FEDERAL SUBSIDIES

• Each year, taxpayers spend more money on subsidies to US farmers, oil and gas companies and others than they spend on Social Security and Medicare combined

• Many subsidies make no sense in the 21st Century; however, they continue because of the influence of powerful Members of Congress and/or in the Administration

All existing Federal Subsidies should be subject to immediate review. Absent an obvious need that withstands public scrutiny (such as compensation for a disaster or a bad crop year), each one should be reduced or eliminated

The granting of new federal subsidies should be taken out of our legislators’ cloak room and become matters of vigorous and open public debate

1) Farm Subsidies;

The 2008 Farm Bill provides US farmers with $307 Billion over 5 years. The main beneficiaries are multi-million dollar farms growing corn, soybeans or wheat (although the bill contains subsidies for just about every crop grown)

This is in addition to tobacco subsidies of $204.6 Billion over 10 years beginning in 2004, when Congress passed and President Bush signed the Fair & Equitable Reform Act providing a “Buy-out” of annual payments to certain tobacco farmers of $18.6 Billion (total) each year until 2014 at which time payments are supposed to stop

Obama tried to eliminate some farm subsidies in his budget last year but the farm lobby prevailed and Congress did not allow any cuts to the subsidies in the Farm Bill.

US Cotton subsidies were declared unlawful by the WTO (World Trade Organization) when Brazil complained about them. The US settled with Brazil by agreeing to pay $147.3m per year to Brazil’s cotton farmers and to let in more Brazilian beef to the US.

Why didn’t the US just stop the unlawful subsidies to avoid the fine? One explanation could be that some of the subsidiary recipients are in Arkansas and Georgia, home of the Chairman of the Senate Agriculture Committee and the Ranking Republican on that committee, respectively

Our cotton subsidies (about $3 Billion per year) are paid to relatively few farmers who each get an average of more than $150,000 per year. According to Time Magazine, these subsidies prevent many impoverished cotton producing nations in India and Africa from competing in the world market and make them more dependent on US foreign aid

2) Energy Subsidies

Calculating these subsidies is difficult because they are given in many forms:

Direct Payments

Price supports

Loans at cut rates

R&D paid by Uncle Sam

Tax Credits and other tax breaks

Reduced environmental costs such as for air and water pollution

Royalty reduction (special low rates for federal leases, etc.)

Note: Royalty reduction pertains to oil companies that obtained US drilling leases in the Gulf of Mexico at dramatically reduced rates in 1995 when oil prices were low. Because the leases were poorly drafted, oil companies continue to get these reduced rates even though prices are now high. Estimated cost to taxpayers: ~ $80 Billion.

According to a study by the Environmental Law Institute, US annual subsidies to oil, gas & coal are $72 Billion with $29 Billion going to renewables (of the $29 Billion, $16.8B goes to corn ethanol enterprises)

Nuclear energy was not part of that study, but The Kerry-Lieberman Power Act proposes $140 Billion of subsidies in the form of loan guarantees to the Nuclear industry. The Government Accountability Office claims that the default rate for these loans could be as much as 50% (although the GAO did find that the energy bill proposed by Kerry and Lieberman would reduce the deficit by ~$19B over 10 years, probably due to the carbon tax that is provided in the bill)

In an interview with Larry King in July of 2008, Representative Robert F. Kennedy, Jr. claimed that US subsidies (if you consider indirect as well as direct subsidies) total more than $1Trillion per year to oil companies and more than $1 Trillion per year to coal companies

OTHER SUBSIDIES
{This is not a complete list; perhaps it is just the tip of the iceberg}

Fishing Industry: $713 Million per year largely dominated by fuel subsidies

Steel: Large loan guarantees and import duties paid to steel companies

Health: Examples are the Children’s Health Care Act that seems to continue despite the new Affordable Health Care Act which also provides subsidies such as $5 Billion for the High Risk Pool Program

Transportation subsidies are many and huge, with several examples below that do not include Stimulus funds:

Highways: Total of $15 Billion for the fiscal year 2009 a portion of which came from taxes on fuel; some of this money is allocated for public transportation

Small Airports Subsidies: $125 Million which Obama wants to increase to $175 Million in his new budget; The Department of Transportation tried to shut this subsidy down (it was supposed to be temporary when first adopted) because the subsidies are huge compared with the number of people that fly on these commuter planes, but the Congress refused and wants to keep this program going

Airport Security: The budget for 2008 for the TSA was $6.8 Billion of which $2.3 Billion was from fees and the remainder ($4.5 Billion) was appropriated by Congress

Amtrak: $1.4B in 2006 and ~$2B in 2007 (we could not find 2008 or 2009 appropriations for Amtrak, although Amtrak is not self sustaining so Congress probably appropriated funds; in addition, Amtrak just got $1.3 Billion in stimulus money)

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• Before slashing Medicare, Medicaid and Social Security (“entitlements” for ordinary Americans), we should re-examine the “entitlements” the US provides to farmers, oil companies and other special interest groups