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Welfare Inequality: The Rise of Corporate Welfare

Research Associate with 5+ years of experience compiling, analyzing, and reporting data to explain or forecast trends.

Learn about social construction theory and its applications to the increase in corporate welfare payouts.

Learn about social construction theory and its applications to the increase in corporate welfare payouts.

We show so much disdain for increases in social welfare, but where is the outrage against the trillions of dollars the government spends on corporate welfare? The American government spends more on corporate welfare than it does on food stamps and financial assistance for needy families with children. Lack of transparency in government operations and how tax dollars are spent keeps citizens from realizing who really deserves to wear the “welfare crown” in this country. This article explores why the government spends more on corporate welfare than social welfare through the lens of social construction.

What Is Social Welfare?

Social welfare, in this article, refers to individuals who receive food stamps and Temporary Assistance for Needy Families (TANF), formerly Aid to Families with Dependent Children (AFDC). These individuals have been negatively referred to as “welfare magnets” (those who migrate to states that offer higher benefits) and “welfare queens” (those who collect excessive welfare payments).

What Is Corporate Welfare?

Corporate welfare, also known as “tax expenditures,” refers to the government support or subsidy of corporations, such as tax breaks, or money grants. Despite the fact that the government spends twice as much on corporate welfare than it does on social welfare, there are no negative coined terms associated with the corporations that receive excessive government handouts. The reason why we view these two groups so differently might be explained by social constructionism.

Origins of Social Constructionism

Social construction theory originated decades ago when public policy scholars recognized that the political world is socially constructed. The theory was designed to explain why some groups are advantaged more than others independently of traditional notions of political power and how policy designs can reinforce or alter such advantages (Schneider p. 334). Social constructions are stereotypes about particular groups of people that have been created by politics, culture, socialization, history, the media, literature, religion, and the like (p. 335). Social constructions are powerful images or stereotypes that help explain why public policy fails in its nominal purposes, fails to solve important public problems, perpetuates injustice, fails to support democratic institutions, and produces an unequal citizenship (Weible p. 105).

The Eight Assumptions

Social Construction theory is founded upon eight assumptions that can be divided into three categories: (1) the model of the individual, (2) power, and (3) the political environment (Pierce p. 3).

The assumptions about the model of the individual are that:

  1. Actors cannot process all of the information relevant to make a decision, and therefore rely on mental heuristics to decide what information to retain.
  2. Mental heuristics filter information in a biased manner, thereby resulting in a tendency for individuals to confirm new information that is consistent with preexisting beliefs and reject information that is not.
  3. People use social constructions in a subjective manner that is evaluative.
  4. That social reality is boundedly relative where individuals perceive generalizable patterns of social constructions within objective conditions.

The assumptions that relate to power is that power is not equally distributed among individuals within a political environment (Pierce p. 4). The assumptions about the political environment are that:

  1. Policies creates future politics that feeds forward to create new policy and politics.
  2. Policies send messages to citizens that affect their orientations and participation patterns.
  3. Policies are created in an environment of political uncertainty.

These assumptions interact to form two core propositions: Target populations are benefited or burdened, and the way target populations are treated through policies has “feed-forward” effects.

Four types of target populations were created from the convergence of power and social constructions (Schneider p. 335).

The Four Target Populations

  1. Advantaged groups are seen to be powerful and positively constructed, such as Veterans and small business owners (Schneider p. 335).
  2. Contenders, like corporations and the rich are categorized as powerful, but are negatively constructed, usually as undeserving (Schneider p. 335).
  3. Dependents include people with disabilities, mothers, and children. They are viewed as politically weak, but have positive constructions.
  4. Deviants, like drug addicts and criminals, are perceived as weak and negatively constructed.

Applying the Social Construction Framework

Social construction is such a great theory to describe the welfare issue because it explains how policies select certain people to receive benefits or burdens and how they surround positive and negative social constructions around those individuals. It’s the constructions that justify the rewards and penalties created by the policy, and help explain how democracy behaves.

The powerful stereotypes and powerful images created by social construction are key to understanding why some policies have a positive effect on society and others fail to serve their purpose or perpetuate injustice. By uncovering the positive and negative social constructions of target groups, we are able to see why policy reveals a trend of distributing benefits to some groups, and at the same time punishing others.

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Social constructions of target groups play a major role in political arguments and rationales, and they impact the wellbeing of these target groups, but they also influence their political attitudes, patterns of participation, and social reputations. When the emotional and value-laden images of certain targets, and not others, are manipulated to show that they are undeserving or less entitled, those groups tend to be treated differently which affects their images of government, notions of efficacy, and more importantly their identities. As a result, they tend to be discouraged from political participation.

Instead of looking at objective representations of reality, most of the political problems are constructed socially, and the issues that are addressed depend not on the seriousness of the issue, but on the assignment and interpretation of judgments, images and stereotypes of certain target groups. According to Schneider and Ingram, “Political leaders like to do “good” things for “good” people, and they like to be “tough” on “bad” people (Weible p. 106). By doing so, political leaders gain political capital, which helps ensure their reelection.

Although women and children are in a positive social construction (Dependents), they are viewed as having little political power. The images, symbols, and heuristics associated with this target groups allows us to consider them “good” people and deserving of financial assistance from the federal government, but we also want to see them work for it, get drug tested in order to qualify, and predetermine what they can do with that money. Social construction tells us that poor children, but not poor mothers are deserving of federal assistance, because they are innocent and don’t deserve to go hungry. However, we don’t hold mothers to the same social construction as we do corporations, in fact we treat corporations much like we do poor, starving children. Why is that?

The social construction of corporations (Contenders) is negative, but they have strong political power. Without requiring any additional work or testing, in 2013 the federal government handed over $154 billion to corporations by way of special tax breaks contained in 135 provisions of the tax code. Lawrence F. O’Brien, an influential lobbyist stated, “There is a justification and rationale for every one of these. They have their intellectual advocates, and they have their political advocates, and that’s how they get in the law” (Rowland p. 2) Former Chief of Staff of the Joint Committee on Taxation, Edward D. Kleinbard said, “What we’re doing is running a Soviet-style, five-year industrial plan for those industries that are clever enough in their lobbying to ask all of us to subsidize their business profits” (Rowland p. 2).

Senator Tom Coburn, an Oklahoma Republican explains why we are so willing to give freely to corporations, stating “It’s not about tax policy, it’s about benefiting the political class and the well-connected and the well-heeled in this country. We’re benefiting the politicians because they get credit for it. And we are benefiting those who can afford to have greater access than somebody else” (Rowland p. 2). According to Schneider and Ingram, target groups like Contenders or corporations in public policy, aren’t chosen just because they have an instrumental ability to serve policy purposes, or their immense political power, but because of the “value-laden, emotional, and powerful positive and negative social constructions with which they are associated (Weible p. 106). Corporations provide jobs, which lead to higher gross domestic product (GDP), and lower unemployment. In fact, we view corporations, in a way, as the key to getting TANF and food stamp recipients off their dependency of the government.

The Rise of Corporate Welfare

It appears that our social construction towards corporations is turning from less deserving to more deserving. This could have a lot to do with how the social construction for welfare recipients changed from deserving to less deserving. Right around the time we coined the term “welfare magnet,” the Tax Reform of 1986 passed and was projected to raise corporate taxes by more than $120 billion over the 1986-1991 period. At this time, both corporations and welfare recipients were socially constructed as undeserving, and their only difference was that corporations had substantially more political power.

Corporate welfare and social welfare are somewhat opposing parties in the policymaking sphere. Wisconsinites, in the mid-1980s claimed that its state’s extremely high welfare payments (ranked as the 4thhighest benefit state), caused a magnet effect that brought an influx of impoverished citizens from bordering towns of Illinois into Wisconsin (Peterson p. 25-26). This “welfare magnet” issue became part of a huge political debate. On one side of the debate was increased taxing and welfare spending, which could harm the state’s climate, and spending policies contributing to higher quality of life (more education, parks, and hospitals) on the other, to improve it (p. 35).

States and the federal government are forced to choose between corporate welfare and social welfare; an increase in one results in a decrease in another. Many people in Wisconsin were concerned that they were losing out to other states in its ability to maintain and create jobs, businesses, and economic growth (p. 33). As a result, the welfare policy “became more contentious as Wisconsin’s economy became shakier, its business climate more salient, and its benefit levels increasingly different from those of its neighbors” (p. 35).

Today, Wisconsin is ranked second in the top ten worst welfare policy states, and nearly a half-billion dollars has been doled out to 19 corporations who were deemed eligible for the state’s Enterprise Zone Tax Credit (Zweifel p. 1) If the tax credits exceed the amount of taxes due in a given year, the corporation can actually receive a refund from the state (Zweifel p. 1). The federal government has followed a similar pattern and today, 99 percent of cash assistance benefits for the country’s poorest families with children is below the level in 1996, when welfare reform created TANF. Since the 1986 Tax Reform, tax breaks steadily crept back in, particularly in the last decade (2006-2016), as law makers heeded the requests of advocacy groups and business lobbyists to lower taxes as a way of subsidizing particular industries (Rowland p. 2).

So what happened to cause states and governments to switch from giving handouts to needy families with children to giving enormous handouts to corporations? The social construction of corporations and welfare recipients changed. In the 1980s and 1990s, political leaders began to view welfare recipients as “welfare magnets” and “welfare queens,” so they advanced policy measures to reduce their benefits and the amount of time they would be eligible for TANF and food stamps. At the same time, corporations were able to prevent political leaders from being “tough” on them for being considered “bad.”

Corporations found that by investing in payments to lobbyists, they would receive huge returns. Cross-party cooperation on corporate taxes among regional groups of lawmakers teamed up to maintain special treatment for businesses in their homes states (Rowland p. 3). According to the data collected by the nonpartisan Center for Responsive Politics, the number of companies disclosing lobbying activity on tax issues rose 56 percent from 1,200 in 1998, up to 1,868 in 2012. Political leaders claim that the special tax breaks are what saved “hundreds” of American jobs from the effects of the recession (Rowland p. 2). Others argue that tax breaks help big companies retain domestic jobs.

With corporations now hailed as the savior of our economy, their social construction has changed from being negative and underserving, to now being positive and deserving to the tune of at least $21.3 billion annually. Between 2000 and 2012 corporate welfare payments made to the Fortune 100 companies totaled $1.2 trillion. Compare the payments made to 100 corporations to $15 billion spent annually for millions of TANF recipients. The disparity between corporate welfare and social welfare is colossal.

Some say crony capitalism is to blame. Instead of believing in a system where minimal governmental intervention maximizes the role of the market, the view has changed to a belief that success in business depends on close relationships between business people and government, which includes preferential regulation and other favorable government intervention for corporations.

Because these social constructions are perceived by the legislature, executive, courts, and ultimately, the citizenry to be so hegemonic they are viewed as a “natural” condition and seldom questioned (Weible p. 107). Social constructions are what influence the status quo in corporate tax regulation, and the message that corporations are “heroes who save and create jobs” is absorbed by the citizens, affecting their orientations and participation. Social construction explains why corporations are more advantaged than welfare recipients, and how policy designs reinforce these advantages.

Will Corporations Remain "Deserving"?

We have seen changes in the social construction of corporations moving from undeserving to deserving, but the revelation that our President doesn’t pay taxes at all, may influence how we perceive corporations in the future. It’s possible that American taxpayers will become outraged and demand corporate tax reform, but based on the social construction of taxpaying citizens, they lack the political power corporations have. Until the social construction of corporations changes back to undeserving, we will continue to see inequality in income, wealth, and welfare.

Free enterprise vs. socialism in a political cartoon.

Free enterprise vs. socialism in a political cartoon.


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This content reflects the personal opinions of the author. It is accurate and true to the best of the author’s knowledge and should not be substituted for impartial fact or advice in legal, political, or personal matters.

© 2019 Rob Borrow

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