Franco
6th April 2002, 03:55
Chairman Kasich and Members of the House Budget Committee, thank you for the opportunity to testify today on the vast subject of corporate welfare.
Today's hearing is long overdue. A significant percentage of the business of Washington, D.C. revolves around corporate welfare -- with lobbyists, trade associations and business executives lobbying to obtain or protect special, favorable treatment from the federal government -- but curiously, notwithstanding our efforts since 1970, there has never been a Congressional hearing devoted to a comprehensive assessment of the issue. Government agencies and research offices have conducted only a handful of Joint Economic Committee-type studies in recent decades which tried just to inventory the long list of mechanisms by which the government distributes tax revenues and other public assets to private business.1
Mr. Chairman, you deserve major credit for issuing a clarion call for Congressional attention to corporate welfare, and for leading various legislative efforts over the years to end egregious corporate welfare programs that benefit narrow business interests at the expense of the taxpayer, and often, one should add, at the expense of other important concerns, such as environmental protection, economic competition, fair consumer prices, national security, job creation and a well-functioning democracy.
As you know well, Mr. Chairman, the myriad of corporate welfare programs generally do not persist on the merits. Rather, they remain entrenched and continue to grow because strong and well-organized business interests, with huge monetary concerns at stake, aggressively work to defend and expand them -- often hand in hand with powerful Members of Congress with whom they maintain mutually advantageous relationships. Cleaning the corporate welfare slate will not be easy.
There is only one change that will counteract the entrenched interests which create, shield and rationalize corporate welfare programs: an informed and mobilized citizenry. Absent organized and focused public outrage, legislative efforts will yield minimal success as compared to the overall scale of the corporate welfare budget. To make this claim is not to belittle such efforts. Legislative initiatives directed toward particular programs and abuses can achieve reforms that are important in their own right, and legislative proposals can and should be part of the very process of generating citizen interest and focused attention.
But innovative legislative proposals will not, by themselves, be sufficient to create an informed public opinion that translates into the action needed to create a countervailing force to the business lobby for corporate entitlements.
Many steps will be needed to create that countervailing force, but one very important step will be a series of high-profile Congressional hearings that shine the light on egregious corporate welfare abuses, develop an analytic framework to assess corporate welfare programs, develop procedures and hone proposals to eliminate or control corporate welfare programs, bring the Corporate Welfare Kings (beneficiary CEOs) before Congressional committees to justify their dependence on the public dole, generate news media stories and investigations, and elevate the visibility of the issue in policy debates within the Beltway and around the country in town hall meetings. This hearing should begin that process. We hope it will be followed in coming months and years by more detailed inquiries.
In this testimony, after preliminary remarks on the evolution of corporate welfare and on defining corporate welfare, I will offer a rudimentary corporate welfare classification scheme and highlight particular examples of each category. (The categories offered: government giveaways; government-funded research and development; bailouts; tax expenditures; government-sponsored enterprises; loans and loan guarantees; state and local corporate welfare; export and overseas marketing assistance; defense, transportation and other pork; loans and loan guarantees; and grants and direct subsidies.) In addition to fleshing out the typology, the discussion of examples will be intended to offer insights into the following questions:
What rationales do private interests use to secure subsidies from the government, and then to shield them from challenge, from either the legislative and judicial branches?
How do corporate welfare programs become entrenched and immune to cessation or reform?
To what extent do foreign corporations benefit from the expenditure of U.S. taxpayer dollars on corporate welfare?
How can fair pricing mechanisms be used to allow beneficial programs to be preserved, while eliminating welfare subsidy components?
What criteria should be used to determine when corporate welfare programs should simply be cancelled, and when they should be restructured to extract public benefits, pay-backs or investment returns from the government-supported enterprise?
What administrative due process should apply to corporate welfare? How can taxpayers be given standing and procedural rights under the Administrative Procedures Act and other relevant statutes to challenge arbitrary agency action in the corporate welfare area?
How do economic subsidies disadvantage non-subsidized competing businesses, who pay their dues, and foster undesirable market outcomes?
At the conclusion of my testimony, I will suggest, for discussion purposes, reforms to rein in the proliferation of corporate welfare programs. These will not be in the form of a target list of programs that should be cancelled (though there are certainly many of these, and several highlighted here). Rather the proposals are overarching approaches, elements of a comprehensive approach to corporate welfare.
Today's hearing is long overdue. A significant percentage of the business of Washington, D.C. revolves around corporate welfare -- with lobbyists, trade associations and business executives lobbying to obtain or protect special, favorable treatment from the federal government -- but curiously, notwithstanding our efforts since 1970, there has never been a Congressional hearing devoted to a comprehensive assessment of the issue. Government agencies and research offices have conducted only a handful of Joint Economic Committee-type studies in recent decades which tried just to inventory the long list of mechanisms by which the government distributes tax revenues and other public assets to private business.1
Mr. Chairman, you deserve major credit for issuing a clarion call for Congressional attention to corporate welfare, and for leading various legislative efforts over the years to end egregious corporate welfare programs that benefit narrow business interests at the expense of the taxpayer, and often, one should add, at the expense of other important concerns, such as environmental protection, economic competition, fair consumer prices, national security, job creation and a well-functioning democracy.
As you know well, Mr. Chairman, the myriad of corporate welfare programs generally do not persist on the merits. Rather, they remain entrenched and continue to grow because strong and well-organized business interests, with huge monetary concerns at stake, aggressively work to defend and expand them -- often hand in hand with powerful Members of Congress with whom they maintain mutually advantageous relationships. Cleaning the corporate welfare slate will not be easy.
There is only one change that will counteract the entrenched interests which create, shield and rationalize corporate welfare programs: an informed and mobilized citizenry. Absent organized and focused public outrage, legislative efforts will yield minimal success as compared to the overall scale of the corporate welfare budget. To make this claim is not to belittle such efforts. Legislative initiatives directed toward particular programs and abuses can achieve reforms that are important in their own right, and legislative proposals can and should be part of the very process of generating citizen interest and focused attention.
But innovative legislative proposals will not, by themselves, be sufficient to create an informed public opinion that translates into the action needed to create a countervailing force to the business lobby for corporate entitlements.
Many steps will be needed to create that countervailing force, but one very important step will be a series of high-profile Congressional hearings that shine the light on egregious corporate welfare abuses, develop an analytic framework to assess corporate welfare programs, develop procedures and hone proposals to eliminate or control corporate welfare programs, bring the Corporate Welfare Kings (beneficiary CEOs) before Congressional committees to justify their dependence on the public dole, generate news media stories and investigations, and elevate the visibility of the issue in policy debates within the Beltway and around the country in town hall meetings. This hearing should begin that process. We hope it will be followed in coming months and years by more detailed inquiries.
In this testimony, after preliminary remarks on the evolution of corporate welfare and on defining corporate welfare, I will offer a rudimentary corporate welfare classification scheme and highlight particular examples of each category. (The categories offered: government giveaways; government-funded research and development; bailouts; tax expenditures; government-sponsored enterprises; loans and loan guarantees; state and local corporate welfare; export and overseas marketing assistance; defense, transportation and other pork; loans and loan guarantees; and grants and direct subsidies.) In addition to fleshing out the typology, the discussion of examples will be intended to offer insights into the following questions:
What rationales do private interests use to secure subsidies from the government, and then to shield them from challenge, from either the legislative and judicial branches?
How do corporate welfare programs become entrenched and immune to cessation or reform?
To what extent do foreign corporations benefit from the expenditure of U.S. taxpayer dollars on corporate welfare?
How can fair pricing mechanisms be used to allow beneficial programs to be preserved, while eliminating welfare subsidy components?
What criteria should be used to determine when corporate welfare programs should simply be cancelled, and when they should be restructured to extract public benefits, pay-backs or investment returns from the government-supported enterprise?
What administrative due process should apply to corporate welfare? How can taxpayers be given standing and procedural rights under the Administrative Procedures Act and other relevant statutes to challenge arbitrary agency action in the corporate welfare area?
How do economic subsidies disadvantage non-subsidized competing businesses, who pay their dues, and foster undesirable market outcomes?
At the conclusion of my testimony, I will suggest, for discussion purposes, reforms to rein in the proliferation of corporate welfare programs. These will not be in the form of a target list of programs that should be cancelled (though there are certainly many of these, and several highlighted here). Rather the proposals are overarching approaches, elements of a comprehensive approach to corporate welfare.