NCPA - National Center for Policy Analysis

Minimal Cutbacks In Corporate Welfare

June 4, 1996

Federal subsidies to 35 of the "least defensible" corporate welfare programs were cut 15 percent in the 1996 budget, according to a just-released study by the Cato Institute.

Cato researchers Stephen Moore and Dean Stansel selected and tracked the 35 most egregious programs from among an estimated 125 corporate subsidies and tax breaks which benefit some companies and industries at the expense of other businesses and taxpayers.

Here are some of their findings:

  • The total cost of all subsidies and tax preferences for 125 programs is about $75 billion a year.
  • Of the 35 programs studied, 29 had their budgets trimmed by about $2.8 billion, or 15 percent, from 1995.
  • Had all of the 125 programs identified as corporate boondoggles suffered the same 15 percent loss of funding, the savings to the fiscal 1996 budget would have exceeded $10 billion.

The size of the cuts ranged from total elimination of some programs to very modest reductions in funding of others.

  • Demonstration projects for the Federal Highway Administration -- a $352 million boondoggle for private contractors last year -- were eliminated this year.
  • The U. S. Travel and Tourism Administration -- which duplicates the efforts of private companies in promoting U. S. tourism abroad --was abolished for a $16 million savings.
  • However, the Agriculture Department's Market Promotion Program -- which pays for foreign advertising of American farm goods -- saw its budget actually increase from about $86 million last year to $90 million this year, thereby helping such needy, threadbare recipients as Gallo Wineries and McDonald's.

The House Budget Committee initially pushed for $74.5 billion in cuts in all business subsidy programs over seven years. The savings were to come through elimination of the Small Business Administration, the Commerce Department and other agencies.

But shifting coalitions of Democrats and moderate Republicans deep-sixed these efforts. The White House also bears much of the blame, according to Cato. President C1inton's original budget proposal for fiscal 1996 would actually have increased spending for the 35 worst programs by 0.3 percent.

Source: Perspective, "Nibbling Around the Edges," Investor's Business Daily, June 4, 1996.


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