In an analysis I recently conducted for the Cato Institute, I found that the federal government spent $181 billion in 2024 on business subsidies, otherwise known as “corporate welfare.” A great example is the $44 billion spent on agricultural subsidies, much of which goes to large corporate-style farms. About 60% of subsidies from the three largest farm programs go to the largest 10% of farm businesses.
The government began subsidizing agriculture during the Great Depression when many farmers were desperate. But the farm economy has greatly changed, and farm households today have average incomes 29% higher than the overall U.S. average. These days, even billionaire farmers receive aid. The original goal of helping poor farmers is obsolete, and the aid programs should be cut.
Also obsolete are the many corporate welfare programs passed to jumpstart new industries. For example, the government began subsidizing the new broadband industry in the 1990s and has since provided more than $100 billion in aid. The subsidies have been mainly for extending fiber service to rural areas. That purpose is now obsolete because of the plunging cost of satellite broadband, yet the government is still dishing out billions of dollars a year to the industry.
The government began subsidizing the solar power industry in the 1970s, but it still provides billions of dollars a year to today’s mature solar industry led by big corporations. Similarly, the nuclear power industry no longer needs subsidies after decades of federal handouts.
Congress keeps launching new subsidy programs despite the government’s huge budget deficits. The 2022 CHIPS and Science Act gave the semiconductor industry $53 billion to supposedly improve competitiveness. Intel’s then-CEO, Pat Gelsinger, lobbied policymakers to pass the subsidies and then won billions of dollars in grants for his company.
Despite the subsidies, Intel is in trouble and slashed 15,000 jobs last year. Gelsinger admitted that Intel needs to “fundamentally change the way we operate.” But he also declared, “We’ll need at least a CHIPS 2 to finish that job.” But the “job” of high-tech companies is never finished because they must continually innovate to stay ahead and ongoing subsidies would become a crutch discouraging needed changes.
Once the subsidies start flowing, industries start relying on them and they often just displace market-based funding. Subsidies for high-tech industries displace venture capital and share issues. Federal farm insurance displaces private insurance. Federal small business loans displace private bank loans. Airport subsidies displace market-based revenues, such as airline landing fees. And subsidies for government-owned Amtrak displace private investment and entrepreneurship in passenger rail.
President Trump says that he wants to combat inflation by cutting “flagrant waste,” but whether he downsizes business subsidies remains to be seen. He is calling for ending semiconductor subsidies and cutting aid to the renewable energy, battery and electric vehicle industries.
However, Trump has a first-term record of defending ethanol subsidies and handing out more than $20 billion to the agricultural industry. He also signed bills during the COVID pandemic providing more than $900 billion in aid to businesses, which spawned up to $200 billion in erroneous and fraudulent payments.
Furthermore, Trump’s protectionist tariffs are a type of corporate welfare. They micromanage the economy to benefit politically favored companies at the expense of other companies and consumers. Trump’s new tariffs on aluminum, for example, may temporarily boost profits for a handful of aluminum makers, but they will hurt U.S. automobile companies and their customers.
In his most recent address to Congress, Trump claimed that in the near future he was going to balance the federal budget. But he will not reach that goal by canceling a “$3.5 million consulting contract for lavish fish monitoring” and “$10 million for male circumcision in Mozambique.” Instead, he should target big-time waste — including $181 billion a year in corporate welfare subsidies.