corporate welfare in the federal budget, cato policy analysis no. 703

7/31/2019 Corporate Welfare in the Federal Budget, Cato Policy Analysis No. 703

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Executive Summary

Rising federal spending and huge deficits arepushing the nation toward a financial and eco-nomic crisis. Policymakers should find andeliminate wasteful, damaging, and unneeded pro-grams in the federal budget. One good way to savemoney would be to cut subsidies to businesses.Corporate welfare in the federal budget costs tax-payers almost $100 billion a year.

Policymakers claim that business subsidies are

needed to fix alleged market failures or to helpAmerican companies better compete in the globaleconomy. However, corporate welfare often sub-sidizes failing and mismanaged businesses andinduces firms to spend more time on lobbyingrather than on making better products. Insteadof correcting market failures, federal subsidiesmisallocate resources and introduce governmentfailures into the marketplace.

While corporate welfare may be popular with

policymakers who want to aid home-state busi-nesses, it undermines the broader economy andtransfers wealth from average taxpaying house-holds to favored firms. Corporate welfare alsocreates strong ties between politicians and busi-ness leaders, and these ties are often the source ofcorruption scandals in Washington. Americansare sick and tired of crony capitalism, and theway to solve the problem is to eliminate business

subsidy programs.Corporate welfare doesnt aid economic

growth and it is an affront to Americas constitu-tional principles of limited government and equal-ity under the law. Policymakers should thereforescour the budget for business subsidies to elimi-nate. Budget experts and policymakers may differon exactly which programs represent unjustifiedcorporate welfare, but this study provides a menuof about $100 billion in programs to terminate.

Corporate Welfare in the Federal Budgetby Tad DeHaven

No. 703 July 25, 2012

Tad DeHaven is a budget analyst on federal and state budget issues for the Cato Institute.


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Recent subsidyscandals

such as thefailure of solar

manufacturerSolyndrahave

heightenedpublic awareness

of the wasteand injusticeof corporate

welfare.

Introduction

The federal government will spend almost$100 billion on corporate welfare in fiscal2012. That includes direct and indirect sub-

sidies to small businesses, large corporations,and industry organizations. These subsidiesare handed out from programs in many de-partments, including the departments of Agri-culture, Commerce, Energy, and Housing andUrban Development.

There have been some efforts to cut corpo-rate welfare in the past, but recent events makethe need for subsidy cuts even more acute. Forone thing, the federal government will run itsfourth consecutive deficit in excess of a trilliondollars this year. Federal debt is approaching

levels that most economic experts believe isdangerous. If the nation is to avert a debt cri-sis, federal policymakers need to dramaticallycut spending. Whole programs need to beterminated, and handouts to businesses are agood place to start.

The problems created by corporate welfarespending include violating limited govern-ment, distorting the economy, picking win-ners and losers, and generating corruption.Some of the other ways that the governmentconfers narrow benefits on favored businesses

are through tax preferences, regulations, andtrade barriers.

Recent subsidy scandalssuch as the fail-ure of solar manufacturer Solyndrahaveheightened public awareness of the waste andinjustice of corporate welfare. But wastefulcorporate welfare has a long bipartisan history.Now is the time for policymakers to scour thebudget and end similar programs that abusetaxpayer interests on an ongoing basis.

Almost $100 Billion inCorporate Welfare

This study is based on a line-by-line reviewof the federal budget looking for business sub-sidies. There have been numerous efforts bythe Cato Institute and other groups over theyears to define and calculate federal corpo-

rate welfare spending, which is not an exactscience.1 Nonetheless, included here are pro-grams that provide payments or unique ben-efits and advantages to specific companies orindustries.

Table 1 presents a list of corporate welfareprograms in the budget, totaling $98 billionin spending in fiscal 2012.2 These programsshould be targeted for elimination as one stepto getting federal spending and deficits undercontrol. The following sections discuss thereasons why these programs are damaging,unneeded, and unfair.

Violating Limited Governmentand Equal Treatment

Under the Constitution, the federal government has specific, limited powers, and mostgovernment functions are left to the statesFederal powers enumerated in the Constitu-tion include those designed to ensure an opennational economy. But nowhere in the docu-ment is an open-ended power for Congress orthe executive branch to choose favored busi-nesses and appropriate funds to aid their pri-vate profit-seeking.

The enumerated powers granted to the

federal government under Article 1, Section8 were intended to limit the scope of federalauthority. However, over time the courts haveadopted an excessively broad interpretationof these powers. As a result, federal power inmany areas has become largely unlimited, andmany policymakers feel free to tax citizens topay for all kinds of subsidy programs.

While many policymakers ignore consti-tutional limits when creating new programs,others sometimes justify business subsidiesby adopting an expansive view of the General

Welfare Clause. Article I, Section 8 says thatCongress shall have the power to lay andcollect Taxes, Duties, Imposts and Excises, topay the Debts and provide for the commonDefence and general Welfare of the UnitedStates. That provision authorized the federalgovernment to collect and spend money onthe activities specified. It does not authorize


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Table 1Corporate Welfare Programs in the Federal Budget (millions of dollars)

Program 2012 Outlays

Department of Agriculture

Agricultural Marketing Service 1,289

Applied R&D 1,143

Farm Security and Rural Investment programs 3,175

Farm Service Agency 11,863

Foreign Agricultural Service 2,164

Risk Management Agency 3,829

Rural Business-Cooperative Service 372

Rural Utilities Service 1,330

Total, Department of Agriculture 25,165

Department of Commerce

Applied R&D 785

Economic Development Administration 531

International Trade Administration 379

Minority Business Development Agency 24

National Institute of Standards and Technology

Technology Innovation Program 8

Manufacturing Extension Partnership 131National Oceanic and Atmospheric Administration

Fisheries Finance Program 6

Fishery promotion and development subsidies 4

National Telecommunications and Information Administration

Broadband Technology Opportunities Program 2,227

Total, Department of Commerce 4,095

Department of Defense

Applied R&D 4,737Total, Department of Defense 4,737

Department of Energy

Energy supply and conservation 9,834

Fossil energy research and development 1,402

Advanced Technology Vehicles Manufacturing Loan

Program4,834


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Innovative Technology Loan Guarantee Program 1,260

Total, Department of Energy 17,330

Department of Housing and Urban Development

Federal Housing Administration mortgage subsidies 15,739

Community Development Block Grants (to businesses) 285

Community Development Loan Guarantees 17

Total, Department of Housing and Urban Development 16,041

Department of the Interior

Bureau of Reclamation 1,254

Bureau of Land Management 1,354

Total, Department of the Interior 2,608

Department of State

Foreign Military Financing 5,201

Total, Department of State 5,201

Department of Transportation

Federal Aviation Administration

Commercial Space Transportation 16

Essential Air Service/Payments to Air Carriers 203

Federal Railroad Administration

High-Speed Rail 1,251

Railroad Rehabilitation & Improvement 17

Railroad research and development 33

Maritime Administration

Assistance to Small Shipyards 37

Title IX Guaranteed loan program 99

Ocean freight differential subsidies 175

Maritime Security Program 193

Total, Department of Transportation 2,024

Other Programs and Independent Agencies

Appalachian Regional Commission 53

Export-Import Bank *

International Trade Commission 91


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The federalgovernmentsproper role inthe economyshould be that oa neutral refereewith interventiolimited tofacilitating the

free exchangeof goods andservices.

the federal government to use its taxing pow-er to bestow widespread benefits on favoredcommercial interests.

Other times, policymakers look to the Com-merce Clause as a reason to intervene in theeconomy and subsidize businesses. The Con-stitution gave Congress the power to regulateCommerce . . . among the several States. How-ever, that provided the authority to removebarriers to interstate trade, not to actively hand

out cash to favored businesses. The idea was tolimit state government power, not to give dis-cretionary power to the federal government tomanipulate businesses and industries.

The Tenth Amendment was supposedto erect a further barrier to the broad discre-tionary power that todays politicians claimwhen they hand out subsidies such as corpo-rate welfare. It reserved to the states, or to thepeople, those powers not specifically delegatedto the federal government. Our federal systemof government allows the states to subsidize

businesses if they choose to do so, subject totheir own legal restrictions, although thatwould still represent bad economic policy.

Federal business subsidies are not just badeconomic policy; they also violate the bedrockAmerican principle of equality under the law.Subsidies give advantage to selected interestsat the expense of other businesses and taxpay-

ers. The federal governments proper role inthe economy should be that of a neutral ref-eree, with intervention limited to facilitatingthe free exchange of goods and services.

The following are examples of the expan-siveness of corporate welfare in the federalbudget today. These programs violate equaltreatment under the law and have no place un-der the framework of limited government andfederalism established by the Constitution.

Community Development Block Grants. TheDepartment of Housing and Urban Devel-opments Community Development BlockGrant program funds efforts to develop localcommunities. A large portion of the fund-ing is channeled to businesses. For example,a craft brewery in Michigan recently received$220,000 to help it expand its brewing capac-ity.3 That subsidy might be good for the brew-ery, but it was paid for by raiding the walletsof federal taxpayers, who will have less moneyto buy their own favored beverages and other

products. This handout is also unfair to thehundreds of craft breweries that do not receivefederal handouts, and instead rely on the vol-untary sale of their products to consumers.

Rural Subsidies. The Department of Agri-cultures Rural Business-Cooperative Serviceprovides subsidies to businesses in rural ar-eas of the country. One of its programs, the


National Institutes of Health: Applied R&D 13,845

NASA: Applied R&D 2,799

National Science Foundation: Applied R&D 450

Overseas Private Investment Corporation *

Small Business Administration 3,157

Trade and Development Agency 46

Total, Other Programs and Independent Agencies 20,441

Grand Total 97,642

Source: Budget of the United States Government, Fiscal Year 2013 (Washington: Government Printing Office, 2012).* Program did not have net outlays in FY2012.


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Divertingresources from

businessespreferred by

the market tothose preferred

by policymakersleads to lossesfor the overall

economy.

Value-Added Marketing Grant program, willhand out about $56 million this year to pro-ducers of agricultural commodities to helpthem make and market their products. Win-eries across the country have recently been re-

ceiving these grants.

4

Once again, the grantsare good for the particular wineries, but theycome at a cost to both taxpayers and to winer-ies that dont receive federal aid. In addition, itis unfair for the federal government to run aidprograms that favor rural areas of the countryover urban areas, and vice versa. Americansare free to move wherever they want, and theycan balance the costs and benefits of living orworking in each location.

Minority Business Subsidies. The Depart-ment of Commerces Minority Business De-

velopment Agency is supposed to providemanagement and technical services to minor-ity-owned businesses. However, much of its$24 million budget is spent on bureaucraticoverhead costs.5 More importantly, federalprograms should be race-neutral, and not fa-vor some ethnic groups over others. Some ofthe largest obstacles to the success of minorityand nonminority entrepreneurs alike are ex-cessive taxes and regulations. The governmentwould aid all businesses, including minoritybusinesses, if it focused on removing burden-

some costs from productive entrepreneurs.Farm Subsidies. Federal farm programs re-

distribute wealth from taxpayers to a smallgroup of relatively well-off farm businesses andlandowners. The United States Department ofAgriculture figures show that the average in-come of farm households has been consistentlyhigher than the average of all U.S. households.In 2010, the average income of farm house-holds was $84,400or 25 percent higher thanthe $67,530 average of all U.S. households.6Moreover, the majority of farm subsidies go

to the largest farms. For example, the largest10 percent of recipients received 68 percent ofall commodity subsidies in 2010.7 Numerouslarge corporations, and even some wealthy ce-lebrities, receive farm subsidies because theyare the owners of farmland. In fact, owners ofland that is no longer used for farming have re-ceived billions in subsidies over the years.8

Distorting EconomicActivity

Policymakers justify business subsidies bysaying they are needed to fix alleged imperfec-

tions in the marketplace. The theory is thatpolicymakers can design optimal subsidies inthe national interest to remedy easily identi-fied market failures. The reality is that poli-cymakers usually have parochial interests inmind when they create subsidy programs. Andinstead of making markets more efficient,subsidies distort economic activity and createeven larger failures than might have existed inthe marketplace.

By aiding some businesses, subsidies putother businesses at a disadvantage. For exam-

ple, businesses that dont receive a loan backedby the government are disadvantaged whenthey compete against businesses that do re-ceive government backing. Diverting resourc-es from businesses preferred by the market tothose preferred by policymakers leads to lossesfor the overall economy.

The following are examples of federal sub-sidy programs that distort economic activityand, thus, represent government failure:

Housing Subsidies. Policymakers have longargued that the government should intervene

in housing markets to make the Americandream available to more people. One govern-ment intervention is to guarantee mortgageloans issued by private lendersan effectivesubsidythrough the Federal Housing Ad-ministration (FHA). The FHA insures lendersfor 100 percent of the principal and interest onmortgages issued with small down paymentsHowever, data shows that the smaller the downpayment, the higher the possibility of a loandefault.9 To cover these losses, the FHA chargeslenders fees on the mortgages it insures. Private

mortgage insurers provide the same service, butthey face bankruptcy if they insure risky loanswithout sufficient fees to recoup losses. TheFHA, on the other hand, can tap taxpayers if itdoesnt take in sufficient fee revenues to covermortgage defaults. This year, the budgetarycost of paying bad loans that would otherwisebe borne by lenders will be around $16 billion.


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Instead oflearning theirlesson after thebubble burst

and allowing thehousing marketto self-correct,policymakershave continuedto intervene andsubsidize.

These losses to taxpayers from hous-ing subsidies are only part of the problem.Housing subsidies also inflict damage on thebroader economy, as is clear in the aftermathof the housing meltdown and financial cri-

sis of recent years. The housing bubble wasgenerated, in part, by government efforts toincrease homeownership, which in turn fos-tered distortions in the housing market. How-ever, instead of learning their lesson after thebubble burst and allowing the housing mar-ket to self-correct, policymakers have contin-ued to intervene and subsidize. In recent years,policymakers have been using the FHA to tryto help prop up the housing market and theagencys lending portfolio has soared to over$1 trillion.10

Small Business Subsidies. Policymakers arguethat under market-driven lending, some wor-thy small businesses would be denied credit.And so Congress has tasked the Small Busi-ness Administration (SBA) with correctingthis alleged market failure. The SBA tries toincrease lending to small businesses by guar-anteeing loans issued by private lenders for upto 85 percent of losses in the event that loanrecipients default. As a result of the guaran-tee, lenders are more willing to lend money toriskier applicants because the taxpayer-backed

SBA is ultimately responsible for the bulk ofany losses.

However, the notion that the governmentneeds to subsidize credit to small businessesis mistaken. Capital markets have developedeffective private solutions, such as credit scor-ing, that enable lenders to make more prudentlending decisions. Second, small businesseswith sound business plans and solid prospectsshould be able to raise debt and equity capitalthrough private means. If a small business hasshaky finances and questionable prospects,

it should be denied private capital as a badbusiness risk. Indeed, the large failure rateson loans backed by the SBA illustrate that thegovernments credit market interventions do apoor job of allocating capital.11

Water Subsidies. For more than a century,the Interior Departments Bureau of Rec-lamation has subsidized irrigation in 17

western states. It builds and operates dams,canals, and hydroelectric plants. About four-fifths of water supplied by Reclamation goesto farm businesses, and the agency under-prices water to those users the most. These

subsidies encourage farmers to grow crops inareas where it is inefficient or unsuitable todo so. Because farmers receive federal waterat a small fraction of the market price, theyoverconsume it, which is leading to increas-ing battles over water supplies in many re-gions. Another result of subsidized Westernirrigation is the environmental damage torivers and wetlandsdamage that the federalgovernment, in turn, spends more taxpayermoney trying to fix.12

High-Speed Rail. The Obama administra-

tion has poured billions of dollars into tryingto develop a high-speed rail network. But ifhigh-speed rail made economic sense, the pri-vate sector would build it without governmentsubsidies. For example, freight rail makes eco-nomic sense, and private rail businesses heav-ily invest in building and maintaining theirrail systems and rolling stock.

Even in more densely populated areas,such as Europe and Japan, where high-speedrail might make sense, rail operators are de-pendent on government subsidies.13 In the

United States, passenger rail might make eco-nomic sense in certain corridors, such as theNortheast, but we should let the market de-cide whether passengers are willing to pay forhigh-speed service.

Interestingly, a Florida company recentlyannounced plans to build and operate a com-pletely privately financed rail line that wouldconnect Miami to Orlando.14 If it fails, at leasttaxpayers wont be on the hook. If it succeeds,it could provide a model to other entrepre-neurs. Contrast that with a Nevada company

with ties to Sen. Harry Reid (D-NV) that isseeking a $4.9 billion loan from the FederalRailroad Administration (FRA) to build a railline between Las Vegas and Victorville, a city 81miles east of Los Angeles. The project makeslittle economic sense, and prompted the Wash-ington Post to call for the FRA to derail thisgravy train.15


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Policymakersdo not possess

specialknowledge thatenables them toallocate capital

more efficientlythan markets.

Undermining Marketsby Picking Winnersand

Many Losers

Policymakers do not possess special knowl-edge that enables them to allocate capitalmore efficiently than markets. They are nomore clairvoyant about market trends and sci-entific breakthroughs than anyone else. Thus,when the government starts choosing indus-tries and technologies to subsidize, it oftenmakes bad decisions at taxpayer expense. Busi-nesses and venture capital firms make manymistakes as well, but their losses are privateand not foisted involuntarily on taxpayers.

In addition to the money thats often wast-

ed when policymakers try to steer the marketin certain directions, government meddlingcan also delay the development of superioralternatives by entrepreneurs who dont re-ceive subsidies. Thats because private inves-tors usually prefer to provide capital to proj-ects that are subsidized over ones that are not.Private investors, such as venture capitalists,make investments based on the perceived riskand expected returns. Thus, when the govern-ment gives a company a financial leg-up overits competitors, a private investors upside po-

tential is enhanced, while the downside risk re-mains limited to the amount it invested.

The following are examples of federal pro-grams that subsidize businesses in an attemptto pick winners:

Energy Subsidies. The U.S. Department ofEnergy (DOE) has been subsidizing the devel-opment and commercialization of alterna-tive fuels for decades. Successive administra-tions have attempted to plan for the countrysfuture energy needs by effectively throwingtaxpayer money against a wall and hoping

that something will stick. For example, theDOE has been funding clean coal researchfor decades, but it has little to show for the ef-fort.16 Every president from Ronald Reagan toBarack Obama has supported clean coal subsi-dies. Unfortunately, clean coal has been a costlyand unproductive exercise from the taxpayerspoint of view, and it remains unpopular with

environmentalists. The Government Accountability Office found that many clean-coal proj-ects have experienced delays, cost overruns,bankruptcies, and performance problems.17

More recently, the Obama administrations

costly campaign to increase subsidies for al-ternative energy sources, including solar andwind, has been marked by high-profile failuresand scandal, which is discussed below.

Automaker Subsidies. The Department ofEnergys Advanced Technology Vehicles Man-ufacturing (ATVM) Loan Program providessubsidies to companies to develop greenerautomobiles. Companies that have receivedassistance from the ATVM program includeFord and Nissan.18 In a 2009 article in Wiredmagazine, Darryl Siry, a former executive with

Tesla Motors, which received an ATVM loan,wrote that startup companies applying forenergy subsidies have admitted that privatefundraising is complicated by investor expec-tations of government support.19 Siry notesthat the government trying to pick winnersdistorts the market for private capital, whichwill have a stifling effect on innovation, as pri-vate capital chases fewer deals and companiesthat do not have government backing have aharder time attracting private capital.20

The ATVM program is just the latest at-

tempt by policymakers to create greener carsIn 1993, the Clinton administration launchedits Partnership for a New Generation of Ve-hicles. This program handed out $1.2 billionover eight years to U.S. automakers for thedevelopment of hybrid cars. The programwas widely panned, but instead of eliminatingsuch subsidies altogether, the George W. Bushadministration replaced it with a new initia-tive called FreedomCar. This program focusedon developing automobiles that would run onhydrogen fuel cells, and it cost taxpayers about

$2 billion.21 The Obama administration an-nounced in 2009 that the government wasmoving away from funding vehicular hydro-gen fuel cells to technologies with more imme-diate promise.22

Rural Broadband Subsidies. The 2009 feder-al stimulus law contained $7.2 billion to sub-sidize rural broadband service through the


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Policymakersoften claimthat they wantto invest inhigh rewardareas, but with

fast-changingmarkets, no oneknows whetherrisky ventureswill end up beinlucrative or flop

Department Agricultures Rural Utility Ser-vice and the Department of Commerces Na-tional Telecommunications and InformationAdministration. A recent study found that thesubsidies provide coverage in areas where the

majority of households already have accessto service.23 As a result, the benefit of provid-ing broadband services to the relatively smallnumber of unserved households is dramati-cally outweighed by the exorbitant cost totaxpayers. The authors note that subsidizingthe construction of duplicative broadbandnetworks creates strong disincentives to pri-vate broadband investment in the long run,as potential future investors will discountexpected returns for the possibility that thegovernment may step in, ex post, to subsidize

a competitor.24

Information technologies have rapidly

evolved and will continue to do so as long asthe regulatory climate remains friendly. A Catoanalysis on broadband subsidies explained,what attracts new competitors is the ability tomake a profit by offering lower prices or betterservice to the existing providers current cus-tomers, or by serving customers whom thoseproviders have yet to serve.25 However, thegovernments subsidization of existing tech-nologies reduces the incentive to develop even

more advanced technologies.Research Subsidies. The Constitution al-

lows the federal government to promote theProgress of Science and useful Arts, by secur-ing for limited Times to Authors and Inven-tors the exclusive Right to their respectiveWritings and Discoveries. The securing ofpatents has long provided a stimulus to pri-vate research, discovery, and product develop-ment. Americas great technological advance-ments have mainly come from private-sectorefforts aimed at creating better products and

earning profits.There is a theoretical argument for the

government doing some basic scientific re-search, but there is less support for the govern-ment meddling in applied and development-oriented research. And even the governmentsbasic research can be unproductive and pork-barrel in nature. Government research propo-

nents often argue that federal funds are neces-sary to support high-risk investments that theprivate sector would not undertake. However,the private sector undertakes risky projects allthe time. Consider the growing interest in pri-

vate space travel spurred by the 2004 launchof SpaceShipOne, the worlds first privatemanned space flight. That flight was fundedby Microsoft co-founder Paul Allen. Otherwealthy entrepreneurs have launched theirown space projects. A new company backed bybillionaire investors, including Googles LarryPage and Eric Schmidt, recently announcedthat it is developing plans to mine asteroidsfor precious metals.26

Policymakers often claim that they wantto invest in high reward areas, but with

fast-changing markets, no one knows wheth-er risky ventures will end up being lucrativeor flops. Even the smartest venture capital-ists invest in duds, but at least the costs ofthose failures are borne by private investors.With government-funded research, the costsof failed investments are borne involuntarilyby taxpayers.

Funding new businesses should be left tothe experts in the venture capital and angelinvestment industries. These types of inves-tors pump about $50 billion annually into

innovative companies.27 There would beeven more funding of private innovation ifpolicymakers freed U.S. capital markets fromexcessive tax and regulatory burdens.

A Corrupting Relationship

Business subsidies create an unhealthyand sometimes corruptrelationship be-tween businesses and the government. Themore that the government intervenes in the

economy, the more lobbying activity is gener-ated. The more subsidies that it hands out tobusinesses, the more pressure lawmakers faceto hand out new and larger subsidies. As theranks of lobbyists grow, more economic deci-sions are made on the basis of politics, moreresources are misallocated, and the nationsstandard of living is harmed.


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Since the dawnof the Republic,federal policies

have often

been driven bybusiness interests

at the expenseof taxpayers and

consumers.

The unhealthy relationship between gov-ernment and business is not just a modernphenomenon. Since the dawn of the Republic,federal policies have often been driven by busi-ness interests at the expense of taxpayers and

consumers. In the 1790s, the Whiskey Rebel-lion stemmed from Congressat the behestof Alexander Hamiltonpassing an excise taxon whiskey that fell unevenly on small-scaledistillers in the frontier lands west of the Ap-palachians. The large distillers in the more eco-nomically developed east recognized the com-petitive advantage it gave them over the smallproducers and supported the tax.

In the 1870s, the Credit Mobilier scandalstemmed from subsidies for the transconti-nental railroads, and the tight connection of

those subsidized businesses with some mem-bers of Congress.28 In the 1920s, the TeapotDome scandal stemmed from the Secretaryof the Interior secretly handing out oil leasesto certain favored businesses and receiving a$400,000 payoff.29

In his book The Big Rip-Off: How Big Busi-ness and Big Government Steal Your Money, re-porter Timothy Carney describes Hamilton asthe first big champion of big government inthe United States based partly on his supportof business subsidies. 30 Unfortunately, we are

living today with all the problems created byHamiltons flawed vision of the governmenthelping the private sector. As Carney ex-plains, big businesses have been helping biggovernment grow for more than a century:

Federal regulation of meatpacking wasthe desire of large meat packers. U.S.Steel turned to Teddy Roosevelt forsalvation from laissez-faire. WoodrowWilson seized control of the U.S. econo-my to the elation of big business. Herbert

Hoover laid the groundwork for theNew Deal, with the support of HenryFord and Pierre DuPont. Franklin D.Roosevelts New Deal found its greatestchampions among top business lead-ers. Big business guided the drafting ofthe Marshall Plan. Dwight Eisenhowerdeflated conservative hopes of cutting

government, thus elating corporateAmerica. Lyndon Johnson, the icon ofbig government, was the favorite of bigbusiness.31

The story has continued in recent years, as thefollowing examples illustrate:HUD Subsidies. In the 1980s, President Ron-

ald Reagans Department of Housing and Ur-ban Development (HUD) overflowed with cor-ruption under Secretary Sam Pierce.32 Pierceroutinely dished out grants, loans, and othersorts of subsidies to friends and private busi-ness associates. And HUD created programsthat involved large subsidies to mortgage lend-ers, developers, and other businesses, with Re-publican Party contributors as frequent ben-

eficiaries.Trade Subsidies. In the 1990s, the Clinton

administration used the Department of Com-merce to raise money for the Democratic Partyby giving top business executives access toexport promotion trips abroad in exchangefor donations. The scheme was orchestratedby Commerce secretary Ron Brown, formerlyhead of the Democratic National Committeeand a top Clinton campaign fundraiser. Busi-ness leaders who played the game and madecampaign contributions not only got taken

on trade missions, but were also rewardedwith loans from the federal Overseas PrivateInvestment Corporation, which subsidizesAmerican exports. TheBoston Globe found amassive amount of OPIC support given tocompanies that traveled with Brown and do-nated to the Democrats.33 Conveniently, oneof Browns top lieutenants at Commerce alsoserved on the board of directors of OPIC.

Ron Brown died in a plane crash in April1996 in Bosnia while on a trade mission, butinvestigations into his dealings continued

In 1998, U.S. District Judge Royce Lamberthdetermined that Commerce officials system-atically concealed and destroyed documentsrelating to the trade mission scandal.34 Hecompared the behavior of Commerce officialsto that of con artists and scofflaws, point-ing to the flurry of document shredding inthe Secretarys office after Brown died.35


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Administrationofficials hadreceivednumerouswarnings thatSolyndrasfinancials wereshaky; however,Obamas adviser

remainedpreoccupiedwith politicalconsiderations.

Enron Subsidies. Enron Corporation is aposter child for the harm of business subsidies,particularly with regard to its disastrous for-eign investments. Enron lobbied governmentofficials to expand export subsidy programs,

and it received billions of dollars in aid for itsprojects from the Export-Import Bank, theOverseas Private Investment Corporation, theU.S. Trade and Development Agency, the U.S.Maritime Administration, and other agencies.Enron received about $3.7 billion in financingthrough federal government agencies.36

Business subsidies create damaging eco-nomic distortions. All those subsidies to En-ron induced the firm to make exceptionallyrisky foreign investments. And the resultinglosses were an important factor in the com-

panys implosion.37

A 2010 Bloomberg investigation, which

looked at the Ex-Im Bank, found that com-panies seeking financing aid from this agencyhad been paying the travel expenses of govern-ment employees on visits to projects underconsideration.38 For instance, Exxon Mobilspent almost $100,000 on Ex-Im Bank em-ployees responsible for helping the agencydecide whether it should aid Exxon on a ma-jor gas project in Papua New Guinea. Elevenmonths later, the Ex-Im Bank approved $3 bil-

lion in financing for the venture.Early in the Bush administration, high-

level officials went to considerable lengths tohelp Enron on an investment in India that hadgone bad.39 When the Washington Postreportedthis in 2002, the administration argued that itwas simply trying to guard taxpayer interestsin the more than $600 million in federal loansthat had been given to Enron by Ex-Im and theOverseas Private Investment Corporation.40However, the government should not be put-ting taxpayer money into such risky private

schemes in the first place.Maritime Subsidies. The Federal Maritime

Administrations Title XI program guaranteesloans made to companies to purchase vesselsconstructed in U.S. shipyards. Previous ad-ministrations have tried to eliminate the pro-gram, but members of Congress with constit-uents that directly benefit from the program

have kept it alive, despite losses to taxpayers. ABloomberg report cites the example of formerSen. Trent Lott (R-MS) and Sen. Daniel Inouye(D-HI), prominent supporters of the loanguarantee program. One particular company,

which was owned by a billionaire real estatedeveloper, received a $1.1 billion Title XI loanguarantee for two cruise ships to be built inSenator Lotts hometown of Pascagoula, Mis-sissippi. Senator Inouye sponsored a provisionin a defense bill that give the company the ex-clusive rights to operate cruise ships in Hawaii.The company eventually went bankrupt, cost-ing taxpayers $187 million.41

Green Subsidies. One of the Obama admin-istrations chief policy initiatives has been tospur the development of a green economy

by subsidizing alternative energy compa-nies. However, as the Washington Post reported,Obamas green-technology program was in-fused with politics at every level.42 The Depart-ment of Energy $535 million loan guaranteeawarded to the now-bankrupt solar company,Solyndra, is the prime example. Solyndra firstapplied for a federal loan in 2007, when Presi-dent George W. Bush was in office. The De-partment of Energy finally approved a loan inSeptember 2009, after receiving repeated pres-sure from Obama administration officials to

make a decision on the loan so that Vice Presi-dent Biden could announce the approval at agroundbreaking for the companys factory.43The following May, President Obama visitedSolyndra and called it an engine of economicgrowth.44

A little more than a year after Obamasvisit, Solyndra filed for bankruptcy protection.Administration officials had received numer-ous warnings that Solyndras financials wereshaky; however, Obamas advisers remainedpreoccupied with political considerations.45

ThePostnoted that the main players in theSolyndra saga were interconnected in manyways, as investors enjoyed access to the WhiteHouse and the Energy Department.46 Accord-ing to the New York Times, Solyndra spentnearly $1.8 million on Washington lobbyists,employing six firms with ties to members ofCongress and officials of the Obama White


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The goalshould be for

policymakers toreform the tax

code, end specialpreferences, andcreate a neutral

tax base that putsall businesses onan equal footing.

House during the period of time that its loanrequest was under review by the Departmentof Energy.47 The interconnected relationshipbetween investors and the administration goesbeyond Solyndra. The Washington Post found

that $3.9 billion in federal grants and financ-ing [from the Department of Energy] flowedto 21 companies backed by firms with connec-tions to five Obama administration staffersand advisers.48

Other Types ofCorporate Welfare

Tax PreferencesThe federal tax code contains many deduc-

tions, credits, and exemptions that distortinvestment and create unequal tax treatmentof individuals and businesses. The govern-ment defines tax expenditures as revenuelosses attributable to provisions of the federaltax laws which allow a special exclusion, ex-emption, or deduction from gross income orwhich provide a special credit, a preferentialrate of tax, or a deferral of tax liability.49 Notethat tax expenditures is a loaded term, sincetax cuts are not the same as spending increas-es. Also, the official lists of tax expenditures are

not carved in stone, and indeed they include abias in favor of broad-based income taxation,which penalizes saving and investment.50

Nonetheless, the enactment of special taxpreferences is bad policy, and preferences forbusinesses are a form of corporate welfare.Some of the arguments made in this paperagainst corporate welfare spending also applyto business tax preferences:

Tax preferences distort economy activ-ity by redirecting investment toward

businesses that are favored by policy-makers. The quintessential example isthe various tax credits offered to pro-ducers of alternative energies, such aswind and solar power.

Tax preferences benefit particularbusinesses to the detriment of others.Businesses that dont produce a prod-

uct favored by policymakers will facehigher tax burdens on their invest-ments than the favored firms.

Tax preferences empower special in-terests. One of the biggest obstacles

to comprehensive tax reform is theopposition of special-interest groupswho enjoy advantages in the tax codeThese groups will fight to maintaintheir special treatment and tend toblock overall tax reform.

Tax preferences help foster an un-healthy relationship between thegovernment and businesses. As men-tioned above, a large scandal duringthe Reagan administration involvedthe flow of tax credits and other hous-

ing subsidies to politically connectedRepublicans via the Department ofHousing and Urban Development.51

The goal should be for policymakers to re-form the tax code, end special preferences, andcreate a neutral tax base that puts all business-es on an equal footing.

RegulationsSome people might assume that govern-

ment regulations on businesses always serve

the general public interest. In reality, regula-tions often serve the interests of the industrybeing regulateda situation referred to asregulatory capture. Nobel laureate econo-mist George Stigler explained that as a rule,regulation is acquired by the industry and isdesigned and operated primarily for its ben-efits.52 Regulatory capture occurs becausesome businesses in an industry that is beingregulated have an incentive to influence thedrafting of regulations to give themselves aneconomic advantage over consumers or other

businesses. Instead of benefiting the public,regulations often end up stifling competitionwhich causes reduced innovation, fewer choic-es for consumers, and higher prices.

Federal regulations, as a whole, are very ex-pensive to the economy. Economists NicoleCrain and Mark Crain estimate the annualcost of regulations to be $1.75 trillion.53 That


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It cost taxpayersabout $55billion in 2011for the federal

government todevelop andenforce federalregulations.

amounts to a massive hidden tax on the econ-omy. In addition, it cost taxpayers about $55billion in 2011 for the federal government todevelop and enforce federal regulations.54

Tim Carney examines corporate welfare is-

sues, including regulations, in the WashingtonExaminers Beltway Confidential column.The following are some recent examples hefound of businesses manipulating regulationsto their own advantage:

The Internal Revenue Service wants torequire tax preparers to pass a test andpay a fee in order to continue doingbusiness. The nations two largest taxpreparation companies, H&R Blockand Jackson Hewitt, are supporting the

IRS effort because the regulatory bur-den would make it harder for smallertax preparation firms to compete withthem. Carney notes that H&R Blockhired lobbyists immediately after theIRSs announcement, and that the IRSofficial in charge of writing the rules isH&R Blocks former CEO.55

The Obama administrations contro-versial decision to mandate that healthinsurance companies provide contra-ceptive coverage is a boon to pharma-

ceutical companies. The contraceptivesmust be FDA-approved, and deductiblesor co-pays are not allowed to be requiredfor the benefit. That means consumersneed not worry about the price of thecontraceptive, which favors producersof name-brand contraceptives. Carneynotes that shortly after he approved themandate, the president travelled up toNew York City to collect $35,800 checksat a fundraiser hosted by the top lob-byist at the nations largest drug com-

panySally Susman, VP for governmentaffairs at Pfizer.56

The Environmental Protection Agencyrecently ordered large trucks to reducetheir greenhouse-gas emissions. Truckoperators will have to spend $50,000 ormore per vehicle to upgrade their rigsor buy a new truck that meets the EPAs

requirement. The powerful AmericanTrucking Association supports the re-quirement, while smaller owner-opera-tors are opposed. The reason is simple:the requirement will squeeze out the

small operators to the benefit of thelarger operators. Carney notes that theformer Republican governor who headsthe ATA, Bill Graves, has a record ofusing big government to protect his in-dustry.57

Trade BarriersInternational trade plays a crucial role in

the growth and prosperity of the United States.Trade generates competition, promotes trans-fers of technology, and allows consumers and

businesses access to the best products world-wide. The result is innovation, higher produc-tivity, and rising living standards. However,the federal government lessens the benefits ofopen trade when it restricts imports.

A prime example of the damage causedby trade restrictions comes from the federalgovernments sugar policies. The governmentguarantees a minimum price for sugar in thedomestic market by maintaining a system ofprice supports, domestic marketing quotas,and import barriers. As a result of these poli-

cies, U.S. sugar prices have been more thantwice world market prices, to the benefit ofU.S. sugar producers. While these produc-ers gain, the governments sugar policies costAmerican consumers about $1.9 billion annu-ally.58 In addition, the artificially high priceshurt American businesses that use sugar,and numerous U.S. companies have decidedto move production to Canada and Mexico,where sugar prices are considerably lower.59

Another example of harmful trade barriersare the antidumping and countervailing duty

laws. These rules allow duties to be imposedon foreign goods that are found to be un-fairly priced by a complex and bureaucraticprocess involving the International Trade Ad-ministration (ITA) and International TradeCommission. The premise of these laws is thatlow-price imports are damaging to America.But low prices benefit both U.S. consumers


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Manypolicymakerslearn to enjoy

the adulation ofspecial-interest

groups, and mostfear the flak they

would receivefrom other

elected officialsand interest

groups if theyactually tried to

cut spending.

and U.S. businesses that use imported prod-ucts. Like regular business subsidies, the anti-dumping and countervailing duty machineryis politically driven, and U.S. industries canpetition the ITA to conduct investigations on

foreign goods that they object to, essentiallyusing government power to attack their com-petitors. Not surprisingly, one study foundstrong correlations between political contri-butions made by firms seeking protection andantidumping outcomes in their favor.60

Hurdles to Reform

If federal business subsidies cause moreproblems than they solve, why do policymak-

ers persist in supporting these interventions?It isnt because business subsidies are particu-larly popular with voters. Indeed, the federalgovernments recent bailout of the financialindustry has galvanized the publics percep-tion that the relationship between the govern-ment and business is often corrupt.

The financial bailout certainly appearedcorrupt, given the many government officialswho had strong ties to the financial industry.The government responded to the crisis byengineering a massive infusion of taxpayer

money into banks and other companies thatthey deemed too big to fail. The Congres-sional Budget Office estimates that the finalcost to taxpayers for the Troubled Asset ReliefProgram (TARP), which was used to providecapital to troubled financial institutions andto bail out Chrysler and General Motors, willbe $32 billion.61 The Office of Managementand Budget estimates that it will cost taxpay-ers $68 billion.62 And the federal takeover ofthe failed government-sponsored mortgagegiants, Fannie Mae and Freddie Mac, has cost

taxpayers more than $180 billion.63

Two polls of likely voters by Rasmussen Re-ports in 2011 found little support for corpo-rate welfare programs.64 A majority said thatthe federal government shouldnt guaranteeloans issued by private lenders to small busi-nesses or finance the sale of military weaponsfrom U.S. companies to foreign countries.

Only 29 percent said the government shouldhelp finance export sales for large corpora-tions. A plurality (46 percent) said farm sub-sidies should be abolished. Similarly, pollscontinue to show strong public opposition to

the 2008 federal bailout of the financial industry. For example, a 2010 Pew Research Center/National Journalpoll found that only 13 per-cent would be more likely to vote for a candi-date who supported federal loans to banks,while 46 percent said they would be less likely.65

Nonetheless, most people arent kickingdown the doors of Congress to demand thatparticular corporate welfare programs be end-ed. That is because the cost of each particularsubsidy represents just a tiny portion of theaverage households total tax bill. By contrast

the businesses that receive subsidies have astrong incentive to spend time and money lob-bying policymakers to protect their benefits. Amajor reason why policymakers continue tosupport business subsidies is the dispropor-tionate influence of special interests.

It is tough for the average citizen to com-pete with the paid professionals who defendeach program. Many policymakers championthe merits of special-interest causes after beingsold on their virtues by listening to lobbyistsbullet points year after year. Policymakers in

Washington are surrounded by doting staff-ers, political operatives, and persistent lobby-ists representing countless special interestsThe result is an endless stream of input en-couraging them to spend more money. Manypolicymakers learn to enjoy the adulation ofspecial-interest groups, and most fear the flakthey would receive from other elected officialsand interest groups if they actually tried to cutspending.

Congressional committee hearings tend toreinforce the pro-spending echo chamber in

Washington. A study conducted by former Yaleprofessor James Payne showed that committeehearings are dominated by witnesses in favorof more spending. Payne surveyed 14 congres-sional committee hearings and found that inthose 14 hearings, 1,014 witnesses appeared toargue in favor of programs and only 7 spokeagainst them, an imbalance of 145 to 1.66 Wit-


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nesses, who typically include representativesfrom lobbying groups, federal agencies, andeven members of Congress, rarely admit thatany program is a failure or unnecessary. Theydont admit failure because they are vested in

the continued funding of programs: their ca-reers, pride, and reputations are on the line.

Conclusions

Rising spending and huge deficits arepushing the nation toward an economic crisis.There is general agreement that policymakersneed to find wasteful and damaging programsin the budget and terminate them. Corporatewelfare is a perfect target. It misallocates re-

sources and induces businesses to spend timeon lobbying rather than on making betterproducts. It is unfair to taxpayers and it gener-ates corruption.

When the government subsidizes busi-nesses, it weakens profit-and-loss signals inthe economy and undermines market-basedentrepreneurship. Most of Americas tech-nological and industrial advances have comefrom innovative private businesses in com-petitive markets. Indeed, it is likely that mostof our long-term economic growth has come

not from existing large corporations or gov-ernments, but from entrepreneurs creatingnew businesses and pioneering new indus-tries. Such entrepreneurs have often had toovercome barriers put in place by governmentsand dominant businesses that are receivingspecial treatment.

Unfortunately, corporate welfare pro-grams are fiercely protected by the recipientsand their lobbyists. The voice of the averagetaxpaying citizen is drowned out by the pro-spending echo chamber in Washington. Many

policymakers convince themselves of the mer-its of business subsidies after being inundatedwith the talking points in favor. Other policy-makers dont want to offend their fellow legis-lators by targeting programs for cuts, and sothey just go along to get along.

Despite these hurdles to reform, Congressis entirely capable of cutting spending and

will have to do so in coming years to avoidan economic calamity. Financial markets willsimply not allow the government to run tril-lion dollar deficits endlessly. When Congressdoes start cutting, corporate welfare should

be high on the list.

Notes1. Stephen Slivinski, The Corporate WelfareState: How the Federal Government SubsidizesU.S. Businesses, Cato Institute Policy Analysisno. 592, May 14, 2007; Congressional Budget Office,

Federal Financial Support of Businesses, July 1995;and the Subsidy Scope project of the Pew Chari-table Trusts at http://subsidyscope.org.

2. Data in this report are generally from theBud-get of the United States Government, Fiscal Year 2013

(Washington: Government Printing Office, 2012).Spending figures are outlays.

3. David T. Young, Bells Brewery Wins Fed-eral Grant to Help Pay for Expansion,KalamazooGazette, April 5, 2011.

4. Tad DeHaven, Turning Taxpayer Moneyinto Wine, Downsizing the Federal Government,March 5, 2012, www.downsizinggovernment.org/turning-taxpayer-money-wine.

5. Tad DeHaven and Chris Edwards, BusinessSubsidies, Downsizing the Federal Government,

February 2009, www.downsizinggovernment.org/commerce/subsidies.

6. U.S. Department of Agriculture, Economic Re-search Service, Farm Household Economics andWell-Being: Farm Household Income, www.ers.usda.gov/Briefing/WellBeing/farmhouseincome.htm.

7. Environmental Working Group, 2011 FarmSubsidy Database, http://farm.ewg.org/.

8. Dan Morgan, Gilbert M. Gaul, and Sarah Co-hen, Farm Program Pays $1.3 Billion to PeopleWho Dont Farm, Washington Post, July 2, 2006.

9. Mark Calabria, Fixing Mortgage Finance:What to Do with the Federal Housing Administra-tion? Cato Institute Briefing Paper no. 123, Feb-ruary 6, 2012, pp. 910.

10. Ibid., p. 2.

11. See Veronique de Rugy and Tad DeHaven,Terminating the Small Business Administra-tion, Downsizing the Federal Government, Au-


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16

gust 2011, www.downsizinggovernment.org/sba.

12. Chris Edwards and Peter J. Hill, Cuttingthe Bureau of Reclamation and Reforming WaterMarkets, Downsizing the Federal Government,February 2012, www.downsizinggovernment.org/interior/cutting-bureau-reclamation.

13. Randal OToole, High-Speed Rail, Down-sizing the Federal Government, June 2010, www.downsizinggovernment.org/transportation/high-speed-rail.

14. Florida East Coast Industries, Inc. AnnouncesPlans for Private Passenger Rail Service in Florida,

All Aboard Florida, March 22, 2012, www.allaboardflorida.com.

15. Editorial, Derail this Gravy Train, WashingtonPost, April 4, 2012.

16. Chris Edwards, Energy Subsidies, Downsiz-

ing the Federal Government, February 2009, www.downsizinggovernment.org/energy/subsidies.

17. Government Accountability Office, Fossil FuelR&D: Lessons Learned in the Clean Coal Technol-ogy Program, GAO-01-854T, June 12, 2001, p. 2.

18. U.S. Department of Energy, Secretary ChuAnnounces Closing of $1.4 Billion Loan to Nissan,press release, January 28, 2010.

19. Darryl Siry, In Role as Kingmaker, EnergyDepartment Stifles Innovation, Wired, December1, 2009.

20. Ibid.

21. Chris Edwards, Energy Subsidies, Downsiz-ing the Federal Government, February 2009, www.downsizinggovernment.org/energy/subsidies.

22. Leo Hickman, Why Dont Governments Pushfor More Hydrogen Cars? Guardian, March 24, 2011.

23. Jeffrey A. Eisenach and Kevin W. Caves,Evaluating the Cost-Effectiveness of RUS Broad-band Subsidies: Three Case Studies, NavigantEconomics working paper, April 13, 2011.

24. Ibid., p. 6.

25. Wayne A. Leighton, Broadband Deploymentand the Digital Divide, Cato Institute Policy

Analysis no. 410, August 7, 2001, p. 10.

26. Mike Wall, Asteroid Mining No Crazier thanDeep-Sea Drilling, Advocates Say, LiveScience.com,

April 25, 2012.

27. For venture capital data, see the National

Venture Capital Association at www.nvca.orgFor angel investor data, see the University of NewHampshire Center for Venture Research at wwwwsbe.unh.edu/center-venture-research.

28. Chris Edwards, Department of Transporta-tion: Timeline of Growth, Downsizing the Fed-

eral Government, www.downsizinggovernmentorg/transportation/timeline.

29. Ibid.

30. Timothy P. Carney, The Big Rip-Off: HowBig Business and Big Government Steal Your Money(Hoboken, NJ: John Wiley and Sons, 2006), p. 32

31. Ibid., p. 36.

32. Tad DeHaven, HUD Scandals, Downsizingthe Federal Government, June 2009, www.downsizinggovernment.org/hud/scandals.

33. Bob Hohler, Trade-Trip Firms Netted $5.5bin Aid; Donated $2.3m to Democrats,Boston GlobeMarch 30, 1997.

34. Bill Miller, Judge Assails Shredding in Com-merce Case, Washington Post, December 23, 1998.

35. Neil A. Lewis, After Judges Rebuke, Com-merce Secretary Widens Inquiry into Mishandlingof Papers,New York Times, January 3, 1999.

36. Jim Vallette and Daphne Wysham, EnronsPawns, Institute for Policy Studies, March 222002, p. 4. And see Carney, The Big Ripoff.

37. Carney, The Big Ripoff, p. 209.

38. Mark Drajem, Exxon Gets Export BankFunding After Paying for Trip, Bloomberg, March25, 2010.

39. Dana Milbank and Paul Blustein, WhiteHouse Aided Enron in Dispute, Washington Post

January 19, 2002.

40. Ibid.

41. Puneet Kollipara, Taxpayer Stuck with Unsold Ferries in Default,Bloomberg, August 8, 2011.

42. Joe Stephens and Carol D. Leonnig, Solyndra: Politics Infused Obama Energy Programs,Washington Post, December 25, 2011.

43. Joe Stephens and Carol D. Leonnig, Solyn-dra Loan: White House Pressed on Review of SolarCompany Now Under Investigation, Washington

Post, September 13, 2011.

44. Carol D. Leonnig and Joe Stephens, Obama


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Was Advised against Visiting Solyndra after Finan-cial Warnings, Washington Post, October 3, 2011.

45. Joe Stephens and Carol D. Leonnig, Solyn-dra: Politics Infused Obama Energy Programs.

46. Bonnie Berkowitz et al., Greenlighting Solyn-

dra, Washington Post, December 2011.

47. Eric Lipton and John M. Broder, In Rush toAssist a Solar Company, U.S. Missed Signs, NewYork Times, September 22, 2011.

48. Carol Leonnig and Joe Stephens, FederalFunds Flow to Clean-Energy Firms with Obama

Administration Ties, Washington Post, February 14,2012.

49. Budget of the U.S. Government, Fiscal Year 2013,Analytical Perspectives, (Washington: GovernmentPrinting Office, 2012), p. 63.

50. For background, see Budget of the U.S. Govern-ment, Fiscal Year 2008, Analytical Perspectives (Wash-ington: Government Printing Office, 2007), p. 313.

51. See Tad DeHaven, HUD Scandals, Down-sizing the Federal Government, June 2009, www.downsizinggovernment.org/hud/scandals.

52. George J. Stigler, The Theory of EconomicRegulation, Bell Journal of Economics and Manage-ment Science 2, no. 1 (1971): 3.

53. See Nicole V. Crain and W. Mark Crain, TheImpact of Regulatory Costs on Small Firms, pre-pared for the Small Business Administration Of-fice of Advocacy, September 2010.

54. See Susan Dudley and Melinda Warren, Fis-cal Stalemate Reflected in Regulators Budget: An

Analysis of the U.S. Budget for Fiscal Years 2011 and2012, Murray Weidenbaum Center on the Econo-my, Government, and Public Policy at WashingtonUniversity in St. Louis and the George WashingtonUniversity Regulatory Studies Center, May 11, 2011.

55. Timothy P. Carney, Little Guys Fight H&RBlocks Regulatory Robbery, Washington Examiner,

March 13, 2012.

56. Timothy P. Carney, Contraceptive CorporateWelfare, Washington Examiner, March 5, 2012.

57. Timothy P. Carney, The Overhead Smash:Big Truckers for Big Regs, Washington Examiner,

January 9, 2012.

58. Government Accountability Office, SugarProgram: Supporting Sugar Prices Has IncreasedUsers Costs While Benefiting Producers, GAO/RCED-00-126, June 2000, p. 5.

59. Chris Edwards, Agricultural Regulations andTrade Barriers, Downsizing the Federal Govern-ment, June 2009, www.downsizinggovernment.org/agriculture/regulations-and-trade-barriers.

60. Jeffrey M. Drope and Wendy L. Hansen, Pur-chasing Protection? The Effect of Political Spendingon U.S. Trade Policy, Political Research Quarterly 57,

no. 1 (2004): 35.

61. Congressional Budget Office, Report on theTroubled Asset Relief ProgramMarch 2012,March 28, 2012.

62. Budget of the U.S. Government, Fiscal Year 2013,Analytical Perspectives, p. 46.

63. Federal Housing Finance Agency, Conserva-tors Report on the Enterprises Financial Performance,

Fourth Quarter 2011 (Washington: Federal HousingFinance Agency, 2011), p. 17.

64. See 58% Want to End Small Business Admin-istration Loan Guarantees, and Voters See TheseCorporate Welfare Programs as a Good Place toCut Government Spending, Rasmussen Reports,

August 16, 2011, http://tinyurl.com/6pmknan.

65. Possible Negatives for Candidates: Vote forBank Bailout, Palin Support, Pew Research Cen-ter, October 6, 2010.

66. James L. Payne, Budgeting in Neverland: Ir-rational Policymaking in the U.S. Congress andWhat Can Be Done About It, Cato Institute Policy

Analysis no. 574, July 26, 2006, p. 3.


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