The President’s Big Boost to Corporate Welfare

by Veronique de Rugy

Contrary to what the New York Times was reporting on Friday, President Obama’s plan to consolidate six agencies into one isn’t “an aggressive campaign to shrink the size of the federal government.” After all, we are talking about $300 million over ten years, which is 0.0081 percent of the government’s 2012 budget of $3,700,000,000,000.

In fact, I did wonder on Friday how the president could get so much news coverage considering how ridiculously small the announced savings were. Identically, I am not sure how much credit one should get for proposing to get rid of duplicative programs. It seems like the least a president should do. On the other hand, the fact that it never ends up happening is a pretty sad statement of what Washington is all about.

My first thoughts after hearing the news was that it was a step in the right direction. But when I looked at the president’s list of agencies, I realized that this plan is even more ridiculous than the amount of money it pretends to save. In the aftermath of the Solyndra scandal and the attention that it brought to crony capitalism, the president’s plan seems like an attempt to give a new lease on life to corporate welfare. Think about it: the thing these agencies have in common is that their main goal is to deliver taxpayer dollars to the private sector. It means that the proper policy then would be to abolish these agencies and programs, rather than merge them.

The Small Business Administration, one of the agencies in the plan, is a good example of that. First, the agency guarantees loans to undeserving small businesses (one criterion for getting an SBA loan is that the business can’t get credit elsewhere). Unsurprisingly, these businesses end up defaulting at a higher rate than small businesses that do not rely on the guarantee to access capital. Second, the SBA’s loan program is little more than a corporate-welfare program for the big banks issuing the loans.

In the end, my colleague Matt Mitchell may have it right when he notes that this consolidation could make the job of lobbyists even easier. Whatever your private interest, in order to get government money, you would only have to make one stop instead of six.