Government Waste: The Shameful Seven
By Howard Gleckman
Senator John McCain, the maverick Arizona Republican, says it isn't true that Washington is torn by partisanship. No, McCain says, Republicans and Democrats are united on one issue: Throwing away taxpayers' money. "Fiscal irresponsibility is the one thing that unites Democrats and Republicans," says McCain, "And, for that, we should all be ashamed."
Both parties on Capitol Hill adhere to an age-old ritual: Congress doles out tax subsidies and increases federal spending to benefit influential constituencies or pet projects. Meanwhile, the deficit keeps going up -- $375 billion last year, probably $400 billion-plus this fiscal year. It's all about spending money America doesn't have -- before somebody else gets to it. "Why should you be disciplined when everyone else is just grabbing what they can," is the way one GOP lobbyist describes the game.
And grab they do. With the government likely to spend more than $2 trillion this year, boondoggles abound. Here are my nominees for the Shameful Seven -- all prime examples of wasteful government spending. Killing them won't balance a $400 billion deficit. Doing away with them would hardly make a dent, actually. But Washington could do a lot to restore its fiscal credibility by ending giveaways such as these:
Farm Subsidies. Perhaps more money is wasted in the name of the mythical family farmer than on any other government program. Washington will spend $17 billion this year on direct subsidies to agribusinesses and billions more on other programs to subsidize crop production.
My personal favorite: Uncle Sam hands out millions in loan guarantees and other subsidies to people who raise angora goats -- a giveaway that dates back to the days when mohair was used in military coats. Last anybody checked, there isn't much call for mohair in modern flack jackets, especially in brutally hot Iraq. Yet despite several efforts over the last decade to kill it off on Capitol Hill, the subsidy is never sheared and has topped $20 million in recent years.
Oh, and about those family farmers.... In the past 30 years, as subsidies have grown, the number of farms in the U.S. has dropped 25%, to 2 million. One reason why: The biggest 7% of farms now get more than more than half of all the subsidies.
Earmarked Pork. It's a fine art on Capitol Hill: Lawmakers lard annual money bills with line-item spending provisions, often on the sly, that go directly to favored groups or projects in their districts or states. McCain estimates that 14,040 of them slipped into fiscal 2004's spending bills, and everyone figures Congress will break that record for next year.
Some $2 million went to the California Prune Board and $300,000 made a splash with the Catfish Institute. The Homesteak Opera House in Lead, S.D., got $375,000, and the New York Botanical Garden's Virtual Herbarium Imaging Project got $400,000. Are virtual herbs even legal in New York? My personal favorite: The indoor rainforest in Coralville, Iowa. That's right, folks, you're spending $50 million to help build a rainforest in Iowa.
But the big winner in this annual pork-a-thon is Alaska, home of Senate Appropriations Committee Chairman Ted Stevens, a master of this game. In 2004, the Last Frontier State is getting $524 million in special giveaways -- more than $800 for every Alaskan man, woman, and child, according to Citizens Against Government Waste. A few highlights: $800,000 for the Bering Sea Fisherman's Assn. and $750,000 for the Ketchikan Wood Technology Center.
TV Spectrum. For decades, local TV stations have been granted free access to broadcast channels to distribute their analog signals. In 1996, the government handed them the right to use parallel digital channels to roll out high-definition TV.
Such "spectrum" space -- radio frequencies on which they can broadcast with no interference -- is incredibly valuable in the digital age. Once 85% of households are receiving HDTV, the broadcasters are supposed to shift completely to digital and, in turn, give their old spectrum back to the government. Trouble is, consumers are years away from going HD. So local stations are sitting on both their analog and digital channels -- sort of a Sutter's Mill of spectrum.
The airwaves belong to the public. If the government could auction them off in an open market, they might be worth as much as $50 billion, according to consensus economic estimates. So local TV stations get $50 billion worth of public airwaves, pay nothing, and citizens barely notice.
It's all perfectly legal, of course. But I look at it differently. In the 1920s, senior members of the Harding Administration went to jail for giving away cut-rate oil leases on public land. These days, special-interest giveaways have become routine. It's enough to make Harding's old Teapot Dome crowd roll over in their graves. By Howard Gleckman Public Broadcasting. Speaking of TV, why do taxpayers spend $400 million a year to fund the Corporation for Public Broadcasting? With hundreds of cable channels offering many of the same cultural, history, and nature shows as PBS, what's the need for a taxpayer-funded network?
Here's what would happen to Sesame Street if it wasn't supported by taxpayers: It would thrive. The program is a goldmine. A private CPB could make a fortune in royalties and use the dough to develop new programming. Besides, restructuring public broadcasting might finally rescue us from the endless pledge drives and the wretched baby boomer nostalgia concerts.
Tax Benefits. These days, Washington just doesn't take care of the special interests through spending subsidies. The tax code works just as well. Take the recent $170 billion business tax bill passed by the Senate. It was supposed to replace $50 billion in export subsidies that were declared illegal by the World Trade Organizations. Instead, it has become a Christmas Tree sagging with ornaments.
One of my favorites is a provision that lets foreign gamblers exclude up to $25 million in winnings at the race track from their taxable income. We all love Smarty Jones and all, but give me a break. Some other shameless goodies: $11 million in tax breaks for makers of imported bows and arrows and $800 million for movie producers. In a Senate version of the bill, Hollywood gets special tax write-offs for production costs, a lower tax rate, and key accounting changes. Even Michael Moore might be eligible for that package.
And don't buy this business about tax cuts just returning money to the people, where it belongs. That's a great argument when the budget is in surplus. But when Washington is $4.5 trillion in debt, every dollar in tax cuts that goes to some special interest must be paid for by spending reductions or a tax increases on someone else. If not, government has to borrow the money. And guess who gets to pay the interest on that debt for another generation? We taxpayers do.
Federal Energy Policy. Think about it. Oil and gas start with a huge cost advantage over alternative energies, such as wind and solar. Yet lawmakers give oil and gas producers huge tax breaks for exploration and fuel development. That gives them an even bigger price advantage.
Then, to level the playing field -- in theory at least -- Congress gives tax breaks to alternative energy producers. The end result is that taxpayers are out billions, and the relative price of fuel is hardly affected. These subsidies don't help consumers much. They're just a giveaway to energy producers who get tax breaks to do what they do anyway.
Pols say it's all about making the U.S. energy-independent. So why, in 2003, did Congress and President Bush agree to a big new tax break for folks to buy gas-guzzling SUVs through their small businesses? Play your cards right, and you can buy a $105,000 top-of-the-line Hummer II and get a $103,000 tax deduction this year.
Then, when we consume too much gasoline and fuel prices rise, lawmakers start to chatter about releasing oil from the Strategic Petroleum Reserve to drive down prices and further subsidize those SUV owners. Here's a better idea: If Washington wants energy independence, end all the subsidies and let gas prices rise -- a lot. Demand will fall, America's dependence on foreign oil will plunge, alternative fuels and innovation will flourish, and taxpayers ultimately will save billions.
Ahmed Chalabi: This one is in a class by itself. Chalabi, a former Iraqi exile with a shady past, was a darling of Bush Administration war hawks and an enthusiastic supporter of the U.S. invasion to remove Saddam Hussein. The Pentagon has been paying him as much as $400,000 a month for nearly two years, and his political party acknowledges receiving as much as $27 million.
Now, he's opposing the U.S. occupation in Iraq, the military has raided his headquarters, and, according to some accounts, the U.S. may soon cut Chalabi off. I guess the White House will just write the whole thing off as a bad investment.
Thousands more of these examples can be cited. But you get the drift. Deficits be damned. As long as pols can keep the federal printing presses running, they'll pretend no one ever has to pay the bill.
Gleckman is a senior correspondent in BusinessWeek's Washington bureau. Follow his views in Washington Watch, only on BusinessWeek Online
Edited by Douglas Harbrecht