Can you cut corporate subsidies in war time?

By John Cunniff The Associated Press
Tuesday October 23, 2001

NEW YORK — If corporate welfare were to be eliminated, a paper published by the Cato Institute contends, the federal government could give taxpayers tax cuts that would make earlier rebates seem small. 

Picking its way through federal budget numbers, it finds at least $87 billion in federal subsidies — also called handouts — to private-sector companies, including General Motors Corp., Dow Chemical Co. and General Electric Inc. 

Keeping a wary eye on government spending is fundamental to Cato, a Libertarian think tank that tends to equate government growth with restraints on individual liberty and free, competitive markets. 

Government has its proper role and the private sector it’s, and Cato says the joining of the two produces problems. Well, for one, for taxpayers, to cite and example. 

“How much did some federal departments give away?” it asks. It answers: Agriculture, $35.8 billion; Transportation, $10.3 billion; Housing and Urban Development, $7.5 billion; Energy, $5 billion. 

Alas, at least from Cato’s viewpoint, it is destined to get worse. There are important roles for government, such as the security of the nation. And in that role, recent events have compelled government to grow. 

The nation’s airlines are getting a $15 billion bailout, the rationale in part being that they are essential to the public welfare. And warding off recession involves $40 billion of emergency spending. 

It could be just the beginning.  

Other industries, important to local and regional interests or to national security, may seek assistance, and in doing so further blur the separation of public and private sectors. 

Bioterrorism dictates changes, and a federally appointed advisory commission is already believed ready to advise the creation of a government-owned facility to assure a stockpile of vaccines. 

A weak economy also demands or, it is argued, justifies government spending to stimulate activity, such as measures to improve the nation’s transportation system. Or to extend welfare benefits for laid-off workers. 

In such ways, Cato suggests, government spreads its power. But you can’t blame government entirely. Private sector businesses cooperate in government spending, their lobbyists even initiating the process. 

President Bush’s first proposed budget sought to cut about $12 billion in corporate welfare, but it also included increases for other programs, including aid to oil and aerospace companies. 

And, you might argue, isn’t such assistance eventually in the interest of national security? Ah, that’s the problem. Of course a strong private sector is in the nation’s interest, but how do you draw the line? 

Because of current events, the arguments pro and con have now been made even less distinct. Cutting has become more difficult, spending more easily justified. And longer-run consequences have been put on hold. 

Nevertheless, the Cato paper, written by Stephen Slivinski, a fiscal policy analyst, offers a possible solution: the convening of a corporate welfare reform commission. 

That commission, says Slivinski, could function like the successful military base closure commission, proposing to Congress a list of cuts on which members of Congress would have to declare themselves. 

End Adv PMs Tuesday, Oct. 23.