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The Corporate Welfare Budget: Bigger Than Ever, Cato Policy Analysis No. 415

The Corporate Welfare Budget: Bigger Than Ever, Cato Policy Analysis No. 415

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Published by Cato Institute
Executive Summary

Federal subsidies to private businesses cost taxpayers

$87 billion per year. That is over 30 percent

more than the Cato Institute's 1997 corporate

welfare estimate of $65 billion. If corporate welfare

were eliminated tomorrow, the federal government

could provide taxpayers with an annual

tax cut more than twice as large as the tax rebate

checks mailed out in 2001.



President Bush's first proposed budget recommends

about $12 billion in total corporate welfare

cuts. Most notable are the proposed cuts for the

Advanced Technology Program, the Export-Import

Bank, the Overseas Private Investment Corporation,

the Maritime Administration's guaranteed loan program,

and the Small Business Administration.

However, the Bush budget proposal also increases

some of the largest corporate welfare programs, such

as federal aid to oil companies through the fossil energy

research and development program and research

subsidies to aerospace companies as well as increases

for the National Agricultural Statistics Service, the

Foreign Agriculture Service, and the Conservation

Reserve Program.



Spending bills working their way through the

House and Senate Appropriations Committees

have reversed or diluted Bush's proposed cuts.

While the House kept intact the cuts for the

Advanced Technology Program and the Overseas

Private Investment Corporation, it diluted the cuts

for the Small Business Administration and the

Export-Import Bank. The Senate voted to increase

the budgets for the Advanced Technology Program

and federal assistance to energy companies.



The Advanced Technology Program, the Small

Business Innovative Research program, the

Partnership for the Next Generation of Vehicles,

and the Export-Import Bank are among the worst

corporate welfare programs. They subsidize large,

profitable corporations at the expense of taxpayers

for projects that already receive, or could

receive, adequate funding from the private sector.



A good way to abolish corporate welfare programs

would be to convene a corporate welfare

reform commission (CWRC). That commission

could function like the successful military base

closure commission. The CWRC could compose

a list of corporate welfare programs to eliminate

and then present that list to Congress, which

would have to hold an up-or-down vote on the

commission proposal. The commission would

help reform-minded legislators to end federal

subsidies to business.
Executive Summary

Federal subsidies to private businesses cost taxpayers

$87 billion per year. That is over 30 percent

more than the Cato Institute's 1997 corporate

welfare estimate of $65 billion. If corporate welfare

were eliminated tomorrow, the federal government

could provide taxpayers with an annual

tax cut more than twice as large as the tax rebate

checks mailed out in 2001.



President Bush's first proposed budget recommends

about $12 billion in total corporate welfare

cuts. Most notable are the proposed cuts for the

Advanced Technology Program, the Export-Import

Bank, the Overseas Private Investment Corporation,

the Maritime Administration's guaranteed loan program,

and the Small Business Administration.

However, the Bush budget proposal also increases

some of the largest corporate welfare programs, such

as federal aid to oil companies through the fossil energy

research and development program and research

subsidies to aerospace companies as well as increases

for the National Agricultural Statistics Service, the

Foreign Agriculture Service, and the Conservation

Reserve Program.



Spending bills working their way through the

House and Senate Appropriations Committees

have reversed or diluted Bush's proposed cuts.

While the House kept intact the cuts for the

Advanced Technology Program and the Overseas

Private Investment Corporation, it diluted the cuts

for the Small Business Administration and the

Export-Import Bank. The Senate voted to increase

the budgets for the Advanced Technology Program

and federal assistance to energy companies.



The Advanced Technology Program, the Small

Business Innovative Research program, the

Partnership for the Next Generation of Vehicles,

and the Export-Import Bank are among the worst

corporate welfare programs. They subsidize large,

profitable corporations at the expense of taxpayers

for projects that already receive, or could

receive, adequate funding from the private sector.



A good way to abolish corporate welfare programs

would be to convene a corporate welfare

reform commission (CWRC). That commission

could function like the successful military base

closure commission. The CWRC could compose

a list of corporate welfare programs to eliminate

and then present that list to Congress, which

would have to hold an up-or-down vote on the

commission proposal. The commission would

help reform-minded legislators to end federal

subsidies to business.

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Published by: Cato Institute on Mar 26, 2009
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Federal subsidies to private businesses cost tax-payers $87 billion per year. That is over 30 percentmore than the Cato Institute’s 1997 corporatewelfare estimate of $65 billion. If corporate wel-fare were eliminated tomorrow, the federal gov-ernment could provide taxpayers with an annualtax cut more than twice as large as the tax rebatechecks mailed out in 2001.President Bush’s first proposed budget recom-mends about $12 billion in total corporate welfarecuts. Most notable are the proposed cuts for theAdvanced Technology Program, the Export-ImportBank, the Overseas Private Investment Corporation,the Maritime Administration’s guaranteed loan pro-gram, and the Small Business Administration.However, the Bush budget proposal also increasessome of the largest corporate welfare programs, suchas federal aid to oil companies through the fossil ener-gy research and development program and researchsubsidies to aerospace companies as well as increasesfor the National Agricultural Statistics Service, theForeign Agriculture Service, and the ConservationReserve Program.Spending bills working their way through theHouse and Senate Appropriations Committeeshave reversed or diluted Bush’s proposed cuts.While the House kept intact the cuts for theAdvanced Technology Program and the OverseasPrivate Investment Corporation, it diluted the cutsfor the Small Business Administration and theExport-Import Bank. The Senate voted to increasethe budgets for the Advanced Technology Programand federal assistance to energy companies.The Advanced Technology Program, the SmallBusiness Innovative Research program, thePartnership for the Next Generation of Vehicles,and the Export-Import Bank are among the worstcorporate welfare programs. They subsidize large,profitable corporations at the expense of taxpay-ers for projects that already receive, or couldreceive, adequate funding from the private sector.A good way to abolish corporate welfare pro-grams would be to convene a corporate welfarereform commission (CWRC). That commissioncould function like the successful military baseclosure commission. The CWRC could composea list of corporate welfare programs to eliminateand then present that list to Congress, whichwould have to hold an up-or-down vote on thecommission proposal. The commission wouldhelp reform-minded legislators to end federalsubsidies to business.
The Corporate Welfare BudgeBigger Than Eve
by Stephen Slivinski
 _____________________________________________________________________________________________________
Stephen Slivinski isa fiscal policy analyst at the Cato Institute.
Executive Summary
No. 415October 10, 2001
 
Introduction
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.
1
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.
2
Thatattempt failed, and little has been done sinceto curtail corporate welfare spending.
3
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.”
4
At times, Daniels has been evenmore pointed in his criticism of corporatewelfare. As the
Financial Times 
reported inMarch, he said that “it was not the federalgovernment’s role to ‘subsidize, sometimesdeeply subsidize, private interests.’”
5
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.
6
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.”
7
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
2
The corporatewelfare state tran-scends any partic-ular agency orinterest group.
 
3
Table 1Corporate Welfare Programs by Federal Agency (FY01 outlays in millions of dollars)
DepartmentOutlayDepartment of AgricultureAgricultural Credit Insurance Fund1,007Agricultural Marketing Service817Agricultural Research Service900Commodity Credit CorporationBioEnergy Program150Export Loans Program315Other Programs7,187Commodity Price Supports14,570Conservation Reserve Program1,656Cooperative State Research, Education & Extension Service1,020Economic Research Service66Export Enhancement Program478Farm Service Agency896Federal Crop Insurance Corporation2,583Foreign Assistance Programs (Public Law 480)1,295Forest Service, State and Private Forestry363National Agricultural Statistics Service100Natural Resource Conservation Service1,074Market Access Program123Rural Development ProgramsRural Community Advancement Program876Rural Business-Cooperative Service60Rural Utilities Service255Total, Department of Agriculture35,791Department of CommerceAdvanced Technology Program132Economic Development Administration411Information Infrastructure Grants29International Trade Administration305Manufacturing Extension Partnership109Minority Business Development Agency23National Oceanic and Atmospheric AdministrationAmerican Fisheries Promotion Act6National Environmental Satellite, Data and Information Service125National Marine Fisheries Service735Office of Technology Policy17Total, Department of Commerce1,892Department of DefenseArmy Corps of Engineers4,571Cargo Preference Program355Defense Advanced Research Projects AgencyDefense Research Sciences110Computing Systems and Communications Technology334Materials and Electronics Technology264
Continued 

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