It’s a business, and if you can’t make a living as a farmer, you should be doing something else and that will allow the market to adjust to perhaps too many farm products and the market will send a message. So I don’t think need has much to do with it, Lisa.
Lisa Conyers: Well, right, but that’s what the farmers will tell you. They’ll say that they need the money in order to survive or to make it work. And it is interesting, if you go out to farm country, if you go out to the Midwest and you go into small towns, farming towns, I was in John Deere tractor stores where they would tell me, “You know, we know exactly when those subsidy checks are coming in and that’s when we sell all our equipment for the year.” You know, the grocery store would tell me, “Oh, yeah, I mean, we know when the checks come in and everybody comes in to stock up.” The car dealerships, they’d say, “Oh, we know when everybody’s getting paid up and that’s when our sales are.” So the entire unintended consequence is the entire economies of these small towns are now dependent on these subsidies coming in, which is, you want to talk about distortions of the market.
But as you said before, it’ll be impossible to get rid of the farm bill. And the main reason for that is because the farm bill includes all the money for the food stamp program. And 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.” And until we separate those two things in the farm bill, you’re right, it’ll continue to be passed every year. And there have been attempts to do that; they just haven’t succeeded yet.
Bob Zadek: One of the areas of the farm bill—I don’t want to beat up on farmers too much, I’m going to lose a friend—but 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”—and that’s in air quotes—cheese, milk, and butter in order to create a sufficient demand to meet the supply, kind of perverse. And then we have these huge butter and cheese warehouses where then we give it away to third-world countries or destroy it. So I wonder if you have had occasion to observe that activity as part of the indirect welfare to the dairy industry.
Lisa Conyers: Yeah, you know, it’s interesting because the dairy industry will argue that they don’t get farm subsidies, which is interesting. People who raise cows will tell you that they don’t get any subsidies, but all of their feed is subsidized. So they couldn’t very well feed their cows—they get subsidized corn and all the feed that they feed their animals. But you bring up a really good point about food being shipped to other countries. Part of what the farm bill—another argument for it—is that, “Oh, well, you know, we need to support the farmers who are feeding our country.” Well, it turns out that 40% of our food is wasted, never makes it into the market, and a good bit of it is shipped abroad. I mean, we’re feeding China and India and we’re 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’d go hungry, well, we’re not eating most of it. That’s another argument again: why in the world are we subsidizing food that’s getting shipped out of the country? It makes no sense. And there are even subsidies for certain kinds of grasses that racehorses in Saudi Arabia eat and we subsidize farmers in Nevada to grow that grass and then ship it to Saudi Arabia. It’s absurd.
Success Stories: Fighting Back in Louisiana [18:58]
Bob Zadek: Now, in your book, the last chapter, as we sort of wind down, the last chapter of your book was very encouraging to me, where you mention what we’ll call success stories. So your book will alert people to the issue, how much of what they pay in taxes is just being used in 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. But you have pointed out in the book there are ways citizens can fight back, in effect can join AOC in her challenge to Amazon and become AOC acolytes and fight big business. We’re not promoting that per se, but tell us, because it’s such an interesting story, we have a few minutes left, Lisa, what happened in Louisiana when citizens got a bit, just a bit active and how they were able to do some good? And this will be an example to the rest of the country.
Lisa Conyers: Right. So in Louisiana, as you know, the Gulf Coast is just littered with Exxon and Mobil and all these other companies that are doing business in the oil industry down there and chemical industries. And there were some people in Louisiana who were active in various causes and they noticed that the USA Today ranking of the states always finds Louisiana at the bottom of the pile in terms of education, in terms of income, in terms of health outcomes. And they started to say, “How can that be? We are such a rich state in terms of natural resources, we have all these major corporations with major headquarters here. What is going on? Why are we so poor?”
And 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. And this committee was started back in the ’30s and yet again another program that never went away. And 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 said, “Hey, we don’t want to pay property taxes. Will you give us a 10-year pass on that?” And this has just been going on and on and on for decades.
So these folks said, “Wait a minute. If they had been paying taxes all this time, our schools would be better, our public infrastructure would be better, our police would be better funded, our fire departments, all of our public services would be in such better shape if those guys had just paid their fair share.” So they mounted a public information and education campaign and just started calling them out and started showing up at public meetings and saying, “Hey, you know, what about this? How about just making those guys—we’re not asking to throw a super tax on them or anything. We just want them to pay their fair share.” And they managed to get a change in the law. And effective last year, I think it came through, those companies can no longer just go to this small little committee and get their request rubber-stamped. They have to make their case to local school boards, to local fire departments, to local public services and say, “Hey, we have this facility in your county or in your parish rather, and we want to not pay our fair share of property taxes,” and then answer to everybody and then they all get to vote on whether they think it’s a good idea. So I love that story because it just shows that a small group of committed citizens can make a big, big change. And we’re talking billions of dollars for the citizens of Louisiana in new revenue. So that was probably the most exciting story I ran across while I was writing the book. But there are others and the great thing about the last chapter is we talk about the ways people can get involved in changing policy. And 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’s some excellent organizations including openthebooks.gov and the Sunlight Foundation which are basically putting all spending online so you can look up what’s happening in your area or at the federal level and see what you think of it.
Bob Zadek: Lisa, the reason I’m so delighted having you share the story of Louisiana is the lesson to me was all it takes is people to care. And it didn’t, I dare say, the group that effected the change, affected the lives of everybody in Louisiana, and it wasn’t that much work. 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 effect a change which will affect everybody and cause governments to care about your money the way you care about your money. And Lisa, that is one of the great services of your book. Lisa’s book is called Welfare for the Rich. She co-authored it with Phil Harvey. It describes in detail all of the ways, a lot of it very stealthy, that our tax dollars are being given to people who shouldn’t be getting it, serves no governmental purpose other than it’s always there and cannot be undone. Bob Zadek saying thank you to Lisa Conyers for a book.
Lisa Conyers: Thank you, Bob.
Bob Zadek: And so long for now.