Corporate Welfare: Five Ways Out

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In 1997, Senator John McCain of Arizona, along with other Senators, introduced legislation calling for the creation of an independent federal commission to eliminate "unnecessary and inequitable federal subsidies" to private industry. Both Congress and the President would be required to act on the recommendations of the commission--either by accepting them or rejecting them. "Unless Congress is forced to act to eliminate programs, it will not," McCain noted when he introduced the bill. "Perhaps independent commissions are the only fair way to ensure that neither side is given an advantage to protect its...corporate pork."

Of course, any such effort will be greeted with stiff opposition from yet another entrenched bureaucracy. Those are the agencies, departments and special-interest groups that profit from the existing system. There would be a spirited fight led by large corporations to preserve the Exim Bank, the Overseas Private Investment Corp. and the Foreign Sales Corporations, to name just three.

SOLUTION NO. 4 Shut off the flow of low-cost loans from the Department of Housing and Urban Development that have helped fuel the competition to snag companies. These loans date from the Housing and Community Development Act of 1974 and were aimed at "eliminating slums and blight." Today, TIME has found, HUD loans help bankroll such projects as a waterfront restaurant in Jacksonville, Fla. (it later went out of business), a downtown hotel in Philadelphia and an upscale fashion retailer in Spokane, Wash. In that case, a $24 million HUD loan arranged by the city of Spokane will go to construct a new store and enlarge a parking garage for Nordstrom Inc.

And if these four solutions are rejected?

SOLUTION NO. 5 is rooted in what has become the American way of late: sue. That's the course advocated by Dwight D. Brannon, a Dayton, Ohio, lawyer, who is suing state and local officials and a onetime Dayton-based company on behalf of its former workers.

The company is Hobart Corp., part of an international conglomerate with sales of $2.4 billion in 1997. Hobart produces commercial equipment for food preparation. Ever since the Great Depression, the company had operated a plant in Dayton. But in 1995, Hobart pulled up stakes and moved 30 miles to the north, to Piqua, Ohio, which offered $2 million in incentives. In July, the company informed its 66 hourly employees in Dayton, many of whom had worked at the plant for years--their average age was 52--that their jobs would be terminated in three days. According to the suit, Hobart staffed the new location with part-time workers--average age 34--from a temporary firm.

During a hearing in the lawsuit pending in U.S. District Court in Dayton, the company's lawyer explained it this way: "Every action [Hobart] has taken is motivated by sound economic or operational rationale."

Exactly. And until governments figure out a way to end the practice, corporate welfare will flourish.