An End to Corporate 'Free Lunch?'

'Dream Congress' for business offered tax cuts, lawsuit relief -- until now

WORDS like ''corporate welfare'' -- uttered by more of the new populist Republican leaders on Capitol Hill each week now -- cannot fall sweetly on the ears gathered around the mahogany tables of corporate America.

But so far the Republican Congress has been such a dream Congress for business large and small that some in the GOP worry that it looks bad.

When Republicans are cutting school-lunch subsidies and housing funds for the poor in the name of cutting the deficit, some federal generosity to business ought to be seen on the chopping block as well, they say.

''I'm disappointed we haven't moved more aggressively than we have,'' says Al Hubbard, president and co-owner of E&A Industries in Indianapolis. As former director of Vice President Dan Quayle's Competitiveness Council, Mr. Hubbard led an earlier Republican assault on government regulation and what he called ''corporate socialism.''

Now, he says, ''it remains to be seen whether Republicans are going to walk the talk and go after corporate welfare the same way they go after poor-people welfare.''

Business expects to take some hits.

''I hope so,'' says Barry Rogstad, president of the American Business Conference, a group of 100 mid-sized companies. ''The only way to make this all up is to spread the pain and the gain.''

''It is unrealistic,'' says Michael Baroody, vice president at the National Association of Manufacturers, ''to think we are going to be held harmless while social programs are getting cut.''

In the past week or two, House Budget Committee chairman John Kasich (R) of Ohio and presidential candidate Sen. Phil Gramm (R) of Texas have recommended an array of cuts from federal export promotion to farm subsidies -- most of which go to large agribusinesses.

Another presidential contender, Sen. Richard Lugar (R) of Indiana, and House majority leader Dick Armey (R) of Texas strongly advocate cuts in federal agriculture subsidies.

For business overall, these subsidies are an easy trade to make for the wish list that makes up the GOP Contract With America. Limiting liability to lawsuits, cutting capital-gains taxes, and putting cost-benefit tests to new regulation -- these big-ticket moves make corporate subsidies look like borrowed socks.

These benefits can mean hundreds of millions of dollars to a single company, says US Chamber of Commerce senior vice president Bruce Josten. But the targeted subsidies on Mr. Kasich's list of recommended budget cuts, for example, affect ''slivers of sectors of certain industries,'' says Mr. Josten.

As the lists of subsidies bound for the cutting-room floor is refined, those slivers of sectors will begin to argue much more strenuously about exactly which federal spending and which tax credits amount to ''corporate welfare'' and which are fair breaks with economic benefits.

Hubbard points out that it was the Clinton administration that tried to cut federal subsidies to Western ranchers by moving grazing and water fees to market levels. The move was killed by Republicans.

''That was one area where I was disappointed with our guys and Clinton was trying to do the right thing,'' Hubbard says.

Two studies came out independently this month toting up how much feeding business does at the federal trough, in the form of either direct government spending or tax credits.

The Cato Institute, a libertarian think tank close to many of the current Republican leaders in Congress, estimates that business subsidies cost taxpayers $85 billion a year. For example, the Pentagon provides nearly $100 million a year to Sematech, a consortium of US microchip producers. But of more than 200 US chipmakers, only the 14 largest get federal support from Sematech, says the report's author Stephen Moore.

The Progressive Policy Institute, a centrist Democratic think tank, found $265 billion in savings over five years by ending or reforming programs. Half the amount comes from subsidies, half from tax breaks such as the special right to fully expense oil and gas drilling and exploration costs instead of depreciating them.

Cutting such susbsidies and credits is now thinkable as it was not even a year ago, says Robert Shapiro, who wrote the PPI study. Republicans need to find spending to cut, he says, and they need to show evenhandedness as well.

''It serves their interests to show they are not only going after poor people,'' says Mr. Shapiro. ''But that's how politics evolves to a new level.''

Would these cuts be merely symbolic? ''Sure,'' he says, ''but I'll take symbolism this year if that's all I can get.''

Some of the member companies in Mr. Rogstad's association have gone on some Commerce Department trips to China to seek contracts. ''If they're there, you do them,'' Rogstad says. ''But your fellow taxpayers are paying for them. Maybe business ought to pay for these things themselves.''

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