The Recession

Washington is Addicted to Federal Subsidy Programs

| by Cato Institute

By Chris Edwards

Most people know that federal spending and budget deficits are
soaring. But an equally troubling trend is that the government is
funding a growing array of activities that used to be left to state
governments, businesses, charities, and individuals. An increasing part
of American society is suckling on the federal subsidy teat.

The accompanying chart shows that there are 1,804 federal subsidy
programs, and hundreds of these were added this decade. The data comes
from the Catalog of Federal Domestic Assistance (www.cfda.gov), an official listing of all federal subsidies, including grants, loans, insurance, scholarships, and other types of benefits.

The CFDA was created in the 1960s because politicians needed a guide
to help their constituents access all the new benefits under Great
Society programs. By 1970, there were 1,019 federal subsidy programs,
and the number rose further in late-1970s before being cut back in the
early 1980s under President Ronald Reagan.

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The number of subsidies started expanding again in the late-1980s,
but leveled out in the late-1990s as Congress briefly restrained the
budget. This decade, budget restraint has vanished and the number of
subsidy programs has exploded 25 percent.

Health and Human Services provides the largest array of aid
programs, including the Medicare prescription drug benefit, which was
added in 2003 and costs taxpayers $62 billion annually and rising. The
Department of Agriculture is also a big subsidy machine, especially
after the passage of bloated farm bills in 2002 and 2008.

More than 800 of the 1,804 subsidy programs are grants to state and
local governments including everything from K-12 education aid to
highway funding. Those are useful activities, of course, but experience
shows that when funding gets kicked up to the federal level the result
is excess bureaucracy and the misallocation of spending based on pork
barrel politics.

The growth in subsidies illustrates the damaging erosion of
federalism in recent decades. As subsidies have grown, so has federal
regulatory control over the states and private sector.

State and local governments, businesses, and
charitable organizations are all becoming tools of the central planning
agencies in Washington. Rising federal fiscal power is coming at the
expense of policy diversity and innovation, personal responsibility,
and individual freedom.

Unfortunately, subsidies are like an addictive drug to
politicians and program beneficiaries, who demand an ever higher
dosage. Indeed, President Obama wants to hook the nation on a range of
new subsidies in energy, health care, and other areas that already
receive big subsidies.

Hopefully, taxpayers will increase their efforts to fight back
and demand that policymakers put the federal budget into rehab. Like
drugs, subsidies might provide a short-term illusion of well-being, but
they are eroding our long-term fiscal health. If we started cutting,
there may be some withdrawal symptoms, but over time our economy and
society would be better off for it.