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Outside View: Scrap corporate welfare

By TOM SCHATZ, A UPI Outside View Commentary

WASHINGTON, Sept. 11 (UPI) -- MEMORANDUM

To: President Bush

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From: Tom Schatz, President, Citizens Against Government Waste

Re: Scrap corporate welfare

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With the recent accounting scandals, everyone is focused on corporate America. Mr. President, the new accountability bill you recently signed, intended to bring greater accountability to the marketplace, is just the first step.

The next logical step is to go on the offensive against corporate welfare.

Corporate subsidies cost about $87 billion annually and support mostly large businesses. Consider the Export-Import Bank. It was set up in 1934 to promote exports during the Depression era. The Ex-Im Bank subsidizes domestic companies to export overseas; in 2000 it gave Enron $132 million.

Is international commerce something taxpayers really need to prop up? Cutting the Ex-Im Bank, plus its export-subsidy cousins, the Overseas Private Investment Corporation and the Trade and Development Agency, would save $3.25 billion over five years. Your budget makes this very same recommendation.

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The Advanced Technology Program is no better: it gives its money to companies like Xerox and General Electric -- to subsidize their research and development costs, ostensibly to discover new technologies. The market already provides sufficient incentive for such activity.

A few other suggested cuts include: the Agriculture Credit Insurance Fund; Export Enhancement Program; the sugar subsidy; Foreign Market Development Cooperator Program; steel subsidies; dairy subsidies; National Quality Program; and the New Generation Vehicles program.

Also, the Maritime Administration's guaranteed loan program; the Small Business Administration -- in its entirety; federal aid to oil companies through the fossil energy research and development program; research subsidies to aerospace companies; the National Agricultural Statistics Service; the Foreign Agriculture Service; and the Conservation Reserve Program.

Perhaps calling for total and immediate elimination is unrealistic. In that case, as CAGW has argued in the past, adapt the principles of social welfare reform, used to such good effect by Republicans in the mid-1990s, to limit corporate welfare. For instance, why not forbid double-dipping at the federal trough?

Just as individuals are now constrained from collecting multiple government welfare checks, so companies should be limited to a single government subsidy program.

Second, as with social welfare reform, an income cap should exist. Any company with revenues beyond a modest level, say $5 million, should become automatically ineligible to receive public funds.

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Third, time limits. A company would have, for example, a total of five years it can be on the taxpayer dole in its lifetime. Once it has used up its allotment, it is on its own.

Targeting corporate welfare makes sense philosophically and politically.

The issue has tremendous populist appeal. In the best of times, people don't like to hear that tax dollars are being redistributed to large corporations.

Given the current climate, people are ready to tar and feather corporate welfare's defenders. Show the country you can play the "for the people against the powerful" card in an intelligent way that doesn't scapegoat all businesses or damage the economy.

Additionally, opposing corporate welfare is good economics.

By your own stated principles, markets function best when taxpayers keep more of their dollars and decide how to spend them. Redistribution of resources from productive sectors to those needing subsidy undermines the market's central virtue of constantly attaining capital's best uses.

If there is anything the Japanese malaise of the 1990s teaches, it is that government should not be in the business of choosing economic winners and losers. To get back on track, our weak economy needs to be confident that Washington will keep money's value stable, taxes low and otherwise stay out of the way.

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Third, it rebuts your critics, who make hay over your initial opposition to campaign finance reform and the corporate credentials of your cabinet, implying you are a shill for corporate donors and the wealthy.

Leaving aside the Democrat's reliance on Hollywood and trial lawyer money, by fighting corporate welfare you would sever the causal link in some people's minds between corporate donations and your policy decisions.

On a related note, fighting with Congress to eliminate $87 billion in corporate welfare would certainly change the focus over who's responsible for the $157 billion budget deficit this year.

When your opponents bemoan your tax cuts, your allies can say, "The president tried to cut the deficit but the big spenders wouldn't let him."

Fourth, it allows you to go on offense even more than you have in recent weeks.

"In this time of economic downturn and war, I call on Congress to eliminate big business subsidies and reallocate those resources to fund the military." Such words would resound powerfully. It would enhance your credentials as "A Reformer with Results."

In short, going to war on corporate welfare makes good political, economic, and moral sense. As they say, only Nixon could have gone to China. Maybe only the Bush/Cheney administration can scrap corporate welfare.

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Thomas A. Schatz is president of Citizens Against Government Waste, a non-profit government watchdog organization concerned with federal spending.

"Outside view" commentaries are written for UPI by writers who specialize in a variety of important global issues.

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