Cutting Corporate Welfare: Is Bush Serious?
President Bush won the White House in part through the largesse of Big Business, which heavily financed his $191 million campaign. But Corporate America's support is not being rewarded in the President's first budget. Instead, Dubya's spending plan cuts sacrosanct aid-to-business programs by nearly $1 billion, drawing blood from Boeing (BA ), Ford (F ), Intel (INTC ), GE (GE ), and many others.
Direct government payments to business cost taxpayers an estimated $300 billion over the past five years. They range from loans to help weapons makers sell arms overseas to grants for researching caffeinated chewing gum. And that figure doesn't include indirect payments through tax breaks.
SOFTBALLS. Government watchdogs seem impressed with Bush's first foray. Says Stephen Slivinski, a fiscal-policy analyst for the libertarian Cato Institute: "I wasn't expecting such an aggressive attack on corporate welfare." For example, to help pay for his proposed tax cut, Bush trims $22 million from the Partnership for a New Generation of Vehicles, a fuel-efficient car program that benefits Detroit. And Bush would slash $251 million in funding for the Export-Import Bank and the Overseas Private Investment Corp., which help big names like Boeing, Bechtel, and Halliburton (HAL ) compete overseas.
But so far, the Baseball President has been swinging at softballs. Lawmakers in the past have targeted many of the same items, including the Commerce Dept.'s Advanced Technology Program, which subsidizes research by such giants as General Electric Co. and BellSouth Corp. (BLS ) "There's support to eliminate most of what he has proposed," says Thomas A. Schatz, president of Citizens Against Government Waste, an anti-pork-barrel outfit. "He and his people are very smart. They didn't want to take on a fight they wouldn't win, at least the first time out."
Office of Management & Budget Director Mitch Daniels says that Bush is following a one-step-at-a-time strategy. But he calls the runup in spending on corporate subsidies "problematic." Adds Daniels: "We'll see what kind of luck we have with [these cuts], then take a look at others."
Once Bush has plucked the low-hanging fruit, he may be under heavier pressure to back off. The really big bucks go to politically powerful agribusiness companies such as ethanol producer Archer Daniels Midland Co. (ADM ) ADM and farmers got a combined $800 million in tax breaks last year. Another big winner is sugar growers: Federal subsidies cost consumers some $1.4 billion last year in higher prices.
Bush, whose campaign received $2.6 million from agribusiness, has avoided painful cuts to the farm industry. His budget leaves intact a $478 million Agriculture Dept. program to boost overseas sales of U.S. crops. And he actually increased spending for a program that funds advertising for peanut growers, catfish farmers, and others.
Critics cite those programs as among the worst examples of corporate welfare but concede they are the toughest to eradicate because "[they] have such entrenched constituencies," says Representative Paul D. Ryan (R-Wis.). Adds Cato's Slivinski: "Going after the big ones might be difficult at this point." But he thinks that small victories could "embolden the troops" to seek larger reforms. Then will come the real test of whether Bush will put principles before patrons.
By Lorraine Woellert, with Richard S. Dunham, in Washington