Corporate Subsidies Rise on Washington's 'Welfare' Target List
PRESIDENT Clinton fired the latest shot this week in the war on federal perks and tax breaks for American business. By proposing $25 billion in corporate-subsidy cuts, he joins an attack already launched by an unusual coalition.Skip to next paragraph
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Republicans and Democrats, plus practically every think tank in town, have put together a "corporate welfare" target list, taking aim at such giveaways as million dollar marketing budgets for cat food, write-offs for Capitol Hill lobbying expenses, and programs to promote US investment and exports overseas.
But the effort to reap savings from cutting business benefits began with Labor Secretary Robert Reich, who last year tried to plug tax loopholes for American businesses. Then, GOP lawmakers saw that snuffing out some $25 billion in tax benefits for Fortune 500 firms could help them balance the budget, as well as escape charges that they are trying to eliminate the deficit at the expense of the poor.
Clinton's suggested subsidy cuts pale compared to what's called for by a wide spectrum of liberal and conservative groups - from Ralph Nader's left-wing consumer advocates to the anti-big government Cato Institute - a GOP favorite. Steve Tidrick, a budget analyst with the moderate Democratic Progressive Policy Institute (PPI), says "Clinton's $25 billion number is modest."
By comparison, PPI offers up $265 billion in cuts over five years. Among the items on its list: $4.2 billion for Department of Agriculture subsidies on foodstuffs sold overseas; $2.5 billion to support US arms sales abroad; $1.3 billion used for programs promoting US tourism and exports.
But he adds, "$25 billion is significant" given that the GOP quickly dropped its own plan to raise revenues by wiping out $25 billion in tax relief for US corporations after House Ways and Means Chairman Bill Archer (R) of Texas recently balked at the concept.
The tax issue aside, what may win bipartisan approval, according to Mr. Tidrick and others, is squeezing the savings out of direct government subsidies.
All of this has created a lot of tension at the US Commerce Department, a major target of budget cutters and where embattled officials have had to ward off GOP calls to simply get rid of the agency altogether.
Fanning out around the country to address powerful business groups, Commerce officials argue that if the government's business promotion programs are put into the "corporate welfare" waste bin, the budget cutters will actually hurt, not help the economy.
"We can demonstrate that for every taxpayer dollar we spend on export promotion, $10.40 is returned to the US Treasury through tax revenues generated by exports," says David Rothkopf, Commerce deputy undersecretary for international trade. "We can show where the exports have gone, and where the jobs have been created."
According to the department's calculations, the $269 million it has spent on export advocacy in the past year has helped push $20 billion worth of exports out the door and support some 300,000 jobs.
"To be the only country that doesn't give business a seat at the Cabinet table and to be the only country not to have a coordinated export-promotion policy is ludicrous and naive. It is to concede defeat and the markets of tomorrow while resigning ourselves to be a second class economic power," says Mr. Rothkopf.
Mr. Tidrick argues that specific industry subsidies such as export promotion "undermine productivity of the economy because they insulate corporations from competition." By affording them, he says, "Congress micro-manages the economy and directs capital to favorite industries." Like other critics, he says it's anticapitalist, because "money does not necessarily flow to the most productive enterprises."
Incredulous that one of Clinton's economic successes could be dismantled, Jeffrey Garten, Commerce undersecretary for international trade says, "We're just at the stage where we've gotten our act together in commercial policy, and there have been huge returns in the face of bruising competition."
A recent report from the Economic Strategy Institute asserts that "Reducing or eliminating export financing and promotion would shift much of currently funded exports - and the jobs they support - to countries with governments willing to promote overseas sales." It's not about the "'ability of our guys to cut it' in the international marketplace," the report says, "but a governmental decision not to meet competition. Without government support, those contracts would be lost even if US producers were the world's most efficient."