There's No
Conceivable Reason to Preserve Corporate Welfare
by Doug Bandow
(Doug Bandow is a senior
fellow at the Cato
Institute)
To listen to Washington officials,
you'd think cutting the budget was impossible. In their
view, every program, no matter how inconsequential, has
played a critical role in America’s past success and
must be preserved to ensure the nation's future
progress. You don’t have to look far into the budget
to find spending for which there is no conceivable
justification. Consider welfare for business. And
despite a majority supposedly devoted to fiscal
frugality, last year Congress actually increased program
outlays by $14.5 million annually.
Every year Uncle Sam spends $75
billion, roughly half the current deficit, on 125
different programs to directly enrich business.
To these, the 104th Congress made only
modest reductions. Cato Institute analysts Stephen Moore
and Dean Stansel reported that many corporate subsidy
programs were reduced minimally, or not at all.
Business subsidies deserve to go on
the chopping block simply as a matter of priorities.
Deficits continue to accumulate at billions of dollars a
year, and, unless further cuts are made, will soon start
rising again. Thus, every low-priority program should be
eliminated, and enriching some of the largest and most
profitable businesses in America should be considered
the lowest priority of all.
Nor are loans and loan guarantees a
cheap means to achieve the same ends. Loans that are
repaid are not cheap, since they divert credit from more
productive uses elsewhere in the economy. That is, money
is not free, so if Uncle Sam is providing subsidized
loans to politically favored interests he is inevitably
directing money away from more deserving, but less
well-connected, businesses and individuals.
There is a more fundamental principle
at stake, however. The problem isn't just that we can't
afford to subsidize corporate America. It is that we
shouldn't do so. It isn't right to take money from
average taxpayers for the benefit of business interests.
Put bluntly, the role of government is to fulfill
critical common goals that can't be achieved privately,
not to redistribute wealth among private parties based
on the size of their campaign contributions.
The fact that major corporations don't
have to pay their own way, and instead are able to
enlist legislators to rip off common citizens-- and
businesses with more modest political connections--
deforms the entire political system.
Of course, advocates of corporate
welfare are rarely foolish enough to admit that their
goal is self-enrichment. Rather, they argue that the
programs generate countervailing benefits-- usually
jobs. Of course, in practice far more jobs are
destroyed.
The Energy Department devotes billions
of dollars to research and statistical activities that
primarily benefit the energy industry. The
Transportation Department is another agency that
benefits business more than the public.
Moreover, Congress has established a
number of independent agencies with no function other
than the enrichment of business.
Some corporate welfare is delivered
indirectly. The U.S. government imposes restrictions,
like quotas and tariffs, on more than 8,000 products,
including autos, computer parts, mushrooms, steel and
textiles. Estimates of the cost of protectionism, which
primarily enriches domestic producers, run as high as
$80 billion annually.
The Jones Act requires that private
companies use U.S. flag vessels to ship products between
U.S. Ports. Military goods and half of other government
cargoes (furnished under federal contract, for instance)
must go on more expensive American carriers. This simple
regulatory directive, which cost the Department of
Defense alone $436 million in 1995, acts as a huge
windfall for corporate America
Even a decade of huge budget deficits
has changed nothing. Over time Congress eliminated two
truly egregious programs, the Synthetic Fuels
Corporation (which subsidized the production of
high-cost synthetic energy) and Urban Development Action
Grants (which paid businesses to invest in particular
regions). But the rest continue, though occasionally
with different names (Congress turned the Rural
Electrification Administration into the Rural Utilities
Service). And new ones, like Sematech, continually
arise.
It is time to kick corporate America
off of the dole. The federal budget has long been filled
with waste. But few expenditures are more obnoxious than
those for business welfare. Policy makers should be able
to agree that there is at least one thing government
should not do-- soak taxpayers to enrich corporate
interests. If legislators won't cut this kind of abusive
spending, what programs will they kill?
© 1997 The Cato
Institute
