ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, December 11, 1996 TAG: 9612110015
SECTION: EDITORIAL PAGE: A-10 EDITION: METRO
IN QUEST of the holy grail of federal budgetary balance, and of easy ways to get there, politicians and policy wonks of many ideological hues have fixed on "corporate welfare" as one purportedly painless place to slash.
But what is "corporate welfare"? Estimates of the potential savings vary so grotesquely - from $23 billion a year (the Progressive Policy Institute) to $45 billion (Labor Secretary Robert Reich) to $87 billion (the Cato Institute) to $150 billion (a series in The Boston Globe) - that you have to wonder whether anybody really knows. Let's help 'em out:
* Corporate welfare is corporate subsidization that serves little or no public purpose.
Applying this definition would probably limit savings toward the lower end of the range. On the other hand, it would get rid of a lot of subsidies that distort market allocations of investment, while retaining some that contribute to the nation's social and economic well-being.
Subsidies for basic research and development are a good example. They should continue because (a) basic research spurs the technological advances on which economic growth depends and (b) the benefits of basic research tend to be too long-range and too widely applicable (including to competitors) for the profit motive alone to produce enough of it. Other examples of general policy aims for which corporate subsidies can be useful: environmental protection and worker training.
* Corporate welfare comes in the form not only of direct spending but also of tax breaks.'
Tax breaks shouldn't count as corporate welfare, some folks say, because they simply let taxpayers keep more of their own money. In a discussion of general taxation levels, the point might be valid. On the question of tax preferences, of when and why some taxpayers should be allowed to keep more of their own money than other taxpayers can, it's meaningless.
Or worse, as Jonathan Chait notes in a recent issue of The New Republic: Direct subsidies must be reappropriated periodically, while tax-code subsidies continue indefinitely until repealed. The latter are less likely to end when they no longer serve a legitimate purpose.
So keep an eye on Congress. If it goes after high-tech encouragers, for example, while retaining obsolete World War I-era tax subsidies like those for oil companies, you'll know you're seeing just a replay of an old game - the game where political influence, not social or economic value, wins.
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