IT'S ONLY MONEY
Knoll, Erwin
IT'S ONLY MONEY ERWIN KNOLL How sweet it is. The Sugar Act of 1948, designed "to protect the welfare of the U.S. sugar industry," provides for direct cash payments from the U.S. Treasury to...
...Sail on and on...
...Subsidies are a mystery—"hidden from public scrutiny," as the staff of the JEC observed...
...These three items—three relatively minor items— are from an incredible compendium of public subsidies for private interests prepared by the staff of the Joint Economic Committee...
...There is virtually no analysis of economic benefits and little analysis of the cost of these programs...
...Treasury to producers of sugar beet and sugar cane in the continental United States, Hawaii, and Puerto Rico...
...And this is precisely why it is so hard to eliminate a subsidy once established...
...It is not at all clear that the subsidies in this area have improved the environment...
...Two Brookings Institution economists, Joseph A. Pechman and Benjamin A. Okner, told the Committee that tax loopholes and "erosions" in the individual income tax alone account for $77 billion in lost revenues...
...Yet Congress has done indirectly—in the tax laws—what it would never dream of doing directly...
...After all, it's only money...
...The subsidy system, he suggested, is inextricably intertwined with the financing of politics, and it is sustained equally by Republicans and Democrats, conservatives and liberals...
...It would be unthinkable," Stern testified, "for Congress to even consider a proposal to vote welfare grants of $14,000 a week for the wealthiest versus thirty cents a week for the nation's poorest families...
...The 222-page study, The Economics of Federal Subsidy Programs, available for $1 from the U.S...
...The term subsidy itself is shunned like the plague by the drafters of special-interest legislation, and appears nowhere in the massive Budget of the Government of the United States...
...Under the Federal Aviation Act of 1958, "to promote the development of air transportation to the extent and quality required for the commerce of the United States, the Postal Service, and the national defense," the Government reimburses air carriers for any losses they may incur...
...In his own short-lived Presidential campaign, Harris revealed, a principal backer "became increasingly alienated by my talk about decentralizing the shared monopolies which dominate thirty-five per cent of American industry and which artificially set prices far above competitive market levels, perhaps as much as twenty per cent...
...The political phenomenon I am describing," Harris said, "explains why our Government is approaching such paralysis...
...If one group is gaining unfair advantage, the reaction of most legislators is not to end that injustice but to seek similar advantages for their constituents...
...Representative Henry S. Reuss, before the Joint Economic Committee, January 14, 1972 and airline subsidies previously cited, and scores more like them...
...One is struck by the large amounts of aid given air and water transportation and, in contrast, the small amounts given to urban mass transit...
...shipping companies whose vessels are used in foreign trade...
...Working from the Pechman-Okner data, he calculated that each of the nation's wealthiest families—those with income of more than $1 million a year—has its taxes reduced by $14,000 a week as a result of deductions and preferences written into the tax law...
...f International trade, $1 billion...
...The JEC's staff study and the January hearings received scant attention in the mass media, and Proxmire complained that at one point in the hearings, three of the four correspondents at the television table seemed to be fast asleep...
...H Housing, $8 billion...
...The monied interests in this country therefore give to political parties not so much in order to gain new advantages as in order to protect existing advantages...
...The Government spends less time and attention in determining the cost and priorities of most Government subsidy programs than the average housewife spends in determining the priorities of her weekly household spending...
...Senator from Connecticut in 1968, chilled some of his best contributors to the point of zipping tight their pocketbooks when he included reform of the capital gains tax in his list of tax reforms needed...
...And politicians, who always face a long list of significant things they may do, move on to other, less controversial issues...
...If the trucking industry gets a subsidy from the highway trust fund, Congress's answer is not to end that subsidy but to grant comparable subsidies to other modes of transportation...
...If the oil industry gets a depletion allowance, the response is not to end that abuse but to pass the abuse on to other extractive industries...
...a fiscal highwayman who takes from the general public to give to a certain favored few who do nothing for society...
...f Medical care, $9 billion...
...Liberals who do not depend on large campaign contributions from the oil industry find it "not too difficult...
...Families with incomes of more than $100,000 a year —about three-tenths of one per cent of the U.S...
...How is it that the average citizen puts up with such an unfair system...
...Credit subsidies, costing $4 billion to $5 billion a year and providing low-interest loans for housing, education, farming, hospital construction, rural electrification, and purchase of U.S...
...20402, is recommended reading for Americans who will soon be bending over their income tax returns...
...A dull and tedious business, subsidies...
...Tax subsidies, diminishing Federal revenues by at least $38 billion a year in order to aid businesses, investors, homeowners, credit unions, banks, and life insurance companies...
...He staggers under his tax burden, grumbling about pathetically small "giveaways" to the poor and totally unaware of the generous giveaways to the rich...
...An answer was provided to the Committee in dramatic testimony by Senator Harris, who dropped his Presidential candidacy last year because of a lack of campaign funds...
...Government Printing Office, Washington, D.C...
...With our honeycomb system of endless subsidies, most of the special interest legislation is already on the books...
...military hardware...
...It includes payments to dairymen and beekeepers whose products are damaged by pesticides (about $5.5 million this year), as well as favorable tax treatment for individual capital gains (at least $7 billion...
...They estimated that income taxes could be slashed by forty-three per cent across the board "if all the eroding features of the tax law were eliminated...
...It covers special housing for disabled veterans and special depreciation allowances for major corporations...
...The $63 billion in subsidies identified by the JEC staff are "just the top of the iceberg," said Senator Fred R. Harris, Democrat of Oklahoma, who testified during three days of subsidy hearings conducted by Proxmire in January...
...The Merchant Marine Act of 1936, "to promote the development and maintenance of the U.S...
...The average citizen has no idea of what is going on...
...U Commerce and economic development, $20 billion...
...But to put it mildly, as the JEC study did, "there appears to be a bias in the system toward producer rather than consumer subsidies...
...Benefit-in-kind subsidies, worth about $10 billion annually, which provide goods and services including mail delivery, food, public housing, airports, public lands, industrial machinery, trees, and other items...
...They give, usually to both parties, in order to insure that whoever is the winner, special interest subsidies, however outdated, will never be touched...
...That definition encompasses the sugar, shipping, Highway Robbery We must not lose sight of the fact that many of these giveaways are not subsidies at all for any useful purpose but simply...
...So it was no surprise that Joseph Duffey, former president of the Americans for Democratic Action who ran for U.S...
...Some of the specific subsidies identified in the study prompted questions and comments from Proxmire: % Agriculture, $5 billion...
...In effect, then, this combination of heavy Government involvement in the economy and of a scandalous system of campaign financing makes it highly unlikely that the Congress will ever embark on a course of fundamental reform...
...How can we be providing subsidies this large and still have so much dissatisfaction with medical care...
...But liberals do get a lot of money from Wall Street...
...Easy come, easy go...
...Merchant Marine," authorizes cash subsidies to U.S...
...The complicated definition runs to a page and a half...
...The supporter wanted Harris to stick to such "safe" subjects as drug addiction and the Vietnam war...
...Still, $63 billion was almost a third of the money spent by the Federal Government that year—$308 for every man, woman, and child in the United States, $1200 for every family...
...The cost to the taxpayers in fiscal 1971: $83.6 million...
...The whole process snowballs until we end up with $63 billion, plus in subsidy programs and with a Government that begins to stagger and fall from its own weight...
...If the public supports the objective of the subsidy—such as increased housing assistance—and the subsidy achieves that objective efficiently and equitably, it is a good subsidy...
...Proxmire asked, but the answer was evident in the Committee's staff study and hearings...
...Some three dozen more detailed studies of specific subsidies have been commissioned, and additional hearings are to be held this spring...
...All subsidies should be openly disclosed and evaluated for the American public," Proxmire says, and his Committee is pondering several plans for an annual review of the subsidy system...
...It cannot be too strongly emphasized," the JEC staff noted, "that the label 'subsidy' does not make a Government program automatically good or bad...
...All this may help spread the word, but the process will not be easy...
...In fiscal 1971, the payments came to $223.8 million...
...The lion's share of this consists of tax subsidies to business, many of which are quite questionable...
...H Transportation, $1 billion...
...Neither Congress nor the Executive Branch determines if alternate programs can do a better job...
...In fact, there is not even the most elementary examination of whether these subsidy programs actually achieve the goals they were designed to achieve...
...Only informed public debate and analysis can determine if a subsidy is good or bad...
...U Natural resources, $3 billion...
...Four major forms of subsidy were identified: • Cash subsidies—direct payments from the Treasury—amounting to $10 billion to $13 billion a year and designed to enhance the profits (or diminish the losses) of certain industries, to discourage the production of certain farm crops, to build fish ponds and irrigation systems, to send students to college, and to achieve many other purposes, some of which are not even spelled out in the legislative history of the authorizing statutes...
...Senator Fred R. Harris, before the Joint Economic Committee, January 18, 1972 American politicians, including many who are quite liberal, to advocate more than just tinkering with fundamental wrongs or simply adding a little more to existing New Deal-type programs...
...after wrestling with the subject, the JEC staff came up with this "simple" definition: "A subsidy is any one-way governmentally controlled income transfer to private sector decisionmaking units that is designed to encourage or discourage particular private market behavior...
...This mammoth subsidy system represents a mindless means of spending taxpayers' money," says Democratic Senator William Proxmire of Wisconsin, the chairman of the Joint Economic Committee...
...H Manpower programs, $2.5 billion...
...Where is the proof that any of these subsidies increase exports...
...How much of the benefits are just windfalls to business firms...
...Subsidies, in other words, are the life blood, tainted to be sure, of our electoral system...
...It helps explain where much of the money goes...
...Do these subsidies benefit the average farmer or the corporate giants...
...For now it is very difficult to get Blood Poisoning Subsidies are to modern politics what patronage was to the politics of the Nineteenth Century...
...Despite its huge cost and formidable impact on the American economy, the subsidy system has been virtually ignored by economists...
...Last year, reimbursements totaled $57.2 million...
...Author Philip M. Stern, whose book on tax loopholes, The Great Treasury Raid, was a best seller in 1964, called the Internal Revenue Code "the largest of all welfare bills"—particularly for the rich...
...We see this everywhere...
...Erwin Knoll is the Washington Editor of The Progressive...
...There is no evidence collected to analyze each subsidy program in relation to the costs and benefits of other pressing needs...
...to talk about doing something about the oil depletion allowance," Harris noted...
...Even defining "subsidy" is a problem...
...At least $63 billion was spent on subsidies in fiscal 1970, according to the Committee staff's admittedly "crude" and "conservative" calculations, which did not include such benefits as welfare and aid to the blind, or such free services as medical care for merchant seamen...
...And so on...
...What share of these benefits go to the poor...
...population—receive "tax welfare benefits" of more than $11 billion annually, Stern noted—about four times the Government's annual expenditure for food stamps to feed the poor, and about 1,000 times the Federal outlay for health programs serving migrant farm workers...
...The total "tax welfare benefits" for families earning less than $10,000—almost forty-six per cent of the population—amount to less than $8 billion...
...The saving for the nation's poorest families—those earning less than $3,000 a year—is thirty cents a week...
...There is no effort to see if the market place would be a more efficient way to achieve the goals...
...The two set the limits to what is politically permissible...
...If it does not meet those tests, it is a bad subsidy...
...the JEC report is the first book-length study to appear in English...
...Flying high...
...It embraces the "cost deficiency" in the second class mail rates paid by newspapers and magazines, which the Postal Service estimated at $136 million in fiscal 1970...
...Why does Congress do it...
Vol. 36 • March 1972 • No. 3
