It’s no surprise that the export lobby and ethanol lobby are fighting fiercely to save their subsidies. What’s a bit odd is that, for the first time, there’s a powerful anti-subsidy lobby working against them.
Corporate welfare persists in Washington because the tiny fraction of companies that pocket the billions care a lot more about the subsidies than do the masses who pay for them. Nowadays, though, an anti-corporate welfare lobby is growing. The latest development: Freedom Partners, born from the political network of free-market billionaire brothers Charles and David Koch, has launched a new campaign to kill the Export-Import Bank, which subsidizes large U.S. exporters at taxpayer risk.
You see the growing anti-corporate welfare push in the Republican presidential field. Ted Cruz’s presidential campaign is being built largely on this fight. On the economic-policy page of his website, Export-Import Bank and the ethanol mandate are at the top of the list — behind only Obamacare. Cruz even went to Iowa and attacked the ethanol mandate.
Most of Cruz’s competitors are also on the record against Ex-Im. Marco Rubio, Rand Paul, Jeb Bush, Scott Walker, Bobby Jindal and Mike Pence all stood on stage at the Club for Growth’s annual Palm Beach retreat for donors and called for Ex-Im’s abolition.
This moment highlighted how and why corporate welfare is finally under threat. Traditionally, the only places a Republican could turn for campaign cash were K Street or the party leadership, which in turn would call on K Street. If you wanted cash for reelection, you played ball with the business lobby.
Today, though, a conservative can find funding outside the K Street leadership axis. The Club for Growth, for example, spent $8.6 million in independent expenditures in the 2014 election and contributed $3.2 million directly to candidates. That combined $11.8 million doesn’t rival the Chamber of Commerce’s $35.9 million in the same cycle, but it’s in the same ballpark.
And this time around, the Club may endorse a presidential candidate.
At the Palm Beach retreat, the candidates spoke and then took questions. The Club, invoking the host’s privilege, asked only one question of each candidate: Would you kill Ex-Im?
Suddenly, there’s muscle behind the campaign against corporate welfare.
Beyond campaign cash, there’s grass-roots pressure, led by Heritage Action For America, the lobbying arm of the conservative Heritage Foundation. Heritage lobbies Republican members directly. But most importantly, it rallies the grass roots to harass their congressmen about Ex-Im.
Defeating corporate welfare has always seemed impossible, because of the phenomenon known as “concentrated benefits with diffuse costs.”
Ex-Im’s costs come mostly in the form of risk to taxpayers and invisible distortions to the economy. The guy who doesn’t get a business loan from his bank probably never learns that he lost out to a subsidized exporter that got an Ex-Im guarantee. The American farmer doesn’t realize his John Deere costs a bit more because Ex-Im-subsidized buyers overseas are bidding up the price.
The cost of educating all the victims of the ethanol mandate — that is, everyone who buys food or gasoline — is huge. It would be impossible to organize them all to fight for the few bucks a year the ethanol mandate adds to their grocery bills.
But the guys on the receiving end of corporate welfare know exactly who they are, and they care immensely about keeping the billions in subsidies flowing.
The lobbying coalition called “Exporters for Ex-Im” can identify its people pretty easily: Just ask Ex-Im for the addresses of everyone the agency subsidized last year. Organizing “Consumers, Taxpayers, and Non-Subsidized Business Owners Against Ex-Im,” would be a lot harder.
But that’s kind of what Freedom Partners, Club for Growth, and Heritage Action have done.
What’s made it possible? For one thing, the 2008 bailouts imbued the conservative grassroots with a deep distrust of big business, thus making an anti-corporatist message resonate.
Also, technology has changed things. These groups, through email, Twitter, Facebook, web videos and other tools can connect all the people who hate corporate welfare. Heritage Action CEO Mike Needham says that corporatism is getting worse, but fighting it is becoming easier. “The cost for Boeing defending the Export-Import Bank has gone up,” Needham tells me. “The cost for us to fight against the Export-Import Bank has gone down. So the market-clearing point of cronyism is changing.”
“You have, economy-wide, a diffusion of power,” Needham argues. “Forgotten men all around the country who are able to meet each other, get together.” He is citing a concept expounded by sociologist and economist William Graham Sumner, of the average citizen who is pillaged to pay off special interests. Only now can he lobby effectively.
Club for Growth VP Andy Roth puts it well: “The diffuse costs are cobbling themselves together to battle the concentrated benefits.”
Timothy P. Carney, The Washington Examiner’s senior political columnist, can be contacted at [email protected]. His column appears Sunday and Wednesday on washingtonexaminer.com.
