The Public Policy/UP From Subsidy
Frum, David
W hich matters more: friends or principles? This dilemma afflicts all political parties, but seldom does the wrong choice bristle with as much danger as it now does for the new congressional...
...But the harm done by federal subsidies to business cannot be measured in dollars alone...
...On principle, of course, the Republicans champion free enterprise and smaller government...
...While it was a November speech by Labor secretary Robert Reich, praising the first draft of Robert Shapiro's research, that ignited the current round of debate on "aid to dependent corporations," it remains true that the Clinton administration has enthusiastically showered money on favored corporations...
...In 1994 award recipients included such Fortune 500 companies as Texas Instruments ($13 million), 3M ($6 million), Chrysler Corporation ($6 million), Hewlett Packard ($10 million), Boeing ($7 million), and Rockwell ($7 million...
...9.4 billion in Small Business loan guarantees—an increase of nearly 50 percent since 1993...
...333 million for the New Generation of Vehicles program, or the "Clean Car Initiative...
...The Cato Institute's Stephen Moore counts 125 federal programs that subsidize business at an annual cost of $85 billion...
...Newt Gingrich's victory came only 24 months after the party's presidential nominee collected a smaller proportion of the vote than any nominee since Alf Landon in 1936...
...Such vast sums are big enough to do more than put a bulge in overall federal spending...
...These workers will remain eligible for food stamps, Medicaid, and other benefits likely to lower the employment bills of large food producers...
...But what the farm and water-rights stories do indicate is that, unsupervised, congressional Republicans can succumb to the institutional corruption that felled the Democrats...
...Shapiro contends that $2 billion could be saved over the next five years by ceasing to subsidize profitable utility companies in the name of rural electrification, and $3.5 billion more could be picked up by telling energy companies to fund their own research and development...
...This dilemma afflicts all political parties, but seldom does the wrong choice bristle with as much danger as it now does for the new congressional Republican majority...
...Even more startling was the last-minute amendment of the Republicans' "private-property protection act," which defined any federal action to reduce the generosity of the subsidies to users of federal water projects as a compensable "taking" under the 42 The American Spectator June 1995 Fifth Amendment...
...Elected officials warn that the voter wrath that immolated Tom Foley and his pals could easily turn against an out-oftouch Republican Party...
...The PPI's proposals for "investment" are located in chapters of their own, clearly identified, so conservative readers can skip over them...
...But Republicans can swallow their qualms...
...Last year the administration provided grant funds to such industry giants as General Electric, United Airlines, Xerox, Dupont, and Caterpillar . . . $500 million for the Technology Reinvestment Project, a newly created military defense conversion program that subsidizes the development of civilian technologies...
...But all too many of their friends—agriculture and ranching interests, logging and mining companies, export-oriented manufacturers—have come to expect a helping hand from Uncle Sam...
...Even the far-left Mother Jones magazine, in an April cover story itemizing all the ways that the GOP will blight America, began by conceding that the new Republican majority is far more honest than the defeated and unlamented machine pols who ran the House between 1954 and 1994...
...But a strong record on the business subsidy issue will give nervous Republican congressmen something to say when the New York Times accuses them of starving orphans...
...T hese actions do not in themselves condemn the entire Republican Party...
...And nothing would underscore the Republican commitment to principle—no matter whose ox is gored—than the sounds of big Dole contributor Dwayne Andreas of Archer Daniels Midland and other corporate welfare queens squealing in outrage at the loss of their subsidies and tax exemptions...
...If that's right, how the new Republican majority produces laws may be just as important as the actual content of those laws...
...p utting an end to this nonsense would invigorate the economy by freeing capital to flow to its most productive use, and go far toward balancing the budget—and financing general tax cuts that would do vastly more to invigorate business than any amount of special favors...
...Should the president in '96 blast his Republican rival for cozying up to the rich, the GOP candidate might want to tick off some of the items on Moore's list of Clinton handouts: $490 million for the Advanced Technology Project (ATP), the Clinton administration's high-tech version of the Small Business Administration...
...As Shapiro points out, they also distort the American economy by attracting excessive investment to the most heavily subsidized industries: farming, energy production, and transportation...
...and—through neat manipulations of the tax code—of the construction and insurance industries...
...And any plan labeled "Cut and Invest" understandably raises Republican hackles...
...But striking at industry subsidies would also immensely strengthen the Republicans politically...
...To big beneficiaries, the federal water subsidy can be worth up to $12 million per year...
...Unfortunately, the Republicans have been sending some ominous signals that business in Washington is continuing as usual...
...The enthusiasm of a Democratic group like the Progressive Policy Institute for slashing business subsidies may worry some Republicans...
...The cost of pumping water through the pharaonically uneconomic CVP is an amazing $1,800 per acre-foot or more...
...Republicans' willingness to disregard the immediate self-interest of their constituencies may matter as much to voters as the size of their tax cuts or the toughness of their crime bill...
...True, President Clinton made his first post-election appearance at a black-tie dinner sponsored by the PPI, but he came to talk, not to listen...
...What was rejected in November, Sen...
...Indeed, the list of business subsidies collected by Moore and Shapiro stands as a waxwork chamber of horrors of institutional corruption...
...Finally, there is partisan hay to be made out of the business-subsidy issue...
...Attacking corporate subsidies may also help to insulate Republicans from accusations of callousness as they reform welfare and middle-class entitlements...
...of Florida's wealthiest sugar growers and Georgia's logging barons...
...Perhaps, as defenders of the subsidy argue, it would be injudicious to withdraw it suddenly and without warning...
...Voters do not need to agree with principles to respect them...
...John McCain (R-Ariz...
...The Washington Post in March reported one petty but obnoxious example: although the Republican welfare reform plan enacted by the House in March abolished federal benefits for immigrants under age 75, it made one exception—for temporary farm laborers...
...It has been underwriting the foreign advertising of McDonald's and Sunkist, exempting credit unions fromtaxes that other savings institutions must pay, and assuming the research expenses of Intel, IBM, and other semiconductor manufacturers...
...Reich's own academic work—which enthusiastically champions targeted subsidies and trade protection to "strategic" companies and industries—that provided the administration with its main economic ideas...
...While the word David Frum is the author of Dead Right, now available in paperback from New Republic/Basic Books...
...The magnitude of this gift is not easy for those in the puny East to comprehend: the lucky farmers and miners who receive water from federal irrigation systems like California's Central Valley Project pay $15 or less per acre-foot (more than 300,000 gallons) of water...
...And in his 1995 report "Cut and Invest," Robert Shapiro of the liberal Progressive Policy Institute identifies $131 billion in business subsidies that could be cut over the next five years, along with $101 billion in highly targeted tax exemptions...
...The steady, high support for term limits—even after voters demonstrated they can toss out-of-touch incumbents out by themselves—suggests a continuing mistrust of the institution of Congress...
...has argued, was not merely liberalism as an ideology—it was interest-group politics as a way of doing business...
...It's not too late: If Budget Committee chairman John Kasich adds farm subsidies to his list of budget-cutting proposals when he unveils the GOP's alternative 1996 budget, he will buy himself partial immunity from criticism of his cuts in Medicaid, student loans, and other sentimental favorites...
...In three ways: ?By ceremoniously and ostentatiously decapitating hundreds of programs for giant corporations, rich farmers, and multinational enterprises, the Republicans could prove to a skeptical electorate the sincerity of their free-market principles...
...71 The American Spectator June 1995 43...
...But the recipients of these subsidies have as much of a moral claim to compensation as the socialist socialites of Central Park West would if New York City asked them to pay the real value of their rent-controlled nine-room apartments...
...As for the rest—Republicans should shamelessly steal it...
...The new congressional majority will need decades to catch up to the venality and corruption of the Democrats...
...The market price for traded water in California oscillates between $250 and $400 per acre-foot...
...conservative" elicits positive feelings in opinion surveys, pollster Frank Luntz reports, the word "Republican" still does not...
...Congress has been tucking money into the pockets of General Motors, Citibank, and American Airlines...
...The elimination of business subsidies no more belongs to President Clinton than does welfare reform or any of the other ideas that PPI has tossed out over the past six years in a remarkably unsuccessful effort to save the Democratic Party from itself...
...Indeed, it was Robert...
...Purging the budget of special favors for big companies cannot substitute for welfare and entitlement reform—relatively few farmers, after all, are getting pregnant out of wedlock and spraying street corners with machine-gun bullets...
...Nobody will say who inserted this provision into the act, but everyone understands how it got there and who profits from it...
...T he massive repudiation of the Democrats last November should not automatically be interpreted as a declaration of confidence in the Republican Party...
Vol. 28 • June 1995 • No. 6
