Getting Businesses To Quit 'Welfare'

April 02, 1995|By PETER H. STONE

Since Labor Secretary Robert B. Reich late last year identified "federal aid to dependent corporations" as a major culprit in the budget crisis, groups across the ideological spectrum have echoed his argument that the government is providing "corporate welfare."

The libertarian Cato Institute, the moderate Progressive Policy Institute (PPI) and the Ralph Nader-affiliated group Essential Information issued separate reports last month saying that eliminating many corporate subsidies and tax breaks would narrow the budget deficit and help the economy.

Cato estimated that its recommended cuts would save $86 billion a year; the PPI said that it had identified potential savings of $265 billion over five years; and Essential Information said that it had found savings of $167.2 billion annually.

Some of the groups have attacked congressional Republicans' efforts to slash government spending, arguing that the GOP welfare reform package recently passed by the House would hurt the poor while leaving corporate America unscathed.

"Welfare payments and tax breaks for allegedly free-market wealthy corporations must be examined and curtailed before payments to needy families and children are slashed," Mr. Nader said.

Essential Information said that in coming up with its $167.2 billion in annual savings, it had identified 153 sources of "federal business welfare." By contrast, it said, total spending on aid to families with dependent children, food stamps, housing assistance and child nutrition programs is only about $50 billion annually.

Corporate welfare takes many forms, the Nader group said, including direct payments to companies, tax breaks, and government acquisition of goods and services at above-market prices. Some of the big-ticket items include $3.1 billion in financing to help foreign countries buy U.S. military equipment and services; Export Enhancement Program bonuses to 147 U.S. agricultural companies that cost taxpayers roughly $7 billion between 1985 and 1994 (three companies -- Cargill Inc., Continental Grain Co. and Louis Dreyfus Corp. -- received 47 percent of the total); and $120 million in subsidies to 14 of the nation's largest computer microchip manufacturers, enabling them to market their wares abroad and maintain a competitive edge over their domestic rivals.

The group suggested that the government consolidate information about corporate welfare recipients and expenditures so that total costs are known.

Strikingly similar examples of corporate welfare popped up on the lists developed by Cato and the PPI. Cato's report, which called federal aid to corporations a "major contributor to the federal budget crisis," argued that every major Cabinet department has become a "conduit for government funding of private industry."

Its proposed cuts include the $1.4 billion sugar price support program -- 40 percent of whose benefits go to the largest 1 percent of U.S. sugar farms -- and the $110 million that the Agriculture Department's market promotion program spends annually on overseas advertising of such products as Pillsbury muffins and McDonald's Chicken McNuggets.

The PPI report listed 120 tax breaks and subsidies that it said should be eliminated, with the revenue savings allocated for deficit reduction, public investment and family tax relief. But most Republican congressional leaders haven't shown much enthusiasm for taking up the corporate welfare issue.

Consider what happened in January when the conservative National Taxpayers Union and the liberal environmental group Friends of the Earth Inc. issued a joint study pro- posing cuts in subsidies to mining, timber and other interests. The groups said that such subsidies are bad for the environment and will cost taxpayers $33 billion over the next 10 to 15 years.

Among other things, the study took aim at the 1872 Mining Law, which it described as a "multibillion-dollar giveaway." The study provoked a firestorm among GOP leaders -- but not for the reason that the groups had expected. In a "Dear Colleague" letter, House Majority Leader Richard K. Armey, Republican of ,, Texas, wrote, "It has been our concern that fiscally conservative groups have been serving as a front for the extreme environmental movement." The letter was headlined, "You can't judge an interest group by its name."

The tone of the letter shocked the study's authors. "I'm very disappointed and very surprised," said Jill Lancelot, the director of the subsidy reform project at the NTU foundation. "Most of the time we don't agree with the environmental groups, but the NTU is here to cut wasteful spending and balance the budget, and if we can find common ground with other groups that also want to cut wasteful spending, then that can be an alliance that makes a difference."

Some Republicans, though, argue that corporate pork has to be targeted as Congress cuts spending. "If we're willing to make tough decisions on domestic programs, we also ought to make tough decisions on defense spending and other government subsidies for corporations," said Rep. Scott Klug, Republican of Wisconsin, who has sponsored a bill that would make major changes in the mining law.

Peter H. Stone writes for the National Journal.

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