Hold on to Your Wallet: The Cost of Corporate Welfare and Rent-Seeking


It seems to me that opposition to corporate cronyism is a cause that should unite the Right and the Left. Veronique de Rugy points to recent studies that show just how costly corporate cronyism is:

I have been talking a lot recently about the cost of cronyism – the practice by which government officials provide preferential treatment (such as loans, subsidies, or regulatory preferences) to handpicked firms or industries. Cronyism takes many forms: It is Solyndra, the farm bill, subsidies to oil-and-gas corporations, banks and automobile companies, but also the protections granted to the sugar industry and other industries, tax credits to private companies, and much more.

In a great new paper, Tad DeHaven of the Cato Institute looks at the cost of one aspect of cronyism: corporate welfare. Corporate welfare programs are “programs that provide payments or unique benefits and advantages to specific companies or industries.” Putting a price on corporate welfare isn’t a perfect science but, after going line by line in the budget and adding the programs up, DeHaven finds a total cost of $98 billion in spending in fiscal 2012.

That cost, however, doesn’t include things like the higher price of goods and services that American consumers have to pay when the government grants special protection to special interests like it does with the sugar lobby.

Nor does it include the cost to our economy of the time, money, and energy that entrepreneurs and businesses spend asking politicians for those privileges, rent-seeking, as economists call it, instead of devising new ways to create value for customers. This chart by Mercatus Center’s Matt Mitchell does:

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