Share this story
Close X
Switch to Desktop Site

If the budget-choppers go after business . . .

When it comes to cutting the federal budget, programs that give a boost to business can muster legions of ready defenders.

The reason is not hard to see: These programs have a highly visible impact on local economies.

About these ads

A congressman from Wisconsin who votes for lower dairy price supports risks constituent rebellion. The Export-Import Bank, which finances many foreign purchases of American airplanes, is a priority for legislators from the aerospace-dependent Northwest.

But with the nation facing ever-deepening deficits, some voices are calling for further cuts in such popular programs. And a few business regulatory agencies - already politically battered - are hearing demands that their funds be squeezed even more.

Compared with defense and entitlement programs, aid and regulation for business, industry, and trade is a small slice of the budget. However, considering Congress's vehement resistance to $100 billion deficits and the untouchable nature of such massive spending chunks as social security, small size is no guarantee of safety.

''After a while,'' says Robert Hartman, senior fellow at the Brookings Institution, ''you begin scraping the bottom of the barrel.''

Figure-rattling rhetoric about slashing business subsidies is nothing new. Individual congressmen have long moaned about agricultural price supports. The Clinch River Breeder Reactor, seen by some as a subsidy for the nuclear industry , survives mainly because it pours jobs into Senate majority leader Howard H. Baker Jr.'s state.

The program's existence depends on the time-honored tradition of arm-twisting and back-scratching: You vote for mine and I'll vote for yours.

This year, ''we're hoping for a reverse effect,'' says economist Thomas Humbert of the conservative Heritage Foundation. ''My program will be cut, so I'm not going to support your program.''

About these ads

A list of possible places to slash the business budget:

The Export-Import Bank. The Ex-Im Bank provides below-market financing for foreign purchases of American goods. Two-thirds of its loans aid seven large corporations that make huge, expensive gadgets such as jet airplanes and nuclear reactors. It produces ''few measurable national economic benefits,'' according to the Congressional Budget Office (CBO).

This year, the Reagan administration is proposing to slash $600 million from Ex-Im direct loans, though powerful supporters such as Sen. John Heinz (R) of Pennsylvania have vowed to fight the cut. Proposed loans would be $3.83 billion for 1983. Charging a market interest rate would save $342 million over the next five years, according to CBO. Mr. Humbert estimates a phase-out could save $900 million a year through 1985.

Dairy price supports. ''The dairy price support program has increased farm milk prices at the expense of consumers, but it has also helped stabilize the industry,'' says the CBO.

Last year, however, supply of milk exceeded demand by about 10 percent. The excess was purchased by the federal government, for about $2 billion. A phased-in, 15 percent reduction in supports could save $0.9 billion in '83 and $ 7 billion by '87, the CBO estimates.

Tobacco and peanut payments. These agricultural supports, though not as expensive as their dairy counterpart, might be phased out over the next two years. By 1987 $150 million would be saved.

Clinch River reactor. A lot of people don't like this controversial ''breeder'' reactor development project. The Heritage Foundation claims ''the plant will be 16 years behind the French designs when complete.''

Waving good-bye to Clinch River would save $1.1 billion by 1987, according to CBO.

Uranium enrichment. The US government charges below cost for enriched uranium. Between 1954 and 1980 this amounted to a $5.5 billion subsidy to the nuclear industry, estimates the Department of Energy. The CBO says charging a fair market price would raise $3.2 billion by 1987.

Amtrak. Almost everbody loves trains, but are they worth it? ''Amtrak's operating costs and deficits have increased dramatically every year,'' says the CBO. Paring the system back to its strong branches would save $1.5 billion by 1987, says the budget office.

Maritime industry subsidies. The Department of Transportation pays out cash to aid ship builders and ship operators, on the theory we must keep the US merchant marine competitive with foreign counterparts. Ending the subsidies would save $616 million over the next five years.

There are other budget-related areas that affect business, but which the business community would like to see cut. Prime among these are the provisions of the Davis-Bacon Act, which provides that workers on federally financed or aided construction projects must be paid an area's ''prevailing wage.'' The US Chamber of Commerce lists Davis-Bacon as a most-wanted further government cut. Its elimination would save the federal government from $1.5 billion to $2.4 billion in labor costs, according to the chamber.

In addition, some business groups and conservative economists have called for the elimination of a passel of regulatory agencies, in the name of fiscal restraint. The US Chamber, National Association of Manufacturers, and other groups are urging the Federal Trade Commission be sharply curtailed.

Other business-regulatory agencies under attack include the Consumer Product Safety Commission, the Interstate Commerce Commission, and the Commodities Future Trading Commission. Eliminating these three would cut about $122 million from the federal budget.

''You're not talking about really paring down the economy by eliminating these agencies,'' says a congressional source who asked not to be named.

The source doubted any agency would be eliminated, although ''you might force them to live within a very narrow budget,'' he said.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.