Table of Contents
In the wake of tremendous budget deficit, the issue of cutting the federal budget becomes especially topical. The necessity to reduce federal expenditure is admitted by Republicans as well as by Democrats. In a word, at least in one question, the nation reached the consensus. In his article “Where to cut the federal budget? Start by killing corporate welfare” (2012), Bandow explores areas in which cuts are possible. In particular, the author focuses on corporate welfare expenditures. Current paper represents a summary of the Bandow’s analysis.
Corporate welfare expenditures
Corporate welfare is one of the most outrageous expenditures of the federal budget (Bandow, 2012). Business subsidies cost approximately $100 billion per year (Bandow, 2012). The federal government subsidizes almost every branch of business: agriculture, energy, insurance, pharmaceuticals, etc. The most subsidized business in the United States is agriculture. Thus, the Department of Agriculture spends approximately $ 25.1 billion to support large farmers, the Rural Utilities Service, and some other programs (Bandow, 2012). The Department of Energy spends about $ 17.3 billion on corporate welfare (Bandow, 2012). It subsidizes various energy and conservation projects (Bandow, 2012). The Department of Housing and Urban Development spends approximately $16 billion (Bandow, 2012). The majority of this amount is designed to subsidize mortgages (Bandow, 2012). Also, some money is spent on underwriting business (Bandow, 2012). Furthermore, the National Institutes of Health pays $ 13.8 billion for applied research and development projects (Bandow, 2012). The expenditures of the Department of State constitute $5.2 billion (Bandow, 2012). It is interesting that even this department is involved in supporting corporate welfare; it provides financial aid to poorer nations, and thus supports the US exporters which sell their goods and services to these poorer nations (Bandow, 2012). The Department of Defense pays $ 4.7 billion for applied research and development (Bandow, 2012). The Department of Commerce assigns $4.1 billion to businesses (Bandow, 2012). Also the Small Business Administration transfers $ 3.2 billion to enterprises (Bandow, 2012). NASA, the Department of Interior, the Department of Transportation, and the National Science Foundation are also among great spenders. Overall, one may observe that corporate welfare incurs large budget expenditure. Bandow (2012) draws attention to the fact that support of corporate welfare comes not only in the form of direct subsidies but also in the form of tax preferences, regulations limiting competition, protective tariffs and quotas. Bandow (2012) suggests that the federal government should stop such an expensive support of corporate welfare; thereby the budget deficit can be reduced. Furthermore, the author points out that market participant can make a better judgment, and thus act more efficiently than politicians. In simple terms, the interventions of politicians in the marketplace are inefficient. In addition, the author notes that expansive governmental intervention in business affairs distorts competition. Furthermore, Bandow (2012) notes that massive subsidies politicize the economy. The author explains that governmental intervention accelerates lobbying activity (Bandow, 2012).
Bandow makes a good point about corporate welfare support. Personally, I agree with his point. Such strong support can be harmful to the business itself. Indeed, with such a support, businesses have no motivation to operate more efficiently since they know that their failures are to be backed by the federal budget. Business is more efficient and flexible when there is no governmental support. The absence of such support makes businesses operate in the most cost-effective manner. In other words, businesses dispose their resources more wisely. Furthermore, the absence of governmental support makes business find new markets instead of relying on the governmental procurement. Finally, the absence of governmental support makes business more independent of the government; thus businesses become less politicized which is good for them (since they do not have to put efforts and invest resources in political lobbying) and for the government (as there is no room for maneuvers in terms of corruption and power abuse).