Ending Corporate Welfare as We Know It

By Pipes, Sally C. | Chief Executive (U.S.), June 1996 | Go to article overview

Ending Corporate Welfare as We Know It


Pipes, Sally C., Chief Executive (U.S.)


In a 1994 speech, U.S. Secretary of Labor Robert Reich coined the term "corporate welfare." Like "welfare queen" and "quota queen," it quickly became a household phrase, popping up in both the mainstream and financial press.

It was an issue on which the biggovernment left and the pro-business right could agree. Both the left-leaning Progressive Policy Institute and the free-market Cato Institute produced studies identifying business subsidies that should be eliminated. The Cato study, which rejected PPI's classification of tax relief as corporate welfare, identified more than 125 federal programs that subsidize business at a cost of more than $85 billion per year.

Programs on Cato's hit list included: Sematech, a consortium of large U.S. computer microchip producers to which the Pentagon provides an annual subsidy of nearly $100 million.

Sugar price supports, from which the largest 1 percent of sugar farmers claim an estimated 40 percent of the annual $1.4 billion subsidy.

The Rural Electrification Administration and the federal power marketing administration, which, among other things, subsidize profitable utilities and luxurious ski resorts.

The Department of Agriculture's Market Promotion Program, which spends $110 million annually underwriting the international advertising of such products as Sunkist oranges and McDonald's Chicken McNuggets.

Such programs would seem to be easy targets in a year in which deficit reduction took center stage. But unlike analysts, politicians-whose livelihoods depend on a steady stream of cash from interests of all kinds-agree that cutting programs is too politically risky.

"Eighty-five percent of the corporate welfare safety net survived the 1995 process intact," a disappointed Stephen Moore, director of fiscal policy studies at the Cato Institute, told Congress in March.

Indeed, while his Secretary of Labor decries business subsidies, President Clinton wants to expand them under the rubric of "public-private partnerships." Clinton's 1997 budget, for example, calls for $300 million a year for the Advanced Technology Program, which funds scientific research and development programs.

T.J. Rodgers, president and CEO of Cypress Semiconductor and an outspoken critic of "techno-pork," debunks the ivorytower view of government-industry partnership. "What does the word 'partnership' mean?" Rodgers asked in recent congressional testimony. "It means, `If you give me free money, I will be your partner and political contributor. …

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