Pro-business programs attacked from two sides

Nation's Business, April, 1997 by Stephen Blakely

Business news in brief from the nation's capital

Another assault is under way against federal spending programs favored by business but derided by opponents as "corporate welfare."

The current attack may be the most formidable yet because the traditional protagonists, liberal-leaning interest groups and their congressional allies, have been joined by several conservative-minded organizations and members of Congress, led by House Budget Committee Chairman John Kasich, R-Ohio.

Kasich and the Stop Corporate Welfare! coalition--made up of 10 liberal and conservative interest groups--have targeted $11.5 billion of spending over five years. At a recent news conference in Washington. Kasich said eliminating that proposed spending would represent "the next step toward ending welfare as we know it."

Referring to last year's overhaul of the federal welfare program, Kasich said: "We've reformed welfare for those who don't have money or powerful Washington lobbyists. Now it is time we did the same thing for welfare programs that aid the rich and powerful at the expense of taxpaying families."

Business Groups Respond

The U.S. Chamber of Commerce and other business groups have denounced the proposed spending cuts as "careless and shortsighted." Most of the programs under attack, such as those supporting U.S. exports, enhance America's competitiveness and protect U.S. jobs, says Willard A. Workman, the Chamber's vice president for international affairs. "Cutting these programs will hurt America's efforts to expand in the global economy, ultimately locking out businesses' access in emerging markets."

Past attempts to scale back corporate subsidies have met with little success in Congress, but the Kasich initiative is different: It builds on last year's sweeping rewrite of federal welfare programs for the poor; it unites a diverse and bipartisan group of supporters; and it helps lawmakers who are desperately looking for ways to balance the federal budget.

Senate Majority Leader Trent Lott, R-Miss., hinted in a speech early this year at the U.S. Chamber's headquarters in Washington that some cuts in business-oriented spending programs and tax-break provisions may be inevitable. "There are some programs that benefit corporations in America that we're going to have to take a look at," he told the audience of business people. "I'm prepared to do that, knowing that many of you in this room squirm a little bit when I say that. I don't call it `corporate welfare,' but I do ask the question: Can we afford it any longer? Do we need it any longer?"

Small Companies Affected

Although many programs under attack by the Stop Corporate Welfare! coalition primarily favor large companies, some benefit small firms. For example, the Overseas Private Investment Corp. which provides loans, loan guarantees, and political-risk insurance to U.S. exporters, has programs aimed at helping small companies. In addition, farmers and rural businesses benefit from federal water projects and from the Rural Utilities Service, which helps finance electric utilities.

While none of the programs targeted by Kasich would be wiped out under President Clinton's 1998 budget plan, the president did call for repealing a number of "unnecessary corporate subsidies and other unwarranted tax breaks"--mostly for big business and investors.

Coalition Is Diverse

The coalition includes liberals, such as consumer advocate Ralph Nader, and conservatives, such as the National Taxpayers Union, as well as environmentalists, such as Friends of the Earth, and pro-business groups, such as the Competitive Enterprise Institute.

Kasich touted the significance of getting such "an unlikely group" to agree on specific spending cuts and said the list "represents just the start of efforts to eliminate corporate welfare." He invited other lawmakers to suggest more cuts.

The Kasich initiative may improve prospects of a Senate bill that would create a nine-member Corporate Subsidy Reform Commission, the panel could be a vehicle for escaping the inevitable political battles over cuts in corporate subsidies.

Sponsored by Sens. John McCain, R-Ariz., and Russell Feingold, D-Wis., the legislation would establish an advisory panel modeled after the politically successful commission on military-base closings. The bill would give Congress four months to approve, reject, or amend the commission's recommendations for eliminating pro-business programs.

RELATED ARTICLE: Endangered Business Programs

The Stop Corporate Welfare! coalition, composed of 10 interest groups--some conservative, others liberal--wants Congress to kill many federally supported projects and programs that benefit business, for an estimated savings of $11.5 billion over five years. Following are some of the endangered programs and their costs.

Highway Demonstration Projects. Miscellaneous construction and improvement efforts; $4 billion.

International Monetary Fund General Agreements To Borrow. Money that developing countries can borrow to pay off loans, many to U.S. banks; $3.5 billion.