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The Corporate-Subsidy Ticket
Once again, Kerry-Edwards is trying to have it both ways.


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On corporate subsidy policies, Sen. John Kerry is not so much a flip-flopper as someone who simultaneously holds opposite views. He rails against “corporate welfare,” but proposes a bevy of new subsidies. He is against corporate tax loopholes, but promotes business-tax “incentives.”

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Politicians who believe in both activist government and anti-corporate populism have no choice but to straddle like this. That’s because if you want to meddle in the economy, you have to do it through corporations because they produce most of the nation’s output.

Kerry’s website says he has a record of “taking on corporate welfare,” and in two of the presidential debates he proposed creating a McCain-Kerry Corporate Welfare Commission. Such a commission would target for cuts more than 100 subsidy programs costing $65 billion a year, according to the Kerry campaign, citing Sen. John McCain.

That is a good idea, but here’s the catch. The McCain-Kerry $65 billion comes from a Cato Institute study, which proposed numerous spending cuts that Kerry strongly opposes. For example, the Cato study targeted the Manufacturing Extension Partnership for elimination, but Kerry is proposing to double MEP funding. In speeches, Kerry tries to cloak himself in McCain’s anti-subsidy record, but it doesn’t fit.

Cato’s report also targeted the Advanced Technology Program, and a McCain press release asked, “Why should the Commerce Department spend $211 million a year on . . . some of the largest and richest high-tech companies in this nation?” But John Kerry’s campaign has criticized President Bush for cutting ATP. Similarly, John McCain has called for ending the ethanol subsidy, but John Kerry is promising to double ethanol use.

What’s worse is that Kerry is proposing a range of new business subsidies. He wants to give $10 billion to automakers for fuel-efficient cars, $10 billion to coal companies for cleaner technologies, and $5 billion for research on hydrogen and ethanol. Kerry wants the government to cover business health care costs, wants to increase trade-adjustment assistance for companies, and wants to create “manufacturing business investment corporations” to hand out government “venture capital.”

Kerry’s running mate John Edwards holds different views on the business sector depending on whether or not companies at issue are part of his political base in North Carolina. He heaps non-stop abuse on HMOs, credit card companies, and other industries. The former trial lawyer rails, “I’ve fought against big drug companies, big insurance companies, big Corporate America.”

At the same time, Edwards lavishes federal pork on homestate businesses. Recent press releases from the senator’s office announced: $233,770 “to improve parking facilities for downtown businesses,” $154,000 for a “revolving loan fund” for businesses, $250,000 for a technology park, and $2.9 million for textile companies in North Carolina. Edwards praised passage of the recent “buyout” that will give more than $10 billion of taxpayer money to tobacco producers.

On corporate taxes, the Kerry-Edwards ticket follows much the same pattern. Kerry charges the president with supporting tax loopholes, but Kerry wants to create business tax credits for health care, new jobs, and other activities. Kerry attacks “Benedict Arnold” companies and proposes to end the “special” tax break for overseas jobs outsourcing. But the “special” break he refers to is standard tax policy in other major industrial countries. Indeed, most of our trading partners have tax rules on foreign investment that are more business-friendly than ours.

Kerry promises to increase U.S. jobs, but his plan to raise taxes on foreign subsidiaries would probably cause job losses. If taxes on subsidiaries were increased, U.S. firms would lose sales to foreign competitors causing them to scale back their U.S. operations. Besides, Kerry’s corporate tax plan would be dead on arrival in Congress given that a large bipartisan majority just passed a pro-growth bill that went in exactly the opposite direction and cut taxes on subsidiaries.

If elected, one would hope that Kerry and Edwards would focus on serious reforms and stop using Corporate America as a punching bag. Whoever wins the election should combine deep cuts to corporate welfare with a large corporate tax-rate cut. That would end favoritism, spur growth, and eliminate fears about jobs outsourcing as new investment poured into the U.S. economy.

Chris Edwards is director of tax policy at the Cato Institute.



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