Number of subsidy programs soaring

The proliferation of special interest spending in the Federal budget in recent years has created much waste and corruption. Politicians have helped special interests while helping themselves. However, the main problem has not been that politicians have their hands in the cookie jar; it is that the cookie jar has grown so large, maintains Chris Edwards, director of Tax Policy Studies at the Cato Institute, Washington, D.C., who points out that there are 1,696 subsidy programs in the Federal budget, which dispense hundreds of billions of dollars annually to state governments, businesses, nonprofit groups, and individuals.

The number of subsidy programs has risen some 44% since 1990. Federal spending, aside from interest, has grown 47% since 2001 and currently stands at 2.43 trillion dollars annually. A related--but unexamined--trend is the growth in the sheer number of Federal programs. The scope of Washington's control over society has widened as politicians from both parties have favored nationalizing many formerly state, local, and private activities.

The largest recent increases have been in the Departments of Agriculture, Health and Human Services, Homeland Security, the Interior, and Justice. Farm programs have soared partly due to the bloated 2002 farm bill. Many Homeland Security initiatives have been added since 9/11. That may have made political sense, but it has not made much economic or security sense, Edwards contends.

Programs have been reduced in two areas: energy and education. Interestingly, at the same time, there has been a large jump in the number of subsidies or "incentives" in the tax code in those two areas. For example, energy incentives in the income tax code skyrocketed from nine in 1990 to 26 by 2006. Also note that spending on those two activities has gone up substantially despite the static number of programs--Department of Education outlays have tripled since 1990.

Moreover, many government agencies are in violation of federalism--the constitutional principle that the Federal government ought not to encroach on properly state, local, and private activities. As time has passed, more farm crops are receiving Federal subsidies; local police services are being paid for with Federal grants; and cradle-to-grave health services are being created by Congress.

Indeed, 10 new programs have been added to the Catalog of Federal Domestic Assistance in the past year. While the programs are relatively modest in size, they are illustrative of the broad advance of the welfare state. Each new subsidy program comes with complex rules regarding eligibility, funding formulas, reporting requirements, auditing, and other types of paperwork--and each spawns interest groups that favor program expansion and politicians who battle to keep the subsidies flowing.

Most proposals for Federal budget reform focus on cutting the growth in overall spending, but reformers also need to concentrate on eliminating subsidy programs and preventing the creation of additional ones--even small initiatives, as they often become larger over time, concludes Edwards.

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