The sugar program is illustrative. In 1995 the program was under assault. It appeared that the anti-corporate welfare forces, would finally win a high profile fight on behalf of taxpayers and consumers. On the day of the vote on the House floor, big sugar prevailed by just three votes. Big sugar had provided hundreds of thousands of dollars of campaign contributions, with about a ten to one ratio going to members who voted for the price supports versus those who voted against them.
Corporate welfare reduces American competitiveness.
Business subsidies, which are often said to be justified because they correct distortions in the marketplace, create huge market distortions of their own. The major effect of corporate subsidies is to divert credit and capital to politically well-connected firms at the expense of their less politically influential rivals. This is precisely what Japan has found during it economic collapse over the past six years. In Japan the myth of industrial policy as a competitiveness strategy has led to a 60 percent reduction in the value of Japanese stock market since 1991. Although it is said that corporate subsidies are necessary so that U.S. firms can compete with their subsidized rivals in other nations, more than 90 percent of American businesses manage to stay in business without ever receiving government grants, loan guarantees, insurance, or airplane seats on Commerce Department trade missions around the globe.