Welfare Reform For Fat Cats

'WELFARE REFORM
FOR FAT CATS'

If you've eaten a Tootsie Roll,
taken a back road through the forest or thrown a light switch.
you too are a welfare recipient

Story by Gayle Worland
Illustrations by Daisy Juarez

Tootsie Roll received $154,250 in marketing subsidies from the U.S. government to help satisfy sweet teeth abroad. LP International was awarded $56,750 to promote overseas sales of its taco shells and salsa.
The two companies, who belong to a handful of Illinois-based concerns benefiting from the federal Market Access Program, have been held up as examples of "corporate welfare," the latest dirty word among congressional budget-cutters.
Ohio Rep. and House Budget chairman John Kasich, along with a diverse coalition of organizations from the left and right, has vowed to change corporate subsidies as we know them, by targeting programs they argue benefit big business at the expense of taxpayers and the environment.

Spurred by last year's success in Congress to block efforts to double appropriations for the Overseas Private Investment Corporation (OPIC), the group met through the fall and winter to draw up a list of 12 programs for reduction or elimination. The coalition estimated the cuts would save $11.5 billion over five years.

On March 12, the 57 members of the Progressive Caucus — including U.S. Reps. Lane Evans, Jesse L. Jackson Jr. and Luis Gutierrez of Illinois — upped the ante further, announcing a $240 billion list of "most wanted corporate welfare and fat cat cuts."

Threats to "Aid for Dependent Corporations," as some editorial writers call it, have become political currency on both sides of the political aisle. Not just money is at stake, advocates say.

"It's not waste," says Kasich spokesperson Bruce Cuthbertson. "We call it 'corporate welfare.' In an era when we have reduced welfare benefits for people with limited means ... it's a question of fairness," he explains. "It's unfair to have welfare reform only for people without lobbyists, and to not have welfare reform for those with lobbyists. Everybody has to be in the box."

Overall, government spending to promote commerce tops $28 billion a year, according to a 1995 study by the Congressional Budget office. Tax breaks for specific businesses may cost more than an additional $1 billion a year.

Kasich and his coalition have proposed cuts that would directly affect Illinois, such as the Department of Energy's plutonium processing program at Argonne National Laboratory at its sites in northeast Illinois and in Idaho. Environmental groups charge the program, designed to reprocess hazardous nuclear wastes, costs taxpayers at least $50 million a year, poses environmental hazards and raises the risk of proliferation.

Illinois Issues April 1997 /31

'The Dirty Dozen'

The programs on the Stop Corporate Welfare
Coalition's hit list, drawn up by Ohio Rep. John
Kasich and a broad range of interest groups. The
dollar figures are estimated savings over five years:

1) Rural Utilities Service (RUS): Successor to the New Deal-era Rural Electrification Administration, established to bring electricity to rural areas. Opponents say the program serves only 10 percent of the population, which might be more efficiently served by investor-owned utilities. $190 million.

2) The Market Access Program: Helps exporters offset the cost of advertising their products abroad through payments to trade associations, commodity groups and some small companies. Illinois beneficiaries have included Tootsie Roll, LP International and TKI Foods ($125,000 to market meal replacement abroad), Vienna Sausage ($70,000 to market products abroad), and Inter-Group Trade Service ($50,000 to market fruit juices abroad). $347 million.

3) Animas La Plata: Public works project in southwest Colorado would divert much of the water in the Animas River to farmers growing low-value crops such as alfalfa. Environmentalists say it threatens endangered species of fish, would destroy animal habitats and would cause violations of the Clean Water Act downstream in New Mexico. $432 million (over the project's lifetime).

4) Pyroprocessing Program: DOE program creates new fuel from the spent fuel of nuclear reactors and is a big-ticket item for Illinois, home to Argonne Laboratory. Opponents claim the technology research benefits Westinghouse, General Electric and British Nuclear Fuels. $100 million.

5) Appalachian Regional Commission Roads Program: Builds roads in 13 Appalachian states; opponents claim urban centers are the primary beneficiaries. $500 million.

6) Fossil Energy Research and Development (including oil, coal and gas research): DOE program to develop applied energy technologies; the General Accounting Office reports that too often "the DOE continues to develop technologies in which the market clearly has no interest." $1.37 billion.

7) Timber Roads in the National Forests: Builds roads in national forests intended for recreational and timber industry use; opponents say private companies who profit from activities on public lands should pay their own road construction costs. $100 million.

8) Clean Coal Technology Program: The 1990 Clean Air Act Amendments gave the private sector a clear legislative mandate for lowering coal emissions; opponents say this program created in 1984 to assist private industry in developing commercial technologies is no longer necessary. $500 million.

9) The Overseas Private Investment Corporation: Provides loans, loan guarantees and insurance to U.S. companies that invest in developing countries too risky for commercial bank loans. OPIC has been criticized for putting too much taxpayer money at risk, and for financing environmentally damaging projects in host countries. Decatur's Illinova Generating Co. received $50 million in OPIC financing for a project involving oil-fired power generation. $281 million.

10) General Agreements to Borrow: Part of the International Monetary Fund, and intended to prevent international monetary crises caused by developing countries on the verge of default. Opponents argue the program bails out governments with detrimental policies, bloated bureaucracies and unnecessarily expensive militaries. $3.5 billion.

11) Enhanced Structural Adjustment Facility: The International Monetary Fund's low-interest loan program for the poorest developing countries. Opponents say that despite 10 years of lending, poverty continues to increase in many ESAF countries. $150 million.

12) Highway Demonstration Projects: Critics would curb road demonstration projects specifically requested by individual lawmakers. According to opponents, the projects are often misguided and draw funds from other highway projects, such as maintenance of interstates. $4 billion.

Gayle Worland

32 / April 1997 Illinois Issues

All these issues will affect residents of Illinois, says Courtney Cuff of the Washington-based group Friends of the Earth. The organization's annual "Green Scissors" report points to some 57 environmentally risky corporate subsidy programs costing $36.4 billion, including the 1872 Mining Act, a century-old law that allows mining companies to pay a small fraction of the value of minerals found on public lands; and a Forest Service program that builds woodland roads used by the timber industry. According to the Public Interest Research Group and the General Accounting Office, the U.S. Forest Service — and thus taxpayers — wrote off $1.4 million from 1992-94 for forest management programs in the Shawnee National Forest that ultimately benefited the timber industry. We don't merely pay at the front end, says Cuff. "We also pay for the cleanup."

Rep. John Porter, a Wilmette Republican, is a longtime supporter of the "Public Subsidies Deficit Reduction Act," designed to reduce tax dollars that provide businesses with cheap minerals and timber, subsidized water and other benefits. The current bill, several incarnations of which have previously failed in Congress, would require higher returns on land leases for oil, gas, minerals and livestock grazing, and would charge full costs for federal water used to irrigate surplus crops.

Illinois' Evans also has introduced corporate subsidy-related legislation that would cut loopholes allowing U.S. companies with foreign subsidiaries to shift income to their overseas operations, thus avoiding domestic income taxes.

One of Illinois agriculture's most sacred Washington cows — tax breaks for the ethanol industry — is not threatened under the coalition's plan. But cutting business subsidies — even when they're in someone else's district — is not always easy for members of Congress. "You may be in favor of eliminating corporate welfare in general. But if you're in a district with a lot of forests, for example, it may be hard to explain to the taxpayers in your district that you're voting to cut funds that would help build roads through those forests," says Gene Guerrero of Public Citizen, a pro-consumer interest group in Washington.

Public Citizen and the pro-market Competitive Enterprise Institute (CEI) are only two of the strange bedfellows to join Kasich's diverse coalition. CEI agrees that the debate over corporate subsidies is both "a moral and a market one," says the institute's Fred Smith. He points to OPIC, which provides loans and insurance to American companies that invest in developing countries — including, among others, a not-so-struggling restaurant chain in Oak 'Brook called McDonald's. Smith argues that government doesn't pay insurance premiums for the private individual; why should it insure businesses against loss in risky overseas markets? "Why is government involved in insurance at all?" he asks, adding that OPIC "has a good chance of going down."

Likewise, Smith compares the government's Market Access Program, which provides businesses with overseas advertising dollars, to the shopkeeper who throws $100 bills out the window in order to draw people into the store. Some American businesses who are trying to increase foreign trade argue government should pitch in and do its share. But, "It's not an efficient way of doing business," counters Smith. "Americans know how to sell goods abroad; get out of the way and let them do it."

Legislation from Kasich's coalition was scheduled to be introduced last month.

"All these projects are extremely complex," so no legislative deadline has been set, Cuthbertson explains. Even if primary legislation fails, the cuts may take hold in the appropriations process when each program is examined for funding, he says.

Despite the broad range of supporters, cutting subsidies doesn't appeal to everyone. "It's like campaign finance reform in a way," says Guerrero of Public Citizen.

"You have a lot of big money spending money to defend these programs that we call corporate welfare."

Gayle Worland is a Rock ford native now living in Washington, D. C. Her free-lance pieces have appeared in several publications, including Illinois Times and the Washington Post. Her most recent article for Illinois Issues was a profile of Illinois' U.S. Sen. Richard Durbin.

Ethanol, one
of Illinois agriculture's
most sacred Washington cows, is
not threatened. But cutting business
subsidies, even when they're in
someone else's district, is not always
easy for members of Congress.

Illinois Issues April 1997 / 33