Albion Monitor /News

Strange Bedfellows Target Corporate Welfare

by Abid Aslam

(IPS) WASHINGTON -- A coalition of politicians, analysts, and activists from both the left and right are mounting an attack on "corporate welfare" -- the use of public funds to subsidize large corporations.

Details of their plan to defund government programs and downscale U.S. contributions to multilateral institutions, including the International Monetary Fund (IMF), were unveiled Jan. 23.

"This is clearly a strange-bedfellows coalition," says coalition member Stephen Moore, an economist at the Cato Institute, a free-market think tank.

IMF bail-outs and loans -- notably to Mexico in the wake of the 1995 peso crisis -- benefit corporate investors
Led by Republican Rep. John Kasich, chairman of the House Budget Committee, the coalition includes a broad range of free-market, anti-government, environmental, and consumer-rights organizations.

Coalition targets are understood to include about a dozen government programs, with public-works and fuel-development subsidies at the top of the list.

Their proposals also are reported to include trimming U.S. commitments to the IMF.

Some coalition members consider IMF spending to be corporate welfare because IMF bail-outs and loans -- notably to Mexico in the wake of the 1995 peso crisis -- benefit corporate investors. Others are hoping to leverage greater public accountability and closer attention to the environmental and social consequences of IMF-designed structural adjustment policies (SAPs).

The IMF demand is not likely to sit well with the Bill Clinton administration, which this week celebrated Mexico's early repayment of the U.S. contribution to the 1995 bail-out package.

The administration is attempting to get Congressional approval for U.S. participation in an expanded IMF line of credit, meant to head off future such crises in developing countries. Such an arrangement would make it unnecessary for the United States to make direct loans like the one to Mexico, which was highly unpopular here.

How much the United States will be asked to commit to the line of credit should be known after the IMF's executive board discusses the matter, sources say.

U.S. Treasury Secretary Robert Rubin has said repeatedly the United States must maintain its commitments to the IMF and World Bank in order to remain a global economic leader.

"The United States is truly the only nation in the world that can provide leadership in the global economy," Rubin told participants at a conference here on Jan. 13.

Other likely targets of the coalition include the U.S. Department of Agriculture's Market Access Program, which provides grants to food industry associations so they can subsidize U.S. agribusinesses advertising overseas.

By members' own admission, however, the coalition is a fragile one riddled with what Moore termed "natural suspicions" about the hidden agendas of partners who sit at opposite ends of the political spectrum. That fragility likely will be severely tested by powerful corporate lobbies that have quashed previous attempts to wean them off public subsidies.

Nevertheless, coalition members remain hopeful about their effort.

"We're starting to see more public education," said Courtney Cuff of Friends of the Earth. "The people are starting to be increasingly aware of harmful and wasteful spending by their elected representatives."

Cutting $60 billion in corporate welfare could be used to cut the budget deficit in half
Cuff coordinates Green Scissors, a network of groups which early next month will release its latest annual report on economically wasteful and environmentally harmful spending.

"Nobody wants to be seen to be funding things that don't benefit the greater good," she said of Congress, citing Kasich's "courage" and a "Congressional climate created in large part by the outcry of the people."

Cuff credits public education and lobbying with helping to dissuade Congress in 1994 from passing a $2.6 billion research and development spending proposal that would have led to the construction of a nuclear reactor in California.

"This is the year to do this," Moore said. "This coalition is unprecedented. The Republicans now see that it's good politics to distance themselves from large corporations, and the question is, where else do we get the money to cut the deficit?"

Moore would like to eliminate all of what he estimates to be around $60 billion in corporate welfare from the federal budget. The money, he said, could be used to halve the budget deficit, estimated at about $108 billion in fiscal 1996, which ended in October. Or it could be used to eliminate inheritance and capital gains taxes, a proposal likely to win plaudits from the right wing.

But the consensus plan to be unveiled next week is likely to be relatively modest, saving only a reported $2 billion to $3 billion a year. The list of programs the coalition would like to see cut itself has been shortened because of continuing disputes between members.

While they are in favor of cutting direct government subsidies to big business in order to level the corporate playing field, some members reportedly have opposed attempts to close corporate tax loopholes.

The Clinton administration is expected to target at least some corporate tax breaks in the budget it presents next month, however. And although Secretary Rubin bridles at the term "corporate welfare," he is said to be in favor of "broadening the corporate tax base."

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Albion Monitor January 17 , 1997 (

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