Corporate Welfare Must Go

Support for the program is typical of today’s politics

By David Herbst

If someone breaks into your house and runs off with your television set – is the person a crook?

No one questions what he did with the TV, whether he sold it to help support some noble cause, or used it invest in his community’s Internet bandwidth. Yet when it comes to corporate welfare, some would have you believe that as long some in society benefit, then you shouldn’t care that the government has been running off with your money – much less running off with your money and doling it out to corporations.

American Rural’s Diane Smith recently took to the opinion pages arguing that some companies deserve corporate welfare because “we often need subsidies to support under-compensatory industries.”

With all due respect to Mrs. Smith –that may be one of the most absurd statements we’ve seen in a while.

Americans for Prosperity came to the hearing at the Montana Public Service Commission’s meeting because we saw the hearing as an opportunity to start a discussion. Are Montanans comfortable with paying into and receiving corporate welfare benefits from a program that is nearing completion and yet has no end in sight? Are Montanan’s comfortable with millions of their tax dollars being handed out willy-nilly to corporations to guarantee profitability?

In Montana, we’re at close to 90 percent wired and 96 percent wireless broadband service. With so many households now being served, you’d think we’d have the end of this program in sight. But as it stands, the Universal Service Fund – a system of telecommunications subsidies and fees managed by the United States Federal Communications Commission (FCC) – looks poised to stand forever, handing out corporate subsidies to telecoms in perpetuity.

As the program accomplishes its core goal – connecting rural areas to telephone and the Internet – the program should slowly be phased out to be sure Montana taxpayers aren’t on the hook forever.

The reality is that the Universal Service Fund was intended to promote access to telecommunications services. In Montana, that goal has largely been met and we should start thinking of ways for it to be phased out.

In the meantime, the program’s design is in desperate need for reform. The program favors larger telecoms and corners many smaller telecoms out of the rural market. Americans for Prosperity Montana is in favor of telecoms reaching the homes of Montanans with the best possible service, which is only possible under a system of free competition.

As it currently is, the program guarantees incumbent telecom companies an 11.25 percent return, which means that the more costs the company incurs, the bigger the checks these companies get from us the taxpayer. What other industry – maybe aside from Wall Street – gets such fat, government-insured paydays?

The program has been riddled with case after case of outright fraud and evidence suggests that hundreds of carriers actually inflate or misreport costs in order to beef up their taxpayer-funded subsidies.

It has been well published that since 2011, nearly 59 cents on the dollar went to an increase in personnel, administrative, and general expenses – not the infrastructure for which these funds were intended.

Lastly, we don’t really understand how systematic the problem is because the program is terribly under-policed. From 2002 to 2008, the Universal Service Administrative Company (USAC), the administrator of the USF program, completed only 17 audits of more than 1,400 eligible carriers. Even then the Government Accountability Office states “it has been difficult to determine whether (the audited) carriers are actually in compliance with FCC rules largely due to a lack of documentation available to substantiate the carriers’ information.”

Support for the program is typical of today’s politics. It represents a political culture that blindly supports programs that give concentrated benefits to a highly motivated minority of people, with little to no accountability. This toxic, culture of exploiting one another for monetary gain using the power of government needs to stop and we need to stop judging government programs based on their intention rather then their actual affects.

Even if the USF once served a good purpose for Montana, we ought to see these sorts of programs as temporary functions, and always maintain a skeptical eye for abuse. Otherwise Montanan’s face a grim future of perpetual corporate welfare.

Americans for Prosperity Montana opposes corporate welfare. And we are proud of that stance.

David Herbst is the state director of Americans for Prosperity Montana

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