United States. Congress. Senate. Committee on Gove.

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 8 of 10)
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age it, and then say, OK, the whole thing stands or falls; you can't
continue picking at it.

Senator McCain. I think that is a very valid point.

Did you want to say anything, Ms. McBride.

Ms. McBride. No. Thank you.

Senator McCain. Thank you, Mr. Chairman.

Chairman Stevens. Thank you very much. Senator.

Senator Levin?

Senator Levin. Mr. Chairman, I will be brief because I know it
is late. I think the bill as it is intended is well intended. I think
we have to look at the whole host of programs. I think it is, how-
ever, way broader than what its intent is, and that is something
which we have to be concerned with. At least I am concerned with
it.

So I applaud the sponsors and the supporters for proposing that
we look for a mechanism to take a look at some of these programs.
But when you analyze the bill itself and look at the breadth of the
bill, it seems to me it is overly broad, to say the least.

As I read this bill, we would be investing in the President and
eight of the President's appointees, a majority of which would be
five, the power to look at any program that directly or indirectly
benefits any profit-making entity, any mom-and-pop store or any
partnership, any sole proprietorship. This isn't just big corporations
we are talking about. We are talking about any entity that is in
business.

Those five people representing a majority picked by a President
would then be able to make a proposal on literally thousands of
programs, and maybe tens of thousands, but literally thousands of
programs, and submit them to a Congress in a package. Presuming
the President would agree, because he made the appointments.
These are all Presidential appointees. These are not congressional
appointees. Congress can give advice to the President, but they are
Presidential appointees.

That package then comes to the Congress. If a committee does
not disapprove of its piece of the package within a very limited
number of days, then it goes to the floor, and there are 20 hours
of debate. And you could literally have thousands of changes in
vital programs.

You could have a school-to- work program. This is a vocational
education program that I have been looking at it very closely. I
think it does a tremendous amount of good. It surely has a direct
or an indirect benefit for business. It helps to provide skills to stu-
dents who are then utilized by businesses. And I don't know what
"inequitable" means in this language exactly, but somebody can
argue it doesn't fall equitably.



48

Do you know how many programs are covered by the bill, by the
way, and tax expenditures? Do you have any idea if it is 1,000,
10,000, or 50,000?

Ms. McBride. I don't.

Ms. Phillips. My impression is that there aren't that many pro-
grams. It depends on whether you mean programs, projects, or ac-
tivities as defined under the Budget Act. But there is a finite list.

Senator Levin. Do you know what that would be as defined by
this bill, how many?

Ms. Phillips. It was not defined, as I recall.

Senator Levin. Do we have any idea as to how many programs,
potentially?

Senator Thompson. Cato identified 125.

Chairman Stevens. That is their list, though.

Senator THOMPSON. That is just their list.

Senator Levin. That is the list of the ones they want to get rid
of.

Chairman STEVENS. Right.

Senator Levin. No, no. I am talking about how many are poten-
tially covered by the commission. I would think it would be tens
of thousands. It would be every program and tax expenditure,
which anybody could argue

Senator THOMPSON. It depends on what you mean by covered by
the commission. The only ones that will be identified by the com-
mission will be ones that do not have a clear and compelling public
interest. So it is not just every entity that happens to be on some-
body's list.

Senator LEVIN. But I think almost any program could be argued
to have the effect of creating an inequitable, indirect subsidy. I
don't know of too many programs that someone couldn't argue
against as not being in the public interest.

Once it is defined that broadly, it seems to me almost every pro-
gram and every expenditure then is covered. This isn't a finite list
that is going to a commission that has limited powers. This is a list
of any program or tax expenditure which anybody can argue has
an inequitable, indirect subsidy.

Let me tell you, I don't know of too many programs that someone
couldn't argue that — that someone doesn't disagree with, basically.

Now, that is a huge mandate to an appointed commission in the
executive branch, which then has a very restricted congressional
review. It is a very time-limited committee review, and then it is
a 20-hour debate on the floor. That is potentially a huge shift of
power.

Now, I happen to agree there are a whole bunch of what we call
corporate subsidies I would like to see changed, by the way. So I
know what the sponsors are getting at, I think, and I think they
are doing the right thing by forcing an analysis of those subsidies.
But this bill goes beyond that. This gives some very large powers
to a commission and narrows the congressional review of whatever
that commission comes up with.

Every farm price support program, I assume — I don't know if
that is on the Cato list or not, but every single one of those, every
farmer in business, presumably. Now, maybe they all ought to be
looked at. I don't doubt that. But we just had a farm bill. That was



49

a debate which took days. That was on one bill. And every single
farm support program, arguably, provides an indirect subsidy
which someone can say is inequitable to a business that is called
farming. But you multiply that by 100, that is just farm subsidies.
I think there are more than 125 of them, maybe. I don't know.

So if this were a matter of creating a commission which would
review and make a recommendation with a tighter standard, I
would be a lot more comfortable. But when you go to a very broad
standard, and then restrict severely the congressional review and
when you give the executive branch — I don't care who controls it,
but the President and eight appointees of the President that kind
of power, it seems to me it is potentially too great a shift in real
power. Not just a tool of analysis, but, again, a real shift of power.

I think that the sponsors are doing us a service here by forcing
a review of these subsidies. I think, however, we have got to be
careful that anything we adopt is a balanced view.

The bill ought to, I think, have a greater legislative input in
terms of appointments. Its mandate, I think, ought to be narrower.
I think the word "inequitable" is too general a word, and "direct"
and "indirect" opens it to everything. We may want to either enu-
merate some or — and then at the end, perhaps. I don't think we
ought to use the model of the base-closing commission, because this
is all the programs and tax expenditures basically of the United
States, because they all indirectly, arguably, benefit somebody who
is in business.

I will leave it at that. My full statement, Mr. Chairman, I would
like to be made part of the record.

Chairman STEVENS. Without objection, we will make your state-
ment part of the record.

[The prepared statement of Senator Levin follows:]

PREPARED STATEMENT OF SENATOR LEVIN

In this era of declining budgets, Congress has a moral obligation to examine every
federal program and tax expenditure to determine whether the cost justifies the
benefits and whether the American taxpayer ought to be asked to pay for it. The
bill before us today is an attempt to meet that obligation, and I commend my col-
leagues for attempting to address an issue of great importance.

But I am concerned that S. 1376 appears to go far beyond what I believe to be
the authors' limited purpose and, if enacted, could permit the President and a few
individuals of his choosing to cause possibly sweeping changes across government,
with very limited opportunity for congressional action.

First, the bill is not limited to corporations. It covers all "individuals or organiza-
tions engaged in profitmaking enterprises." That means the bill reaches every mom-
and-pop store, partnership, farming operation, and business of any type set up to
make money.

Second, the bill covers not only government "subsidies," but also any federal "pro-
gram," "tax," "benefit," "payment," "service" or Tinancial advantage," that provides
a "direct or indirect" benefit to a profitmaking enterprise. That's broad language.
Farm price supports, medical research programs, low-income housing tax credits,
health insurance regulations, worker training programs, even public schools — all
provide benefits to profitmaking enterprises in one way or another and could be
within the scope of this bill.

Third, the bill is not limited to government benefits that advantage one company
or a small number of companies over their competitors. The bill goes after any fed-
eral program or tax expenditure that is "inequitable." The problem, however, is that
"inequitable" is not defined, and it's anybody's guess as to what it means.

Who decides what is inequitable? Under this bill, eight individuals whom the
President appoints at will, after consulting congressional leaders. Five of the eight
could form a commission majority to determine which of thousands of federal pro-



50

grams and tax expenditures should be terminated, which should be modified and
which should be left intact.

The bill places no restrictions on the modifications that could be proposed to gov-
ernment programs or tax expenditures, by the way, except to prohibit the creation
of a new program or tax. The open-endedness of this provision alone, allowing unre-
stricted modifications of existing programs and taxes, raises serious questions.

The problems posed by the bill's broad scope are compounded by unrealistically
short time frames that leave little room for deliberation. Agencies would be required
to come up with an initial list of recommendations by January 1997, 2 months after
the Presiaential election. The proposed commission would then have only 6 months
to analyze agency suggestions, hold hearings, and construct its own recommenda-
tions. The President would have all of 2 weeks to evaluate the commission's rec-
ommendations and come up with legislative language to be submitted to Congress.
Congressional committees would then have less than 3 weeks to report a bill, and
each House would then have only 20 hours to debate the issues and offer amend-
ments, even if faced with thousands of proposed changes to existing law.

This is not a base-closing commission recommending the closure of a limited num-
ber of military facilities. It is a commission whose recommendations could affect
every profitmaking enterprise in this country. There is no need or justification for
limiting Congressional judgment so sharply. In addition, I don't believe any rep-
resentative of the business community, the community that would be most affected
by this bill, was invited to testify today. I assume we will hear from them in later
hearings.

Many programs and tax expenditures that benefit business legitimately support
jobs, greater competitiveness and a healthy economy. It takes time and judgment
to separate the chaff from the wheat in this area, and reasonable people may dis-
agree. This bill would turn over the process of evaluating these programs and tax
expenditures to an unelected commission, answerable to no one, with very abbre-
viated Presidential and Congressional review. The bill's time restrictions could lead
to Senators having to vote on sweeping changes to thousands of federal programs
and tax expenditures after only a few minutes of debate on a handful of the sug-
gested changes. I don't believe that is the aim of the bill sponsors, but that appears
to be what the bill would require.

Those are my concerns, and I look forward to working with the Committee to ad-
dress them.

Chairman Stevens. Ladies, we do appreciate your courtesy. I get
a little excited about some of these things once in a while. I really
want you to know that my basic problem with this commission is
probably highlighted by the experience on the entitlements com-
mission. That was a lot of time and effort, and everyone involved
went away frustrated, and they went away frustrated because, as
you know, the commission itself split. I don't know how you could
envision people that knew anything about this subject that
wouldn't be split on almost every one of those issues in one way
or another. I think it is the political process, Ms. McBride. We tried
to get statehood from 1913 to 1958. Did you know that? And we
finally got it. But we finally changed enough votes, really enough
opinion in the country. I think you are part of the political process,
and I admire what you are doing. But I don't think that there is
a way under our constitutional system to give a carte blanche to
something, to put it all together so it will pass.

I agree with Senator Levin. The base closure example was the
follow-on from a basic decision we made to downsize the military
from 23 division to 8, from 600 ships to 240 or 340. We made basic
decisions first, and then we had to allocate that with the funds that
would be involved in maintaining that kind of a force structure as
compared to what we had at the height of the Cold War.

Now, I don't see how you can get a commission that would be
similar to that. I am willing to try. I am really willing to try to see
if we can get a commission that would review some of these things
and come back with a report and say. Is the underlying reason for



51

these expenditures still valid? But I would not want to support a
commission that would just go look at the expenditures and say
they are invalid without looking at the base root cause for the ex-
penditures involved in the system.

Do you have any further comments, Senator?

Senator Thompson. No, Mr. Chairman, and I agree with what
you are saying. I do think this all presumes a basic problem that
needs to be addressed. And if you don't believe in that, then you
are not going to believe in this concept. I believe that there is a
substantial problem. Every independent institute that has taken a
look at this has come to the basic same conclusion, that not only
is there a problem that something should be done about, but that
it is intractable under current circumstances.

I believe there is a growing cynicism among the American people
that things like this are for the benefit of those who have the influ-
ence and not themselves. I think it is part of a much bigger prob-
lem. So I see a pretty substantial problem, and it is like the base
closure commission. You are right. The approach was preceded by
sort of a unanimity of opinion that there was something that had
to be done. And I think that in this debate we are going to have
with this bill that is going to be the starting point. Is there a sub-
stantial problem of reality and perception among the American peo-
ple that needs in some way to be addressed in a different way? And
I look forward to that debate.

Chairman Stevens. We thank you very much. We are going to
keep this record open and pursue the question of whether there are
any further witnesses who wish to testify pertaining to the bill and
its underlying objection.

Thank you very much.

[Whereupon, at 11:25 a.m., the Committee was adjourned.]



APPENDIX



104th congress
1st Session



S. 1376



To terminate unnecessary and inequitable Federal corporate subsidies.



IN THE SENATE OF THE UNITED STATES

No\t:mber 1, 1995
Mr. McCain (for himself, Mr. Thompson, Mr. Kerry, Mr. Feingold, Mr.
Kennedy, and Mr. Coats) introduced the follo\\ing bill; which was read
tA\nce and referred to the Committee on Governmental Affairs



A BILL



To terminate unnecessary and inequitable Federal corporate

subsidies.

1 Be it enacted by the Senate and House of Representa-

2 tives of tJie United States of America in Congress assembled,

3 TITLE XX— CORPORATE SUBSIDY REVIEW,

4 REFORM AND TERMINATION COMMISSION

5 SECTION 2001. SHORT TITLE AND PURPOSE.

6 (a) Short Title. — This title ma}- be cited as the

7 "Corporate Subsidy Review, Reform and Termination Act

8 of 1995".

9 (b) Purpose. — The purpose of this title is to estab-
10 lish a fair process that ^^^ll result in the timely review,

(53)



54



2

1 reform, and elimination of unnecessary subsidies, benefits,

2 or financial advantages provided by the Federal Govern-

3 ment to individuals or organizations engaged in profit-

4 making enterprises.

5 SEC. 2002. THE COMMISSION.

6 (a) Establishment. — There is established an inde-

7 pendent commission to be knoAvn as the "Corporate Sub-

8 sidy Termination Commission". The Commission shall be

9 composed of 8 members appointed as provided in sub-

10 section (e)(3).

1 1 (b) Duties. — The duties of the Commission are to

12 examine Federal programs based on the following criteria:

13 (1) To examine the programs of the Federal

14 Government and identify such programs that provide

15 direct payments, services, or benefits to entities and

16 industries engaged in profitmaking enterprise. In re-

17 viewing such programs the Commission shall deter-

18 mine if such payment, service, or benefit —

19 (A) predominantly serves the pecuniary in-

20 terests of the specific entity or industry rather

21 than a clear and compelling public interest;

22 (B) provides an unfair competitive advan-

23 tage to one entity \vithin an industry or market

24 segment, or to one particular industry; or



S 1376 IS



55



3

1 (C) has the effect of creating any other in-

2 equitable federal direct or indirect subsidy.

3 (2) To examine the tax system of the Federal

4 Government to determine if current laws and prac-

5 tices result in —

6 (A) inequitable tax advantages that provide

7 financial benefits to an entity or industry in ex-

8 cess of that intended by the applicable law;

9 (B) benefits to an entity or entities that

10 are disproportionate to those available to simi-

1 1 lar entities within the same industry; or

12 (C) benefits to an industry or industries

13 that are disproportionate to those available to

14 comparably sized industries that are not eligible

15 for such benefits, and which create an undue

16 tax advantage for such industries; or

17 (D) the creation of any other inequitable

18 tax benefit or advantage.

19 (3) To report programs which satisfy any of the

20 conditions stated in paragraph (1) or paragraph (2)

21 to the Congress with specific recommendations for —

22 (A) termination;

23 (B) modification; or

24 (C) retention.



S 1376 IS



56



4

1 (4) Exclusion. — This Act is not intended to

2 result in the creation of new progi'ams or taxes, and

3 the Commission estabhshed in this section shall limit

4 its activities to reviewing existing programs or tax

5 codes wnth the goal of ensuring fairness and equity

6 in the operation and application thereof.

7 (c) Appointment. —

8 (1) Nominations. — The President shall trans-

9 mit to the Senate the nominations for appointment

10 to the Commission by no later than Januaiy 31,

11 1997.

12 (2) Failure to appoint. — If the President

13 does not transmit to Congress the nominations for

14 appointment to the Commission on or before the

15 date specified in paragi-aph (1), the process estab-

16 lished under this Act shall be terminated.

17 (3) Members. — In selecting individuals for

18 nominations for appointments to the Commission,

19 the President should consult A\ith —

20 (A) the Speaker of the House of Rep-

21 resentatives concerning the appointment of 2

22 members;

23 (B) the majority leader of the Senate con-

24 cerning the appointment of 2 members;



S 1376 IS



57



5

1 (C) the minority leader of the House of

2 Representatives concerning the appointment of

3 1 member; and

4 (D) the minority leader of the Senate eon-

5 cerning the appointment of 1 member.

6 (4) Chairman. — ^At the time the President

7 nominates individuals for appointment to the Com-

8 mission the President shall designate 1 such individ-

9 ual who shall sei've as chairman of the Commission.

10 (5) Background. — The members should rep-

1 1 resent a broad array of expertise covering, to the ex-

12 tent practical, all subject matter, programs and poli-

13 cies the Commission is likety to review.

14 (d) Terms. — Each member of the Commission in-

15 eluding the Chairman shall serve until the termination of

16 the Commission, not later than December 31, 1997.

17 (e) Meetings. —

18 (1) Initial meeting. — The Commission shall

19 meet during calendar year 1997.

20 (2) Open meetings. — Each meeting of the

21 Commission, other than meetings in which classified

22 information is to be discussed, shall be open to the

23 public. All proceedings, information, and delibera-

24 tions of the Commission shall be available, upon re-



S 1376 IS



58



6

1 quest, to the chairman and ranking member of the

2 relevant committees of Congress.

3 (f) Vacancies. — A vacancy on the Commission shall

4 be filled in the same manner as the original appointment,

5 but the individual appointed to fill the vacancy shall sei-ve

6 only for the unexpired portion of the term for which the

7 individual's predecessor was appointed.

8 (g) Pay and Travel Expenses. —

9 (1) Pay. — Each Commissioner, other than the

10 chairman, shall be paid at a rate equal to the daily

1 1 equivalent of the minimum annual rate of basic pay

12 for level IV of the Executive Schedule under section

13 5315 of title 5, United States Code, for each day

14 (including travel time) during which the member is

15 engaged in the actual performance of duties vested

16 in the Commission.

17 (2) Chairman. — The chairman shall be paid

18 for each day referred to in paragraph (1) at a rate

19 equal to the daily equivalent of the minimum annual

20 rate of basic pay payable for level III of the Execu-

21 tive Schedule under section 5314 of title 5, United

22 States Code.

23 (3) Tra\^l expenses. — Members shall receive

24 travel expenses, including per diem in lieu of subsist-



S 1376 IS



59



7

1 enee, in accordance with sections 5702 and 5703 of

2 title 5, United States Code.

3 (h) Director of Staff. —

4 (1) Qualifications. — The Chairman shall,

5 Avithout regard to section 5311(b) of title 5, United

6 States Code, appoint a Director who has not served

7 in any of the entities that the Commission intends

8 to review during the 1 year period preceding the

9 date of such appointment.

10 (2) Pay.— The Director shall be paid at the

1 1 rate of basic pay payable for level IV of the Execu-

12 tive Schedule under section 5325 of title 5, United

13 States Code.

14 (i) Staff. —

15 (1) Additional personnel. — Subject to para-

16 graphs (2) and (4), the Director, ^\^th the approval

17 of the Commission, may appoint and fix the pay of

18 additional personnel.

19 (2) Appointments. — The Director may make

20 such appointments without regard to the provisions

21 of title 5, United States Code, governing appoint-

22 ments in the competitive service, and any personnel

23 so appointed may be paid without regard to the pro-

24 visions of chapter 51 and subchapter III of chapter

25 53 of that title relating to classification and General

S 1376 IS



60



1 Schedule pay rates, except that an individual so ap-

2 pointed may not receive pay in excess of the annual

3 rate of basic pay payable for GS-18 of the General

4 Schedule.

5 (3) Detailees. — Upon request of the Director,

6 the head of any Federal department or agency may

7 detail any of the personnel of that department or

8 agenc}^ to the Commission to assist the Commission

9 in accordance \vith an agreement entered into with

10 the Commission.

11 (4) Restrictions on personnel and

12 detailees. — The following restrictions shall apply

13 to personnel and detailees of the Commission:

14 (A) Not more than one-third of the person-

15 nel detailed to the Commission may be on detail

16 from Federal agencies that deal directly or indi-

17 rectly with the programs and policies the Com-

18 mission intends to review.

19 (B) Not more than one-fifth of the profes-

20 sional analysts of the Commission staff may be

21 persons detailed from a Federal agency that

22 deals directly or mdirectly with the programs or


1 2 3 4 5 6 8 10

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 8 of 10)