Politics & Policy

No to Coal Subsidies, No to Corporate Welfare

West Virginia governor Jim Justice shakes hands with President Trump at a rally in Huntington, August 3. (Reuters photo: Carlos Barria)
West Virginia’s governor asks Washington for billions of dollars to subsidize utility plants.

Conservatives have long been among the biggest critics of welfare programs for poor and low-income Americans, mostly with just cause. But such criticism would probably be received better if there was even half as much outrage directed at welfare for corporations.

The latest outrageous example of corporate welfare comes from West Virginia, where Republican-turned-Democrat-turned-Republican governor Jim Justice is asking for $4–5 billion in subsidies for coal-powered utility plants. The Trump administration is reported to be favorably inclined to the idea.

Trump, of course, made support for the coal industry a key part of his campaign, and that was undoubtedly a major reason he carried West Virginia by 45 percentage points. But Justice now admits that, even after Trump’s efforts at deregulation, the West Virginia coal industry is in trouble, challenged not just by alternative fuels but by bigger and cheaper sources of coal from Indiana and Wyoming.

Like corporate welfare queens everywhere, Justice pitches his plea for taxpayer bailouts in terms of jobs. Yet Governor Justice’s proposal, for example, would simply prolong the dying of an industry that has been declining for years, because West Virginia coal is increasingly expensive and difficult to mine, in the face of national and international competition. Just over 12,000 West Virginians still work in the coal industry.

Perhaps realizing the weakness of his economic argument, Justice also pitches this as a national-security issue. After all, what if ISIS takes control of our natural-gas supply? Yesterday Mosul, tomorrow South Dakota.

Conservatives were justifiably outraged when the Obama administration poured billions of dollars in subsidies into companies like Solyndra and other “green energy” programs. They correctly made the point that if alternative-energy technologies were economically viable, they should take their place in the market and succeed or fail on their merits. Bailouts don’t become free-market policies just because the industry being bailed out is one you like.

Far from draining the swamp, Donald Trump simply wants to feed his alligators rather than Democratic ones.

We should know by now that President Trump has little interest in free-market capitalism. From trade policy to the Import-Export Bank to his support for ethanol subsidies, Trump has made it clear that his idea of “making America great again” involves government picking winners and losers, largely based on the president’s whims and whether the workers who would benefit voted for him. Far from draining the swamp, Donald Trump simply wants to feed his alligators rather than Democratic ones.

The Cato Institute estimates that corporate welfare costs American taxpayers more than $100 billion annually. And worse than the direct cost is the way in which such subsidies distort the economic decision-making process and limit the creative destruction that drives innovation and economic growth. The beneficiaries of corporate welfare are seldom entrepreneurs and innovators — or even workers — but rather those crony capitalists who have the right connections or who know how to work the system. This sort of crony capitalism encourages businesses to invest in lobbying and cozying up to politicians rather than invest in serving their customers or developing new products.

That’s a terrible way to run an economy. In fact, studies show that economies dominated by crony capitalism grow more slowly than free-market economies. By upending market efficiencies, corporate welfare makes us all worse off.

Let’s be clear. I have long been critical of most social-welfare programs. In the long run, they do more harm than good. Still, it would be nice, for once, if conservatives fought as hard against a bailout for some company as they do against, say, an increase in food stamps.

After all, welfare is welfare.


On Trump’s Energy and Climate Executive Order

The Matter with Coal Country

Coal Miners Should Protest to Their Union, Not to Congress

Michael TannerMr. Tanner is the director of the Cato Institute’s Project on Poverty and Inequality in California and the author of The Inclusive Economy: How to Bring Wealth to America’s Poor.


The Latest