Members of Congress will soon return home for August recess.
While there, many will express outrage over the 33 percent increase
in government spending since
2001, and the $400 billion budget deficit. They will offer vague
pledges to rein in government.
Taxpayers have heard it all before.
Those who want to see how serious lawmakers are about restraining
spending would be wise to follow the fate of the Advanced
Technology Program (ATP) in this year's budget. Corporate welfare
at its worst, ATP may be the most offensively unnecessary program
in Washington. If lawmakers cannot even close down ATP, then they
clearly are not ready to make the larger and more complicated
decisions necessary to bring the budget under control.
Congress created ATP in 1988 when Japanese-style industrial policy
was en vogue. ATP would "bridge the gap between research and the
marketplace" by providing grants to businesses engaged in
commercial scientific research. Unlike the National Science
Foundation, which funds basic academic-style research, ATP funds
projects with a "significant commercial payoff," meaning those that
would create substantial profits for businesses.
Between 1990 and 2004, ATP spent more than $2 billion, 35 percent
of which was distributed to 39 Fortune 500 companies. For example,
$127 million has gone to IBM, $91 million to General Electric, $79
million to General Motors, and $44 million apiece to Motorola and
3M. Overall, these 39 companies reported revenues of $1.4 trillion
in 2003. This is how Congress spends tax dollars extracted from
working Americans.
Taxpayers aren't the only ones questioning Washington's
priorities. Economists wonder why government should subsidize
commercial research at all. Basic economics clearly states that, if
these projects will be as profitable as promised, businesses have
every incentive to invest their own funds in their development.
Surely the investors and businesses spending $150 billion each year
on commercial research and development should welcome these
profitable investment opportunities. Yet Congress maintains that no
company would invest its own money in, say, profitable HDTV or
flat-panel televisions unless taxpayers were footing most of the
bill.
ATP officials respond by claiming to serve only as a "financier of
last resort" for promising projects that have repeatedly failed to
secure private investors. Hogwash. Surveys reveal that the majority
of ATP applicants never bother to seek private funding before
applying for a grant (and some even reject private investors,
possibly because it would mean sharing the profits).
Most near-winners, after being rejected by this so-called
"financier of last resort," suddenly and miraculously find private
investors. Among remaining near-winners, most still refuse to
invest their own money or even seek private investors. Instead,
they continue playing the ATP lottery by submitting the same
application year after year.
Not surprisingly, it turns out that Uncle Sam is a poor investor.
Only one-third of ATP projects ever make it to the market. In hopes
of minimizing conflicts of interest, ATP purposely seeks grant
reviewers without any knowledge of the markets. Even if they wanted
market knowledge, businesses are typically tight-lipped about their
research plans. The predictable results are taxpayer-financed
boondoggles: Grants for technologies that had been patented decades
earlier; millions for discredited technologies that no private
investor would waste a dime on; companies filing for bankruptcy
shortly after receiving their grant. Perhaps investors who avoided
these projects knew what they were doing after all.
During a recent Senate committee hearing, several senators argued
that eliminating ATP would devastate America's scientific progress.
Yet ATP represents just 0.1 percent of federal
research-and-development spending. Lawmakers loath to shrinking the
federal budget could shift this money into the National Science
Foundation.
President Bush has repeatedly called for ATP's elimination, and
the House of Representatives has voted to eliminate the program for
six consecutive years, including this year. Yet every year, the
president and the House have allowed a group of senators --
representing states that disproportionately include recipient
companies -- to guarantee the continuation of this Fortune 500
gravy train.
Lawmakers offer platitudes about smaller government and deficit
reduction and then vote to lavish the tax dollars of waitresses and
welders on Fortune 500 companies. Whether or not they end this
abhorrent program will reveal more about lawmakers' values and
priorities than any speech back home.
Brian Riedl
is Grover M. Hermann Fellow in Federal Budgetary Affairs in the
Thomas A. Roe Institute for Economic Policy Studies at The Heritage
Foundation.
Distributed Nationally on the Knight-Ridder Tribune wire