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other extreme, when income taxes are illegal, we have American-style capitalism, circa

1789. That is a black-and-white representation. Today, Americans live in a gray world

where the government takes and controls 35 percent of the country's yearly production.

Western Europe's economies are more socialist than ours, and their mediocre performance

is the end result. They have growth rates so low and unemployment rates so high--in

some cases more than double the current U.S. rate of 5 percent--that they would cost any

American president a second term. And, of course, the socialist disasters of Eastern

Europe make even the ailing West European economies look strong.

Sometimes it is difficult to see the big picture because of incremental thinking. An

increased tax of only a nickel a day per American supports a $5 billion per year subsidy.

With easy money and companies promising breakthroughs in health care, pollution

control, or electronics for "only" a few billion dollars, government often makes the wrong

choice. The road to socialism is paved with nickels-trillions of them--each taken with the

best of intentions.

The descriptions of Department of Commerce programs, such as the ATP, dazzle

us with possibilities: next-generation video compression; high-definition television

(HDTV); new-generation laser-based welding; a less polluting, more cost efficient painting

process; super-hard coatings of boron nitride; and so forth. All of those ostensibly com-

pelling and cost-effective reasons for corporate subsidies beg the question: if General

Motors has annual sales of $160 billion and $20 billion in the bank, why does GM refuse

to fund those research projects itself, and patent the results? GM is prominent in the ATP

programs. So are Ford, Chrysler, General Electric, AT&T, IBM, Black and Decker,

Honeywell, 3M, U.S. Steel, duPont, RCA, Phillips, MCI, Goodyear, Amoco, Kodak,

Polaroid, Xerox, Caterpillar, Westinghouse, and even Time Warner--apparently, Bugs

Bunny needs the taxpayers' money.

All those Fortune 500 corporations maintain that they need nickels from the

American taxpayer to bring their products to market.

There are two commonly cited reasons why such subsidies should continue. First,

some of the projects really are worthy and businesses are simply seeking a subsidy from

the government to get value from their extensive lobbying groups and the high taxes they

pay. The second reason is risk avoidance--companies want the government to help fund

projects that are long shots.

I believe that the "high-risk" argument used by the Commerce Department is

usually just an excuse for underwriting poor investments. Breakthrough ideas often

involve great risk, that is, a significant chance for failure. The important evaluation is

really not about risk but about return on investment. Risky ideas can be great, if they offer

huge returns. It is like gambling: A bet that has only a 1-in-10 chance is very risky, but it

is a big winner if it pays 100 to 1. Conversely, a bet that wins 9 times out of 10 has very