Wal-Mart: The Latest Salvo

Stephen Bainbridge has a column up over at TCS Daily that comes closer than anything else I have seen so far to making the observation I made long ago concerning one aspect of the great anti-Wal-Mart crusade by the left. Namely Wal-Mart's eagerness to dine at the public trough is being used as an excuse to further enslave it to the government. This tack has some traction because government interference in the economy is taken for granted by the vast majority of Americans as I pointed out some time ago:

What I find more interesting is that in the public debate over Wal-Mart, the existence of the welfare state is being taken for granted. As Ayn Rand might put it, man-made has acquired the status of the metaphysically given in the minds of far too many people.

In the great Wal-Mart debate, I have so far seen no one point out that the costs (in taxation) of Wal-Mart in terms of its employees' reliance on Medicare are not Wal-Mart's fault. Its workers, after all, are free to seek other employers and other medical plans. It is the government, by guaranteeing medical coverage to certain income groups, that is in fact, adding to the "cost" of Wal-Mart to the public. Worse still, it does this not just to customers of Wal-Mart, who would (and should) be the only ones affected were Wal-Mart to offer comparable medical coverage to workers currently accepting Medicaid, but to every non-customer taxed to support Medicaid.

The fact that the welfare state is taken for granted thus leads to a corporation being blamed for what is beyond its control -- and the real culprit, the government, being curiously absent from the list of suspects! Wal-Mart can't threaten someone who resists paying taxes to support Medicaid with jail or fines or confiscation of property. Only the government can do that. In a free economy, Wal-Mart would not be compelled to offer medical coverage to all its workers, but it might, to attract or avoid losing them. It may or may not have to raise prices to do so. But taxes would be out of the question.

Bainbridge, as I said, comes close in one respect, yet, he gets no cigar.

[B]oth the left and right implicitly cast Wal-Mart in the role of free market capitalist. What's missing from the debate is the extent to which the Wal-Mart story really is the antithesis of laissez-faire capitalism. When you look under the rug, it turns out that Wal-Mart is a beneficiary of corporate welfare.

When Wal-Mart plans a new store, it typically asks local and county governments for an array of benefits, principally in the form of various economic development subsidies:

• Infrastructure assistance in the form of new or expanded roads and utilities servicing the store location.
• Sales tax abatements.
• Property tax abatements.
• Income tax credits.
• Enterprise zone treatment for the store location.
• Eligibility for job training programs.
• Eligibility for tax exempt industrial revenue bond financing.
• Economic development loans and grants.

In some cases, Wal-Mart benefits directly from such subsidies. In others, the benefits initially go to the real estate developer....

...

[I]nformed debate requires one to view Wal-Mart not as a rugged free market capitalist, but as a leading recipient of corporate welfare. If one is on the left, one thus might insist that Wal-Mart provide a so-called living wage in return for its subsidies. If one is on the right, one might call for abolishing such subsidies. In either case, however, we at last will be debating the real issues. [bold added]

Would that at least Bainbridge were debating the "real issues"! He comes close in the sense that he suggests that conservatives might want to "end corporate welfare". But he misses the cigar for the vagueness the term "corporate welfare" introduces, not to mention the fact that missing entirely from his laundry list of "corporate welfare benefits" is the fact that Wal-Mart encourages employees to enroll in various forms of public assistance in lieu of granting benefits on its own. This is a telling omission.

Look at what Bainbridge does list and indiscriminately lumps together as "subsidies". Many of these are tax abatements -- hardly the stuff of welfare. By Bainbridge's own implications, the conservative side of this debate would favor ending tax abatements for new businesses since they're "corporate welfare". Given what he has glossed over, this would hardly come as a surprise.

There is some merit, prima facie, in the argument that all businesses must abide by the same laws. However, when some of these laws involve the wrongful confiscation of tax revenue, the implied conservative position -- of making Wal-Mart pay up -- ends up being, like the liberal "alternative" of making the firm pay a so-called "living wage", simply another version of "how will the government extract more loot from all businesses". This is not a debate about fundamental issues, but quibbling: The welfare state is still taken for granted. (And if you think I am underestimating the conservatives, observe how many oppose immigration because it strains the welfare state -- rather than opposing the welfare state.)

Only when one side of the debate consists in unambiguous, morally-certain support for yes, the law applying equally to everyone -- but also for ridding private enterprise of all onerous taxation and regulation -- will we really, as Bainbridge claims, "be debating the real issues". Bainbridge's essay is, unfortunately, too vague to offer any real clarity to this debate. In fact, he might seem to some to be attempting to sell capitalism down the river.

-- CAV