The Other Welfare Program
The 1996 welfare reforms comprised the boldest social policy reform
over the last 60 years. Millions of people moved off the government
dole and achieved self-sufficiency. Unfortunately, those reforms
excluded a rather large segment of society that still considers
itself too vulnerable to survive on its own, and stubbornly resists
subjecting itself to sink-or-swim capitalism: Corporations.
Corporate welfare-defined as direct payments, low-cost loans or
insurance, subsidized services to private businesses-costs
taxpayers over $90 billion per year. That means the average
household pays $850 in taxes each year to special interests that
neither need nor deserve the help.
The federal government's top two priorities are fully funding
national security, and reducing the high tax burden that is
currently weighing down the economy. Addressing those priorities
without expanding the budget deficit requires eliminating
unnecessary and wasteful spending elsewhere. It requires
eliminating corporate welfare.
The Advanced Technology Program (ATP) represents a typical
corporate welfare program. Back in the late 1980s, America had a
brief fixation with the Japanese economic "miracle." Believing that
Japan's system of government subsidies and protections to preferred
businesses was the Next Big Thing, America created ATP to fund
private research projects and bring them to the market.
Japan's economy has since drifted into stagnation, and so has ATP.
Costing $2.5 billion since its inception, the program is a classic
government boondoggle. A recent audit showed the program doesn't
keep records identifying why grant applicants get selected or
rejected. Program officials also apparently lack knowledge of the
fields they provide grants to: They recently gave a $1.2 million
grant for initial research into computer recognition of cursive
handwriting, even though the technology had already been developed,
patented and marketed years ago. Anyone who owns a credit card or
regularly signs for packages likely has been signing these small
electric screens for years.
ATP's largest problem is that it pays businesses to perform
activities they would naturally do anyway. Bribing corporations to
research and develop profitable new technologies is about as
necessary as bribing athletes to try and win games. Consequently,
these federal research grants do not create new projects. They
merely subsidize existing ones. Better to leave corporate research
funding to the stockholders-at least they'll get a share of the
It's not exactly the small, capital-starved companies that receive
ATP grants, either. IBM, with $8 billion in annual net income and
$89 billion worth of assets, could fund its own research even
without the $111 million of ATP funds it has received. Similarly,
companies such as General Motors ($82 million in grants), General
Electric ($75 million) and Sun Microsystems ($50 million) should
not receive additional taxpayer dollars.
Although the Advanced Technology Program fits almost all
definitions of corporate welfare, fewer people would think to
include farm subsidies in that group. Most Americans maintain the
Rockwellian stereotype of farm subsidies aiding small, struggling
family farmers at the mercy of unpredictable weather. But Farmer
Jones has been bought out by Agribusiness, Inc. Thus, farm
subsidies have evolved into America's most expensive corporate
welfare program, peaking at $30 billion in 2000.
Since 1996, Fortune 500 companies such as Westvaco, Chevron and
John Hancock Mutual Life Insurance have received as much as 68
times the amount of farm subsidy dollars the median farmer
receives. Tyler Farms of Arkansas has received $31.9 million since
1996-more than 7,000 times more than the median farmer. Overall,
nearly three-fourths of federal farm subsidies are granted to just
10 percent of subsidy recipients. The bottom 80 percent of
recipients combined for less than one-sixth of all farm
The $90 billion freed up by ending corporate could be put to much
better use. It could fully fund a war to remove Saddam Hussein from
power, dramatically beef up other defense and homeland security
needs, or reduce taxes by $850 per household.
Besides, if there ever was a time for politicians to get rid of
corporate welfare, it's now. Recent corporate accounting scandals
have provided a political environment that's safe enough for even
the most timid politician to finally end this wasteful spending.
Corporations should be assured that leaving the government dole
isn't so bad. Just ask the 3 million families who've already done
Riedlis the Grover M. Hermann fellow in federal
budgetary issues at The Heritage Foundation (www.heritage.org), a
Washington-based public policy research institute.