If the pre-budget rumors are true, President Donald Trump is making good on his promise to drain the swamp by putting a few corporate welfare programs, such as the Export-Import Bank and the Overseas Private Investment Corp., on the chopping block. Unfortunately, getting rid of cronyism in the federal government won’t be easy, given the deep-rooted and mutually beneficial relationship between politicians and commercial interests. Still, the new administration and Congress could take some action in the coming year to move in that direction.
Before I start detailing how, let me say that abolishing all corporate welfare programs is the right thing to do. Corporate welfare, a practice in which government officials provide preferential treatment (such as loans, subsidies or regulatory preferences) to hand-picked firms or industries, is unfair. It picks winners and losers for no other reason than that they’re politically connected or not politically connected. The winners are usually big and able to invest in lobbying on Capitol Hill. The victims are often unseen and usually don’t have a press office. Favoritism also slows the economy because entrepreneurs and businesses misdirect their resources. They spend time lobbying for those privileges instead of finding new ways to create value for customers.
Short of terminating programs, the first thing Congress could do is adopt fair-value accounting, writes Veronique de Rugy.