The Corporate Welfare Budget: Bigger Than Ever

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Federal subsidies to private businesses cost taxpayers$87 billion per year. That is over 30 percentmore than the Cato Institute's 1997 corporatewelfare estimate of $65 billion. If corporate welfarewere eliminated tomorrow, the federal governmentcould provide taxpayers with an annualtax cut more than twice as large as the tax rebatechecks mailed out in 2001.

President Bush's first proposed budget recommendsabout $12 billion in total corporate welfarecuts. Most notable are the proposed cuts for theAdvanced Technology Program, the Export-ImportBank, the Overseas Private Investment Corporation,the Maritime Administration's guaranteed loan program,and the Small Business Administration.However, the Bush budget proposal also increasessome of the largest corporate welfare programs, suchas federal aid to oil companies through the fossil energyresearch and development program and researchsubsidies to aerospace companies as well as increasesfor the National Agricultural Statistics Service, theForeign Agriculture Service, and the ConservationReserve Program.

Spending bills working their way through theHouse and Senate Appropriations Committeeshave reversed or diluted Bush's proposed cuts.While the House kept intact the cuts for theAdvanced Technology Program and the OverseasPrivate Investment Corporation, it diluted the cutsfor the Small Business Administration and theExport-Import Bank. The Senate voted to increasethe budgets for the Advanced Technology Programand federal assistance to energy companies.

The Advanced Technology Program, the SmallBusiness Innovative Research program, thePartnership for the Next Generation of Vehicles,and the Export-Import Bank are among the worstcorporate welfare programs. They subsidize large,profitable corporations at the expense of taxpayersfor projects that already receive, or couldreceive, adequate funding from the private sector.

A good way to abolish corporate welfare programswould be to convene a corporate welfarereform commission (CWRC). That commissioncould function like the successful military baseclosure commission. The CWRC could composea list of corporate welfare programs to eliminateand then present that list to Congress, whichwould have to hold an up-or-down vote on thecommission proposal. The commission wouldhelp reform-minded legislators to end federalsubsidies to business.

Stephen Slivinski

Stephen Slivinski is a fiscal policy analyst at the Cato Institute.