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The current pork-barrel system of taxing and spending creates a downward

economic spiral. With corporate taxes so high (the federal corporate tax rate is 35

percent), companies must lobby for givebacks to remain competitive. Congress is

consequently put under extreme pressure to "bring home the pork" to home-state

corporations, some of which are political contributors. Payouts to those corporations then

lead the government to raise taxes, which, in turn, stimulates corporations and politicians

to invent new subsidies, sometimes creatively labeled "government investments" or

"government-industry partnerships." "Government-industry partnership" is

Washington-speak that means Americans will be compelled to pay for more unnecessary

corporate welfare programs like the Advanced Technology Program proposal to

"rebioengineer" cotton to make cotton fibers more like polyester. We should break out of

this downward economic spiral by ending corporate welfare now.

Technology subsidies to corporations are sold using technobabble to camouflage

unjustifiable investments, which typically fall into four categories:

· Subsidizing the rich: Sematech. We gave $800 million over an eight-year period

to 14 electronics companies that currently make more than $800 million in profits

every month--and they don't have to pay the money back.

· Competing unfairly with private industry: the ATP video compression project.

C-Cube Microsystems in Silicon Valley was venture funded and lost money for

years before its video compression technology took off. C-Cube woke up one day

and found a $1.2 billion rival entering its market with government funding. C-

Cube's investors paid full fare.

· Spending that provides no benefit: gallium arsenide wafers in space. Vitesse

Semiconductor in Camarillo, California, makes some of the world's fastest chips

using an exotic semiconductor called gallium arsenide. Vitesse sees no value

whatsoever in the $500 million National Aeronautics and Space Administration

plan to make gallium arsenide chips in space.

· Spending that hurts the intended beneficiary: European semiconductor subsidies.

The European Union put a tariff on semiconductor chips to protect its fledgling

chip industry. European chip companies lost market share anyway. Now the EU

is removing the tariff, but not before higher chip prices decimated its computer

industry.

One common rationalization for corporate welfare is that Japan and Europe

subsidize their corporations, compelling U.S. corporate subsidies to keep U.S. firms

competitive. The rationalization is totally false. Objectively viewed, Japan's programs

have been consistent losers. Western Europe's socialized economies are among the least

healthy on the planet with double-digit unemployment rates. The industrial policy strategy