Corporate Welfare

Bad Influence

Tax breaks aren't corporate welfare. Cash giveaways are.


The new Republican-led Congress promises major changes in "welfare"—giveaways to the relatively destitute. But the federal government is equally adept at throwing other people's money at those who haven't even a surface excuse for needing it.

The recent "Mexican bailout," $25 billion in U.S. loan guarantees to help keep Mexico solvent so it can eventually pay off its debt, is a good example. In essence, that move aided American banks improvident enough to toss good money after bad at the Mexican government.

If the new congressional regime wants to prove that they mean an end to business-as-usual, they must cut off federal cash flow to the influential as well as the marginal. But contrary to Robert Reich, who has taken to railing against "corporate welfare," letting corporations keep their earnings isn't "welfare"; giving them other taxpayers' money is.

Any supposed devotion to free markets and tight-belted government is a sad joke if we can't end such programs as:

? The National Institute of Standards and Technology's Advanced Technology Program, which in fiscal 1995 is dispersing $431 million to such starvelings as IBM, Hewlett-Packard, and Eastman Kodak to pursue projects such as developing new computer storage systems—projects for which there ought to be private markets, or no market at all.

? The Partnership for a New Generation of Vehicles, which gave around $250 million in 1994 to General Motors, Ford, and Chrysler to help them do what they are in business to do: develop better cars for their customers.

? The Agriculture Department's Market Promotion Program, which pays for overseas advertising for such companies as E.J. Gallo ($15.9 million from 1986-92), Sunkist ($66.9 million), and Tyson's Foods ($9.9 million).

? The $587 million in seed money to be given over the next five years to support flat-panel display development, with the money going to AT&T, Rockwell International, and Xerox, among others.

? The Export-Import Bank, dispensing $831.8 million in fiscal 1995 for export credit loans, loan guarantees, and grants to businesses trying to sell overseas.

? The Overseas Private Investment Corporation, dropping $66.1 million in fiscal 1995 to guarantee against such risks as sudden inconvertibility, nationalization, and political violence that can accompany investing in foreign nations.

Just as "normal" welfare spending has malign cultural effects that outweigh its budgetary burden, so does corporate welfare. Trying to counteract bad economic decisions by foreign governments to protect foolish U.S. banks merely prolongs and worsens an inevitable day of reckoning. Giving cash to those with the most political influence tilts the market in favor of the already successful. Guaranteeing risky foreign or export ventures eliminates the burden of making intelligent decisions in the first place, and thus helps bring about the disasters they are meant to ease.

Corporate welfare isn't just bad business. It's bad civics. It mocks the ideals of limited government and democracy, by giving government a role in meeting the most picayune business expenses of the wealthy and influential and proving that enough pull can get you special benefits that the unconnected are denied—at the expense of all citizens.

If Gingrich and his boys can't put a stop to corporate welfare (correctly defined), it'll be hard to believe that they have the will to accomplish the rest of their impressive-sounding agenda.