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S. 1376, the Corporate Subsidy Review, Reform, and Termination Act of 1995 : hearing before the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, second session, on S. 1376, to terminate unnecessary and inequitable federal corporate subsidies, March 5, 1996 online

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Online LibraryUnited States. Congress. Senate. Committee on GoveS. 1376, the Corporate Subsidy Review, Reform, and Termination Act of 1995 : hearing before the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, second session, on S. 1376, to terminate unnecessary and inequitable federal corporate subsidies, March 5, 1996 → online text (page 7 of 10)
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But, pressure from the ethanol lobby was enough to move Speaker Gingrich to
make an about-face on the issue and order the Ways and Means Committee to do
the same. The ethanol tax break was preserved. As The Washington Post noted,
"The ethanol subsidy is proving to be a life form as sturdy as antibiotic resistant
bacteria; everyone from Gingrich to the White House winked at its resuscitation."

Campaign Finance Reform and Corporate Welfare

Key leaders of the effort on behalf of S. 1376 — Senators McCain, Feingold and
Thompson — are also providing courageous leadership in the effort to reform the
campaign finance system.

We believe these issues go hand-in-hand. Corporate welfare remains an intracta-
ble part of the federal budget in large part because campaign contributions flow to
Members of Congress from those special interests that benefit from corporate wel-
fare programs.

The connection between campaign finance reform and an end to corporate welfare
has been noted by those with widely diverse points of view. The conservative CATO
Institute said,

Much of what passes today as benign industrial policy is little more than
a political payoff to favored industries or businesses. Taxpayer dollars that
are used to subsidize private firms are routinely returned to Washington
in the form of political contributions and lobbying activities to secure even
more taxpayer dollars.

The Clinton Administration's Secretary of Labor Robert Reich agreed, saying,

There's a direct connection between unwarranted tax breaks and the prob-
lems that we have in our current system of campaign finance and lobbying.
Ninety percent [of corporate welfare], if not 100 percent of it, is a result
of lobbying and campaign donations by particular companies and indus-
tries.

These special interests are using the influence money game to their advantage.
Their campaign contributions to Democratic and Republican Members of Congress
and their huge donations to both political parties have helped to ensure that hun-
dreds of millions of dollars in federal corporate welfare keeps flowing their way.

The first and most important step this Congress should take to eliminate cor-
porate welfare is to quickly pass a strong, comprehensive campaign finance reform
bill. We urge the full Senate to act soon to pass S. 1219, the Senate Campaign Fi-
nance Reform Act of 1995.

Ending Corporate Welfare

An independent commission on corporate welfare and an expedited process for im-
plementing that commission's recommendations that would be established by S.
1376 is one way to ensure that these powerfully backed programs are subject to the
same scrutiny as other budget items. For a commission to be effective, it must have
a strong mandate to examine these programs, and to make specific recommenda-
tions on reducing or eliminating corporate welfare benefits in the federal budget.

The commission established by S. 1376 is styled after the successful Base Realign-
ment and Closure Commission, with some differences.

The commission would make a set of recommendations on provisions which should
be eliminated or reduced from the budget and tax code. The commission's report
would be sent to the President, who could approve it as a whole or make revisions
and return it to the commission. If the President makes revisions, the commission
may or may not accept those revisions and then return it to the President. If at that
point, the President disapproves the revised report, the process ends.

If the President sends the report to Congress, the House and Senate would have
expedited procedures for considering the report — but would be allowed to amend it —
and when passed, the report would be returned in legislative form to the President
for his signature.

We believe it is especially important, as Senator McCain pointed out in his state-
ment introducing the legislation, that the final stage of the process be as free as
possible from "opportunities for parochial interests to influence the process."

Conclusion

At a time when leaders in Congress are telling the American people that we must
make difficult choices in the federal budget. Congress must fairly address the bil-
lions of dollars spent on corporate welfare.

We applaud Senators McCain, Feingold, Thompson, Kennedy and Coats for rais-
ing this critical issue and for introducing S. 1376.



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ATTACHMENT

THE COST OF CORPORATE WELFARE

The range of our government's corporate welfare programs is vast. All told, budget
experts estimate that corporate welfare programs will cost taxpayers $265 billion
over the next 5 years. Here are just a few of the programs that cost American tax-
payers billions of dollars.

#1— ARCHER DANIELS MIDLAND

Archer Daniels Midland (ADM) enjoys an enormous tax subsidy that benefits
producers of ethanol, an alcohol-based fuel. ADM has cornered about 80 percent
of the ethanol market.

ADM is a multimillion-dollar campaign contributor. In addition to generous
PAC giving to congressional candidates, ADM gave more than $480,000 in soft
money to the Democrats and more than $345,000 in soft money to Republicans
during the 1994 elections alone.

COST TO TAXPAYERS: $3.6 BILLION OVER 5 YEARS
#2— WEALTHY SHIP OWNERS

Commercial ship owners who agree to make their vessels available to the gov-
ernment during wartime are eligible for enormous federal subsidies, even
though the Pentagon and others agree that the program no longer serves a use-
ful purpose. Ships in the program receive on average $3.5 million each in yearly
federal subsidies, according to the Los Angeles Times.

Despite concern from the Pentagon and others, Congress has yet to scrap the
questionable program. The maritime industry has been particularly generous to
Congress — giving nearly $17 million in PAC contributions to congressional can-
didates during the last decade.
COST TO TAXPAYERS: $1 BILLION A YEAR

#3.— PROMOTING CHICKEN McNUGGETS©, PRUNES & ORANGE
JUICE

McDonald's, Pillsbury, ConAgra and Tysons Foods are just some of the giant
food corporations and agribusiness powers that benefit from huge corporate wel-
fare programs that cost taxpayers billions every year.

One tax subsidy — the Market Promotion Program — helps wealthy corporations
advertise their products overseas. McDonald's has received more than $1.6 mil-
lion since 1986 to advertise its fast food products abroad; Sunsweet Prunes
pulled in nearly $23 million; and Sunkist has received more than $76 million
since 1986 to promote its oranges in Asia.

The subsidies are huge, but there's been little outcry from Congress. Agri-
business and food corporations contributed nearly $50 million in PAC contribu-
tions to congressional candidates during the past decade.
COST TO TAXPAYERS: $6.2 BILLION A YEAR

Sources: Common Cause, Progressive Policy Institute, Los Angeles Times, The Cato
Institute, the Green Scissors Report

Chairman Stevens. Thank you very much.

I am at a loss and probably should keep quiet, but as I recall,
we have had a vote on power marketing agencies. We have had a
vote on ethanol. We have had a vote on, I think, the MPA, Market-
ing Promotion Program, whatever they call that, not MPA, the Ag-
riculture Marketing Program. We had separate votes, I think, on —
at least a third this Congress so far on the list that was presented
to us by Mr. Moore from Cato.

Now, somehow or other people think if those same issues come
up in a bill from a commission that the Congress will change its
mind. Tell me, how do you think Congress is going to change its
mind on ethanol after what you described?

Ms. McBride. Well, Mr. Chairman, I think one of the things is
that a commission that is separate from the money and special in-
fluence that is very evident in this town, I think



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Chairman Stevens. Well, Archer proposed it, Ms. McBride. How
is this commission going to get any further than having the chair-
man of the Committee propose the amendment?

Ms. McBride. Well, Mr. Chairman, what happened then obvi-
ously was that an enormous amount of political influence came to
bear, and you are not free of this in this process. But what you
start out with is a presumption, a presumption that people free
from this process, free from money, should be able to sit back and
make the public case and the reasons why this should be elimi-
nated. That presumption has to be overcome. There are no guaran-
tees in this process that it will be overcome, but there will be an
independent voice and a strong and public case made by those sep-
arate from the process.

Chairman Stevens. I would just ask you one last question. Take
my friend Warren Rudman, my friend Paul Tsongas, and ten an-
gels along with them, and they are on a commission and they rec-
ommend all these things and have one bill and they come up here.
Tell me what is going to happen different to that, their suggestions,
and happen to Archer's suggestion. Why should we use the tax-
payer money for a commission to do something we ought to do
again and again and again until we get it done. As I said, it took
me 25 years to get the Alaska Power Administration sold, but I did
get it done. I wouldn't have got it done under term limits, by the
way, but I would have got it done. [Laughter.]

Senator THOMPSON. Somebody else might have, though.

Chairman Stevens. I don't know. Maybe you could have done it
better. I guess that is true.

I don't see how this is going to help getting a decision by Con-
gress on these issues within a commission when Congress has re-
fused time and time and time again to — I voted with him on most
of these things, although I wish he had mentioned the Seawolf in-
stead of the B2. Thompson said it. One man's pork is another
man's prize or person's prize, you know.

Senator McCain. May I make a quick response, Mr. Chairman?

Chairman Stevens. Yes. Well, she wants to answer first.

Senator McCain. Could I, Ms. McBride, just one second?

Ms. McBride. Certainly.

Senator McCain. I think the same reason why we couldn't close
a base until we had a commission that recommended a package
that Congress could accept. I think it is pretty clear that when the
Pentagon would say we will close Elmendorf Air Force Base in
Alaska, people would rally around with respect and affection for
whatever Senator it may be and say, OK, we won't vote this down.
But when a credible commission of people who were credentialed
and who had the reputation of non-partisanship, nor anj^thing ob-
jective except what was best for our nation's defense, they came
forward with a package, and those packages would be accepted. I
think that is the difference. At least, I hope it is, Mr. Chairman.

Ms. McBride. Let me just add, Mr. Chairman, that I also believe
that this would be a much easier task, that you would not have the
problem of the ethanol switch and many of the other protections of
corporate welfare if, when this commission reports back in 1997,
we have had fundamental campaign finance reform. I believe the
commission will play a major role in creating a package, creating



43

a presumption, but we also in this country have to break the stran-
glehold of money on the Congress and on these kinds of decisions.
And so I would hope that in 1997 we come back with a package
of powerful amendments by a group of people who are committed
to changing and dealing with these in a hard-nosed, realistic way,
and that you will also have a Congress that is no longer so depend-
ent on the money that protects these perks and corporate benefits;
and that, therefore, Congress will be freer to make positive deci-
sions that will benefit the average citizen.

Chairman STEVENS. Ms. McBride, you sound like you are cam-
paigning for Bob Dole and a Republican-controlled Congress. Is
that what you are telling us?

Senator McCain. Sure, she is. [Laughter.]

Chairman STEVENS. Thank you. Go ahead. Senator Thompson.

Senator THOMPSON. Well, I don't like these commissions that do
jobs for us that we ought to do ourselves either. But we went
through this with the balanced budget amendment debate. We all
said all we need to do is the right thing, we don't need the amend-
ment; and we see how close we are now to a balanced budget still.

But I have decided that some of our problems are becoming so
intractable. On the economic side, for example, if we bankrupt this
country, you know, future generations are not going to be all that
caught up in how we did it and what procedure we used. And I
think the same thing is true here, and it has to do, I think, with
public confidence.

I would like for both of you to address that. I was looking again
yesterday at some figures of people's attitude toward Congress, and
after going up a little bit, you know, it is right back down where
it has always been, which is lower than a snake's belly. It looks to
me like that after all is said and done, we can talk about these in-
dividual programs, we can talk about how we attack them and all
of that. But the fundamental issue here is one of public confidence.

I get the feeling that there is a broad feeling out there, and it
is manifested in Ross Perot, Pat Buchanan, Forbes, public opinion
polls, the esteem of Congress or lack of it. I mean, it hits us over
the head, and we refuse to recognize it, of broad cynicism and lack
of trust with what goes on up here. And it looks to me like that
this is a part of that package.

Now, am I drawing too broad a picture here on that, or do you
agree with that?

Ms. Phillips. Well, I think that if you set up a commission to
do this job and you fail, you will heighten that distrust and mis-
trust. So it is a gamble that you are taking. I hate to be the skunk
at the garden party and be such a pessimist. The Concord Coali-
tion's "Zero Deficit Plan" recommended terminating or reducing
sharply a number of subsidies to corporations on both the spending
and revenue sides. We found it to be very, very hard work to get
people to embrace these decisions.

Commissions are not magic. Lord knows we have had commis-
sions and commissions and commissions. There is a long list of
commissions, listed in my formal testimony, that are currently
being proposed to do everything from reform Medicare to figure out
which national parks should be trimmed back or closed.



44

Commissions aren't magic. If you set one up, you are going to
have to invest a lot into making it work. It won't be easy. If you
pull it off, I think it will do an enormous amount to heighten the
esteem and credibility of Congress. And if you don't pull it off, peo-
ple will say, you know, the same as usual.

Ms. McBride. Senator Thompson, I strongly believe that this
issue is part of the piece that concerns people, and in many ways
it has become a symbol because it brings together what they are
concerned about. In the last year since I became president of Com-
mon Cause, I have traveled all over this country and listened to
thousands of people, and they are deeply concerned, as you talked
about in your statement. And I think what this issue brings to-
gether for people is the concern that I am not being represented;
there are powerful voices that are being heard and protected while
the things that I am concerned about are not; that my voice can't
be heard; and that money and power have too much influence in
Washington.

So I think this is an important part of the piece, an important
symbolic piece and an important piece of reality about how the
American people feel. And, you know, none of us loves commis-
sions. If we are honest, this is not the preferred way to go. The pre-
ferred way to go was, Mr. Chairman, when those votes came up
and these were programs that had outlived their usefulness, that
they would be voted down. Unfortunately, this has not happened,
and I think this approach is worth trying, because I do believe this
is an important part. The American people are deeply concerned.

But I believe that underneath their anger and their cynicism,
they desperately want a Government they can be proud of. They
desperately want a Government that works. They desperately want
to have a sense of community and pride in their public officials.
And I think that that, you know, underlies this and underlines oth-
ers of the issues that you are raising.

Senator THOMPSON. You know, it occurs to me that as part of
this education process it could work more than one way. Some of
these things that are on some of these lists, after a public airing
and discussion by an independent body, we may decide that there
is a public good that is being served, even though it is only one
small segment of society, maybe, who can carry it out, whether it
be research and development or keeping us from our oil depend-
ency and all of that.

The other part of the equation would be for people like us and
the two of you to acknowledge that perhaps these are justified. The
process wouldn't be just totally a one-way deal that anything that
is on somebody's list has got to go. But there would be some public
agreement as to what really did serve the national interest and
what was corporate pork.

That is all I have.

Ms. McBride. Yes, and that was the concern raised by Senator
Stevens, that, in fact, this process could provide a real evaluative
process to reach consensus in the country. So thank you.

Chairman Stevens. Well, I disagree with you both. I can see the
headlines in my home town and several other towns in Alaska to-
morrow: Stevens questions commission to eliminate pork. You
know, all you have to do is to suggest some of these things, and



45

if you ask even a question about them, you face such a barrage
today in the pubUc you can't beheve it.

Now, again, I tell you, I think eliminating corporate pork is one
thing, but trying to analyze what caused a Federal expenditure and
seeing whether that is justifiable is entirely different than coming
up with a list like all of you today have come up with, just elimi-
nate these things, they are pork, apparently because they don't
serve anyone that is on the list that suggested them.

I really question seriously whether Congress ought to create com-
missions to do a job the public knows we ought to do ourselves.
And if you are right, Ms. McBride, that issue ought to be brought
up again and again and again until people realize that you are
right. But I don't think having a commission suggested to it is
going to be any stronger to the Congress than having Chairman
Archer suggest it. I just still wonder why we need a commission to
tell us what we ought to do anyway. If we should do it, we should
do it. But those of us who try to look at the background of why
something is being spent, why money is being spent — and I can go
on for years about — look at the West. Look at the Constitution.
There is not a thing in the Constitution that says the Federal Gov-
ernment can own property other than for bases, for magazines and
post offices and a few other things. But the Federal Government
owns the West. And you spend more money every year in about 11
agencies to deal with ownership of land in the West than you can
imagine.

But any of us that suggest maybe we ought to think about that,
we're suddenly tarred with a brush, that we are challenging the
national park system or something. This system today has gotten
to the point where anyone who wants to think out loud is in trou-
ble. I am in trouble right now.

Senator Levin?

Senator McCain. Mr. Chairman, would Senator Levin — could I
have his indulgence? I have to go to the same hearing that Senator
Levin just came from, if he would allow me just a couple minutes.

Chairman Stevens. I have to go to one, too.

Senator McCain. Mr. Chairman?

Chairman Stevens. Yes, sir.

Senator McCain. Thank you, Mr. Chairman.

Ms. Phillips, I appreciate your comments and your recommenda-
tions, and I think that they are very valid. I think we ought to look
very carefully at them, and we appreciate your testimony.

Ms. McBride, thank you for your very cogent remarks, and every-
thing around here is anecdotal, but you brought up the ethanol
issue. I am a C-SPAN junkie, and I was watching when Senator
Dole went over and spoke to the National Governors' Association,
not the Republican Governors, all the Governors, and they had
come up with a bipartisan — the Governors had — agreement on ad-
dressing the Medicare and the Medicaid issue. It was 2 or 3 weeks
ago. And so Senator Dole gave some remarks, and then there were
a few questions from the assembled Governors, most of them focus-
ing on the agreement on Medicare and how Senator Dole was going
to present this to the Congress and whether the President would
agree and that kind of thing. And the last question was from the
Governor of Iowa, who said, "What's your position on ethanol?"



46

This is before the Iowa caucuses. So Senator Dole had to say — and
I am supporting Senator Dole. Senator Dole had to say, "I am for
ethanol 100 percent. I am behind it. It is the greatest thing since
sliced bread," blah, blah, blah. Because clearly if Senator Dole had
said anything else, it would have affected what happened in the
Iowa caucuses.

I saw special interest at work right there on C-SPAN. And so I
respectfully disagree with my distinguished chairman that we are
able to address this issue.

Ms. Phillips, you mentioned with great clarity that we are taking
a risk. I agree we are taking a risk. But my question to you, Ms.
Phillips: Do you think the status quo is going to work? Do you
think that things are going to change greatly under the status quo
if we don't do something like a commission?

Ms. Phillips. I not only don't think things will change under the
status quo, I am not convinced that they will change under a com-
mission either. What I am trying to say is that we encourage you
to launch a commission, but we caution that you are going to have
to invest a great deal of political capital, energy and time into mak-
ing the commission work. It is not enough to just appoint a com-
mission and walk away.

Senator McCain. Your point is

Ms. Phillips. Recently we saw the entitlements commission.

Senator McCain. Exactly.

Ms. Phillips. It got appointed, but, you know, it did not have the
full backing in a lot of places where it needed to be backed in order
to succeed. Nevertheless, it was useful. The public is now aware of
entitlement realities that were not widely before. But nothing
much happened as a result of all of that expenditure of time and
energy. So, a commission is only the beginning; it is not the solu-
tion.

Senator McCain. I agree with you, and for every commission
that has succeeded, there are probably 10 that have failed. I am
agreeing with you. But there have been some, for example, the So-
cial Security Commission that basically gave Congress the back-
bone to make the decisions to save Social Security back in 1983.

Ms. Phillips. The difference with the Social Security Commis-
sion is that when they finally reported, they were in actually the
month when there was not enough money in the trust fund to pay
the benefits. They had to do something. This issue of corporate sub-
sidies, unfortunately, could go on and on and on until the end of
time, and so you don't have that kind of deadline.

Senator McCain. I understand that. I was just citing it as an ex-
ample. Let me give a better example. We didn't close a base for 30
years until we had a Base Closing Commission. Now, those bases
would have gone on and on and on and on, in my view, if we had
not had a commission that would then give us the cover, very
frankly, the political cover, to vote for a package rather than a sin-
gle base being closed or kept open.

Ms. Phillips. But in your bill, you are not going — as I read it —
now, I may have misread it. You are not going to have a package,
so people could still line up and pick them off one by one.

Senator McCain. There will be a package that comes out of the
commission, Ms. Phillips. I am sure you read that in there also.



47

Now, it may go to the Committees, yes, because I think they are
trying to address the deep and vaUd concern that Senator Stevens
has. If you do away with the maritime subsidies, then it seems to
me you have got to look at the Jones Act and take other legislative
action as well. But, you know, that is why we have these hearings,
and that is why we have people like you here.

Ms. Phillips. I wonder if, after you went to the Committee proc-
ess, if there was a way that you could bring it back to a single
package. After the Committees have done their best work, repack-


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Online LibraryUnited States. Congress. Senate. Committee on GoveS. 1376, the Corporate Subsidy Review, Reform, and Termination Act of 1995 : hearing before the Committee on Governmental Affairs, United States Senate, One Hundred Fourth Congress, second session, on S. 1376, to terminate unnecessary and inequitable federal corporate subsidies, March 5, 1996 → online text (page 7 of 10)