Although much has gone wrong during this year's wrangling over state and federal budget deficits, 2010 may go down as the year that America finally shined a light into the dark budget corners where billions are spent on government subsidies.
At the state and federal level, spending on subsidies -- mostly through the tax code -- has outpaced the economy for decades, partly because they are typically invisible during the budget process. Most spending on subsidies takes place through the tax code on special exemptions and credits that do not appear as outlays on state or local budgets, even though these IOUs must be paid for by cutting other programs or hiking tax rates. Politicians can shower their favored constituencies with tax subsidies and simultaneously take credit for these measures as tax cuts. And unlike normal spending which comes up for debate each budget cycle, subsidies typically continue on permanent autopilot hidden in the tax code.
At the federal level, recent attention to the deficit has shone a rare spotlight on the approximately $1 trillion in annual revenues lost due to tax exemptions and credits.
A majority from both parties of the President's bipartisan National Commission to stabilize the debt proposed putting many sacred subsidy cows on the chopping block. These included cuts to agricultural price subsidies, senseless subsidies to ethanol, and subsidies for U.S. companies to market products overseas. Organizations from across the political spectrum forged joint efforts to endorse cutting subsidies to deepwater gas drilling and timber sales as well as eliminate programs that underwrite the foreign operations and overseas marketing of large corporations. That's progress.
Many states have increased scrutiny of the smokestack-chasing incentive programs that have ballooned in recent years to woo corporate operations away from their neighboring states. According to a recent book by Good Jobs First's Greg Leroy, the average state has 30 different economic development subsidy programs, many of which are granted by localities. This week, Good Jobs First released an eye-opening report examining the transparency of major economic development subsidy programs in every state. They found that whereas three years ago 23 states provided online disclosure of programs, including the recipients of such subsidies, 37 states do so presently.
Transparency alone won't curb the excesses of subsidy programs that powerful special interests lobby for. But we can't start the conversation without access to the long-hidden facts. Americans are no longer content for "public records" to be only theoretically accessible in some bureaucrat's filing cabinet upon request. Voters want information about government spending, contracts and subsidies to be readily accessible online. A U.S. PIRG report earlier this year showed that many state subsidies are given equal billing on state's designated spending transparency websites.
The business of doling out public dollars to private businesses has operated in the shadows for far too long. Only with full disclosure about subsidies can public officials and ordinary citizens evaluate whether this spending delivers "bang for the buck." Let's hope that 2011 brings a lot more sunshine.