Cato White Papers and Miscellaneous Reports

January 28, 1997

Federal Aid to Dependent Corporations:
Clinton and Congress Fail to Eliminate Business Subsidies

by Dean Stansel and Stephen Moore

Stephen Moore is director of fiscal policy studies and Dean Stansel a fiscal policy analyst at the Cato Institute

Executive Summary

According to Cato Institute estimates, the federal government currently spends roughly $60 billion a year on programs that provide spending subsidies to businesses. Two years ago both Congress and the Clinton administration pledged to attack that pervasive corporate safety net. This study finds that those promises have been largely unfulfilled.

We find that in 1995 Congress reduced corporate welfare spending by about 15 percent. In 1996, however, of the $37.7 billion budgeted for 55 of the least defensible programs, Congress increased spending by about $500 million. That was a 1.3 percent increase from the 1996 level.

Many corporate subsidy programs were reduced minimally or not at all by Congress. Those programs include the Agricultural Research Service, the International Trade Administration, the Payments to Air Carriers program, Federal Crop Insurance Corporation, the Commercial Space Transportation Office, the Overseas Private Investment Corporation, the Export-Import Bank, and the Agriculture Department's Market Access Program, which subsidizes the foreign advertising of U.S. corporations such as Pillsbury, Dole, and Jim Beam.

The Clinton administration has also shown itself hostile to corporate welfare cutbacks. For the 55 corporate welfare programs examined in this study, the administration's 1997 budget requested a 3.6 percent increase in spending. Moreover, the president's vetoes of the GOP budgets specifically targeted corporate welfare cuts as being too deep. The White House has resisted even small cutbacks in such areas as high-technology industry grants, agriculture price supports, and energy research programs. It also has rejected the shutdown of the Department of Commerce--the nerve center of the corporate welfare state.

To view this entire document, click here. (document size 111k)