Federal subsidies to U.S. businesses now cost American taxpayers nearly $100 billion a year. If all corporate welfare programs were eliminated, Congress would have enough money to entirely eliminate the capital gains tax and the death tax. Alternatively, Congress could cut the personal and corporate income tax by 10 percent across the board. Either of these alternatives would do far more to enhance the competitiveness of U.S. industry than the current industrial policy approach of trying to help American companies one at a time.
Federal subsidies to corporate America take many forms: direct grant payments, below-market insurance, direct loans and loan guarantees, trade protection, contracts for unneeded activities, and unjustified special interest loopholes in the tax code. Despite their promises to downsize government, congressional Republicans have retreated from any serious attempt to reduce business subsidies. The Clinton administration has routinely requested budgetary increases for corporate handouts, including the Export Import Bank, the Overseas Private Investment Corporation, and the Commerce Department's Advanced Technology Program.
This study refutes common myths about corporate welfare programs: that they create jobs and promote growth; that they =`level the playing field=' with our foreign competitors; that they help small businesses; and that the payments are provided without regard to political considerations. The main effects of industrial policy programs are to undermine the free enterprise system and corrupt the political system. Congress should get businesses off the dole and use the savings to cut taxes, reduce the national debt or both.