The U.S. Constitution authorizes Congress to provide for the general welfare. Congress is not empowered to favor specific individuals or groups.
Officials at the Overseas Private Investment Corporation are trying desperately to persuade Congress to extend its lease on life by making exaggerated claims about its effectiveness. Brett Schaefer of the Heritage Foundation refutes these claims, arguing that "OPIC does not benefit the United States. It does not create jobs or exports or help combat foreign business subsidies. It creates distortions in the overall U.S. economy by encouraging a misallocation of capital, labor, and resources that is likely to reduce national income." In short, OPIC is just another form of corporate welfare. If the fat cats want to invest in foreign markets, let them do so at their own expense!
Dean Stansel and Stephen Moore of the Cato Institute define corporate welfare as "any government spending program that provides unique benefits or advantages to specific companies or industries. It includes subsidies, grants, cut-rate insurance, low-interest loans and loan guarantees, trade restrictions, and other special privileges that confer benefits on targeted firms or industries." Most of the $65 billion in annual corporate welfare, they say, "benefits businesses in four industries: agriculture, exports, high technology, and energy." These hefty handouts redistribute income "from generally middle-income tax-payers to the relatively higher-income owners and shareholders in the companies . . . that receive the government checks."
Stansel and Moore point out that, "if all federal assistance to business were purged from the budget, the budget deficit could be cut roughly in half." An end to corporate welfare could instead "generate enough savings to entirely eliminate the capital gains tax and the federal estate tax. Reducing the deficit or eliminating those anti-growth taxes," they say, "would do far more to benefit American industry and U.S. global competitiveness" than does the current practice of handing out subsidies to corporations with clout.
Stansel and Moore argue that "the single greatest obstacle to eliminating corporate welfare subsidies over the past two years has been President Clinton. The Clinton administration," they contend, "has objected to even minor attempts to shrink business subsidies. The White House has linked arms with big business interests to derail a GOP proposal to close down the U.S. Department of Commerce -- one of the major dispensers of corporate welfare. The administration has also opposed cuts in farm price supports, high-tech grants, export assistance, and energy subsidies."
Stansel and Moore conclude that "corporate welfare has been the largest fiscal blind spot of congressional budget cutters. Virtually every corporate welfare program that aided and abetted private industry in 1995," they observe, "continues to funnel funds to corporate America in 1997." Stansel and Moore warn that "the cost of the corporate welfare state is growing, but the political willpower to tackle these subsidies to the business community is nearly nonexistent."
If we're going to end "welfare as we know it," however, shouldn't we start by terminating programs that benefit the least needy? Shouldn't we begin by eliminating the $65 billion worth of annual subsidies to wealthy private corporations?
