In its first budget, the Bush administra-tion hinted at its intent to reappraise the fed-eral government’s role in subsidizing privatebusinesses. The administration’s proposedcuts in a handful of corporate welfare pro-grams are a clear departure from the WhiteHouse policy of years past. In contrast,President Clinton proposed aggregateincreases of 10 percent for major corporatewelfare programs almost every year he was inoffice.
It’s been many years since the last attemptto cut government subsidies to business. Anattempt was made under the Contract withAmerica when the Republicans took controlof both houses of Congress in 1994.
Thatattempt failed, and little has been done sinceto curtail corporate welfare spending.
There are some signs that the new admin-istration is willing to take a fresh look at gov-ernment subsidies to business, even if theBush White House staff does not use theterm “corporate welfare” in its public state-ments. For example, Mitch Daniels, directorof the Office of Management and Budget,recently noted that some programs “havenothing to show for years and years and yearsof essentially subsidizing corporate researchbudgets.”
At times, Daniels has been evenmore pointed in his criticism of corporatewelfare. As the
reported inMarch, he said that “it was not the federalgovernment’s role to ‘subsidize, sometimesdeeply subsidize, private interests.’”
Subsi-dizing private interests not only costs taxpay-ers money; it is beyond the bounds of the fed-eral government’s role as outlined in the U.S.Constitution.Even though there is bipartisan supportfor eliminating many major corporate wel-fare programs, little has been done to stemthe tide of funding for them. This study pro-vides detailed estimates of the billions of dol-lars in the federal budget that go to assistingprivate business and descriptions of the fed-eral programs that distribute that money.The study also provides case studies of someof the most egregious corporate welfare pro-grams, assesses the strength of the Bushadministration’s proposed cuts in programsand how Congress has already begun to resistthem, and concludes by proposing a way toend corporate welfare programs.
Estimates of CorporateWelfare
The federal government dished out $87billion for corporate welfare in the federalbudget in fiscal year 2001, as detailed inTable 1. Descriptions of the programs appearin Appendix 1. In 1997 the Cato Instituteestimated the cost of corporate welfare as $65billion a year.
The corporate welfare budget supports awide-ranging collection of programs. AsTable 2 shows, many agencies administer fed-eral subsidies to business. The departmentsthat are the leading corporate welfareproviders are the Departments of Agricultureand Commerce, followed by the Departmentof Energy. That multiagency spigot of corpo-rate welfare spending is one of the institu-tional biases in favor of budget growth sinceit’s hard for any one congressional commit-tee to target much of the corporate welfarebudget. The corporate welfare state tran-scends any particular agency or interestgroup.These estimates differ from measures ofcorporate welfare by other groups. Forinstance, the Congressional Budget Officeoccasionally updates its estimate of “federalfinancial support of business.”
The CBO esti-mate typically includes only programs thathave a stated goal of promoting commerce orbusiness. It excludes major research and devel-opment (R&D) initiatives that underwrite theresearch budgets of private corporations, andit ignores most infrastructure spending, muchof which funds transportation boondogglesthat would not have been funded in theabsence of federal support and that serve onlyto enrich the bottom line of local contractors
The corporatewelfare state tran-scends any partic-ular agency orinterest group.