This afternoon, the U.S. Senate Subcommittee on Federal Spending Oversight and Emergency Management will hold a hearing on “Wasteful Spending in the Federal Government.” Romina Boccia, the Grover M. Hermann Research Fellow in Federal Budgetary Affairs and Research Manager at The Heritage Foundation, will testify on eliminating wasteful government spending by cutting corporate welfare.
Corporate welfare, one form of crony capitalism, redistributes taxpayer resources to well-connected interest groups, rather than using such resources for the public good. As the percentage of Americans who trust in Congress has reached an all-time low of 28 percent (as of 2014), it is especially important that lawmakers take steps to reduce waste in government.
Besides wasting resources intended for the public good and harming future generations with unnecessary deficit spending, corporate welfare is harmful to the economy. Debt finances government subsidies to businesses, nonprofits, and interest groups. These subsidies disrupt the functions of the free market and create economic distortions, placing certain groups on a higher playing field than others. Any amount spent on this unethical practice takes money directly out of the hands of consumers, giving them less economic power to decide what best fulfills their wants and needs and reduces future net wealth. Moreover, Congress’s failure to control spending and debt is projected to weaken economic growth in the long run.
Boccia’s testimony will identify 21 wasteful programs that represent corporate welfare, including the Export–Import Bank, the Overseas Private Investment Corporation, and energy loan programs (Solyndra), among others. Congress should eliminate these programs to reduce spending immediately as well as taxpayer exposure to risk in the long run, while enabling improved economic performance and improving public perception of government.
Chairman of the Subcommittee on Federal Spending Oversight and Emergency Management Senator Rand Paul (R–KY) has taken measures to combat government waste and out-of-control spending. On May 19, 2015, Senator Paul, along with Senator Mark Warner (D–VA), introduced the Bonuses for Cost-Cutters Act of 2015, which seeks to provide incentives for government employees to identify sources of waste in their departments. As Senator Paul said in the press release for the bill, “[The Act] will reduce the federal deficit…by combating inefficiency and mismanagement of funds in the government.” Senator Paul also periodically releases “The Waste Report”—highlighting various misuses of federal funds—and has received attention for his proposed 2014 federal budget that would cut spending to 16.4 percent of gross domestic product within one year, a reduction of 5.5 percentage points from the current budget
Similarly, House Majority Leader Kevin McCarthy (R–CA) has expressed interest in cutting government waste and inefficiency, informing Politico in 2014 that “he is setting up a congressional mechanism to whittle away at inefficiencies that plague the government,” similar to the commission that succeeded at closing underused military bases. This was followed shortly thereafter with a memorandum to House Republicans encouraging elimination of waste and an overall functional government. However, the commission remains elusive, and little has been done in the way of significant reform. It remains to be seen if lawmakers will follow through.
Boccia’s testimony comes at an important time, since both the Senate and House are interested in government spending reform and growing deficits call for spending cuts. Providing concrete examples of waste should inspire leaders to take real action on an issue that affects the efficiency of government and the economic well-being of American citizens.
Amber Athey is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please click here.
