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A good way to begin to reduce spending would be to immediately eliminate most

corporate subsidies. So-called corporate welfare now amounts to an estimated $65 billion

a year in direct federal outlays.6 Many of the subsidies are intended to benefit America's

high-technology industries. The truth is that Silicon Valley firms would be mostly

unscathed if they lost all federal subsidies, although a few individual companies might be

hurt. (Of course, it would be precisely the CEOs of those companies who would travel to

Washington to make "end of the world" speeches.)

A historical parallel is the government protection from competition conferred on

the U.S. airline industry in the 1970s. When U.S. airlines were deregulated, which

removed subsidies in the form of higher fares, the industry got healthier; weak competitors

were absorbed by better managed companies; and air travel became affordable for many

Americans for the first time. The airline industry is healthier and better off without

subsidies.

Unfortunately, our current pork-barrel system of taxing and spending has created a

vicious downward economic spiral that will be difficult to break. If two corporations are

taxed at a rate of 37 percent (my company's current total tax rate), but one of them

receives a subsidy equivalent to a 10 percentage point rebate, the subsidized company will

enjoy visibly higher profitability, higher share price, and an enhanced ability to raise funds

at a lower cost. Consequently, companies must compete for government subsidies

whenever those subsidies make a competitive difference. Even though I have made seven

trips to Congress to oppose corporate subsidies, I would without hesitation pursue any

important subsidies offered to my company, because it is my obligation to our

shareholders to do my best for them, including obtaining any available low-cost funding.

A company that failed to do so would be as foolish as an individual who refused to take

income tax deductions because of a strong belief in a flat tax.

The spiral continues as corporations build lobbying organizations to pressure

Congress to retain and expand subsidies to home-state corporations, which are often polit-

ical contributors. As Congress succeeds in rewarding homedistrict corporations with their

"fair share of the government pie," pressure builds for the government to raise the revenue

to pay for all of those subsidies. The spiral is completed, as it was in 1993, when tax

revenues are raised to pay the bills by hiking taxes on corporations, which then seek new

and creative subsidies to offset their higher tax rates.

We can use popular Washington buzzwords such as "government-industry

partnership" to describe the process, but the economics of the downward spiral is a slow-

motion version of socialism; that is, the mandated movement of money from individuals

and companies to central government control.

At one extreme, when all of the assets (save those of the black market) are

controlled by central government planners, we have pure, Soviet-style socialism. At the