Christ informed Pilate that his "kingdom
is not of this world," and nothing in either the gospels
or the writings of the apostles suggests that Christ calls believers
to use the power of the state to evangelize the world. However,
American Christians live in a democracy, where the government
is chosen by and responsible to the people. In the United States,
Christians as well as non-believers elect the politicians who
direct the actions of the secular government. In this environment,
Christians have a responsibility to learn and educate themselves
about the issues facing America, even if those issues do not
directly relate to Christ's teachings. Participating in the
civil society, Christians should be aware of and support policies
that strengthen the United States and benefit the American people,
and oppose policies that do not.
One such policy that Christians, along with all
Americans, should learn about and oppose is corporate welfare.
The Federal government spends approximately ninety billion dollars
a year on these programs, and each dollar that the government
spends is one dollar that private citizens do not. Every time
that the government spends tax dollars on a program, it consumes
resources and decreases the resources available for individuals
to use to build their businesses and plan their own lives. In
this time of terror and recession, with the budget deficit exceeding
$400 billion, neither the Federal government nor the American
people cannot afford these expensive and unnecessary handouts.
The ATP - an American Industrial Policy
The Advanced Technology Program, or ATP, is one of the government's
least justifiable programs, a veritable case study of corporate
welfare at its worst. Congress created the ATP in 1998, when
Japanese style industrial policies, where the government directs
investment towards favored businesses and technologies, seemed
to point the way to economic prosperity. Of course, government
directed expenditures frequently flow to the politically well
connected, not the soundest investments, and the Japanese economy
has since collapsed. Nonetheless, Congress continues to fund
the ATP despite the fact that few Americans today seriously
believe that industrial policies and government-business "partnerships"
represent sound economic policies.
At a cost of $150 million a year, the ATP provides
grants to selected American corporations to commercialize potentially
profitable technologies. This isn't pure research, but rather
using taxpayer dollars to convert already existing technologies
into saleable commercial products. The American people have
generously provided U.S. corporations with almost two billion
dollars in grants since the program's inception.
The ATP awards grants to any firm that applies and whose proposals
pass the internal evaluations. Whatever the intent of the program's
creators, in the real world this results in firms either taking
government money and spending it on projects they intended launch
anyway, or investing in risky projects that they deemed unlikely
to succeed, but which they were willing to spend someone else's
money on in the hope that it might pan out. In either case the
ATP uses the taxpayer's dollars poorly.
Public Losses, Private Gains
There is no reason that the taxpayers should have their earnings
forcibly taxed away to fund the research and development budgets
of large corporations. In fact, most ATP grants go to projects
that the market would fund anyway - the Advanced Technology
Program's largely replaces private investment with government
grants. The General Accounting Office found that over half of
all investment proposals that the ATP rejected at the final
review stage were subsequently funded by private investments.
Of course corporations gladly allow the government to subsidize
their R & D budgets, but this does not make it good policy.
ATP grants go to private firms - if the project succeeds then
the corporation's shareholders get to keep the profits. If the
project fails, then the taxpayers have covered the losses. Since
private firms gain all the profit when they successfully commercialize
technologies, they should be required to do their own work and
put their own dollars at risk. It makes no sense to tax every
American to benefit a relatively small number of private firms.
Fortune 500 Subsidies
The firms receiving ATP subsidies certainly have the resources
to invest their own money, if they find the projects worthwhile.
Not only does the ATP subsidize corporate research, it subsidizes
research by the largest firms in America. Over forty percent
of all ATP grants have gone to just forty Fortune 500 companies,
with a collective one trillion dollars in revenue in 2002. Half
of this funding went to just five firms. The largest recipient
was IBM, which, despite earning over five billion dollars in
profit in 2002, raked in $127 million in ATP grants over the
past decade and a half. The sole effect of ATP subsidies to
these Fortune 500 companies has been to transfer hundreds of
millions of dollars from the government to corporate shareholders.
Any Christian should find a program that redistributes wealth
from poor and middle class taxpayers to wealthy executives and
shareholders highly offensive.
Inherently Duplicative Research
The ATP does not even fund original research. The GAO and other
independent audits have discovered that most ATP funding goes
to research projects that duplicate the efforts of the private
sector. In many cases the ATP awards grants to develop technology
when hundreds, or even thousands, of patents for similar technologies
have already been filed by the patent office. As the GAO reported,
the problem of redundant research remains an inherent problem
with the ATP for two reasons. First, to avoid conflicts of interest
in awarding subsidies, ATP applications are reviewed by individuals
with little knowledge of current research in the field. This
largely eliminates the possibility of ATP employees awarding
grants to colleagues or former employers, but also prevents
them from identifying projects that duplicate current research.
Secondly, virtually all private firms keep information about
their R & D efforts private, in order to avoid informing
their competitors about their progress until the products are
ready to be produced and marketed. Since the ATP has no way
of knowing what proprietary research the private sector conducts,
it cannot avoid providing grants that replicate ongoing private
sector research. The economic benefit of providing billions
of taxpayer dollars to subsidize corporate research that already
takes place in the status quo does not exist.
Misplaced Incentives
Furthermore, the government rarely subsidizes economically worthwhile
projects. It has become a truism to observe that few individuals
spend other people's money with the same care that they spend
their own. The level of care drops further when the government
provides the money. Since ATP officials are government employees,
they also benefit from civil service protections that make it
virtually impossible to fire them. The commercial success or
failure of an ATP project has no effect whatsoever on a federal
bureaucrat's career. Since they lack scientific and business
expertise, ATP managers also have a poor idea of what projects
are likely to succeed. Unsurprisingly, career government bureaucrats
who spend government money, without any penalty for squandering
it, have very little incentive to fund worthwhile projects.
Consequently, only one third of all ATP projects result in a
profitable commercialization. The remaining two thirds are expensive
failures. Private employees, knowing the marketplace and facing
the threat of unemployment if they fail, invest far more wisely
than government officials.
The Failed History of Accuwave Corp.
The history of Accuwave Corporation perfectly illustrates the
problems that plague the Advanced Technology Program. In 1993
the ATP granted Accuwave two million dollars to develop wavelength
division multiplexing (WDM) technology to increase the transmission
capacity of fiber-optic cables. However, since the late 1980s
private firms had expected fiber-optics to grow into a multi-billion
dollar industry, which it subsequently did, and heavily invested
their own funds in commercializing WDM technology. While the
ATP subsidized Accuwave, Bell Labs (now Lucent), Ciena Corp.,
and Nortel Networks used private money to research alternate
approaches. Even before the ATP grant, the government had issued
multiple WDM related patents. The GAO found that between 1985
and 1999, the patent office issued in excess of 2,000 patents
for WDM "components, systems, and concepts." The taxpayer
subsidy to Accuwave wholly duplicated existing private research.
Accuwave, however, had a unique approach to developing
WDM technology that involved volume holography, which was one
of the reasons they received ATP funding. No other private firm
seriously considered using their own money to explore volume
holography as a method of developing WDM technology. This was
because private companies had already tried and rejected volume
holography in the seventies and eighties. All previous volume
holography projects failed because of severe problems with signal
loss and filter deterioration. No private firm or investor would
fund another attempt to commercialize the technology. Instead,
the government decided to do it for them. Despite the fact that
both the technical and business reviewers who evaluated Accuwave's
proposal believed that it would fail, senior ATP officials overrode
their objections and awarded the grant in 1993.
At the same time the government invested taxpayer
dollars in volume holography, Ciena Corp. pursued an alternative
fiber-Bragg gratings approach. Founded in 1992, and spending
$40 million in private venture capital, Ciena announced the
successful development of a 16-wavelength WDM system in 1996.
Accuwave, having unsurprisingly failed to make substantial progress
with volume holography, having spent its entire ATP grant, and
incapable of raising additional private capital, filed for bankruptcy
shortly after Ciena's announcement. The two million dollar taxpayer
investment in Accuwave achieved absolutely nothing.
The Lessons of the ATP
The Advanced Technology Program is not an isolated example of
a failed corporate welfare program. Virtually all government
officials lack the knowledge and the incentives to wisely invest
the tax payer's money. Furthermore, even if an investment does
succeed, private shareholders receive all the benefits, while
all other taxpayers receive nothing. Corporate America has all
the resources necessary to fund its own research and development.
The forty Fortune 500 companies that have received 40% of all
ATP grants had a collective one trillion dollars in revenue
in 2002. This is typical of most corporate welfare programs
- the government gives money to firms with plenty of their own
money to spend. General Electric, Ford, Dow Chemical, IBM, and
even Harley Davidson, receive millions in Federal funds despite
the fact that they have more than enough money to prosper without
handouts. If a business finds a proposal worthwhile, it can
and should invest its own money into it. Since firms receive
all the profits if a project succeeds, it is only fair that
they put their own money at risk. In this era of mounting deficits,
the government should not spend taxpayer resources to pad the
corporate bottom line.
Sources
For information on the ATP investment in Accuwave,
and information about how and why the ATP awards grants that
duplicate private research, see "Advanced Technology Program:
Inherent Factors in Selection Process Could Limit Identification
of Similar Research," April 2000, the General Accounting
Office.
Data on ATP grants to Fortune 500 companies comes
from a Heritage Foundation analysis of data publicly available
at: http://www.atp.nist.gov/eao/states/statepartners.htm
