Commentary

Full Disclosure for Corporate Welfare

“Full disclosure” has been a rallying call in both the campaign finance reform debate and the accounting standards debate following the Enron fiasco. But Enron’s activities highlight another realm where the public deserves more transparency: government subsidies to businesses or “corporate welfare.”

Two federal agencies, the Export-Import Bank and the Overseas Private Investment Corporation, lent Enron more than $1 billion for projects in far-flung locations around the globe. Most of those loans have not been repaid. How many taxpayers knew that their hard-earned income was being channeled into risky energy projects in India and Venezuela? How many would have approved of OPIC’s loans to finance an Enron pipeline through sensitive South American tropical forests?

The $2.1 trillion federal government runs thousands of programs through dozens of agencies, making it nearly impossible for taxpayers to track down full details about which businesses are feeding at the public trough. If one digs enough, one can find some lists of corporate welfare recipients for some programs at some agencies. Archer Daniels Midland, for example, received $7.5 million from the Department of Agriculture’s Bioenergy program last year. But we don’t know the total amount that ADM received from all agencies and all programs.

What is needed is a full cross-agency presentation in the annual federal budget detailing companies and cash received for all direct business subsidies. Such a list would provide taxpayers ammunition to question the appropriateness of federal giveaways. As it stands now, the public only finds out about such giveaways after a scandal breaks and investigative reporters begin probing.

But our government should not be funding activities that it is too embarrassed to reveal up front. If the Maritime Administration thought that it was proper to loan $1.1 billion of taxpayer funds to American Classic Voyages to build ships in Senator Trent Lott’s (R-Miss.) hometown, it should disclose this and other such loans in the budget. As it turned out, most people only became aware of the loan to build two cruise ships when the company went bankrupt and stiffed taxpayers for $200 million.

Probably the best example of the need for full corporate welfare disclosure is the more than $20 billion per year in cash subsidies to the farm industry. The Department of Agriculture resists disclosing details of those payments, and it ultimately took a 1996 federal court decision and Freedom of Information Act requests to make subsidy payments public. Now we know what the department was hiding: Most farm subsidies go to the largest and wealthiest farms, with millionaires such as Ted Turner and David Rockefeller receiving hundreds of thousands of dollars in taxpayer money.

It is true that while Sen. Tom Harkin (D-Iowa) admitted that farm welfare for the rich was an “embarrassment, a black eye that can only undermine public and taxpayer support for the programs,” Congress still voted for this year’s mammoth farm subsidy bill. But at least now when politicians defend the subsidies by feigning concern for small farmers, voters will know otherwise. Hopefully, the 98 percent of voters who are not farmers will use that knowledge to tell Congress what they think about the farm bill this November.

Beyond full disclosure, corporate welfare could be tackled through the establishment of a commission, akin to the successful military base closing commissions of the 1990s. The commission could create a hit list of unjustified corporate subsidies and submit the list to Congress for an up-or-down vote on termination. Senator John McCain of Arizona has introduced legislation to establish a corporate welfare reform commission, although he has a different definition of corporate welfare than we do.

Nonetheless, the first step is full disclosure, and the administration can take the lead by planning for a detailed listing of corporate welfare recipients in next year’s budget. Let’s have full disclosure and work toward a federal government that stops robbing Peter to pay Paul Inc.

Chris Edwards is director of fiscal policy and Tad DeHaven is a research assistant at the Cato Institute.