May 11, 2011

Where to Look for Budget Compromise

Matthew D. Mitchell

Senior Research Fellow

Many budget proposals have echoed the same, old Republican and Democratic lines, but few have really focused on opportunities for compromise. One area that provides promise and has not received a lot of attention is corporate welfare, said economist Matt Mitchell.

“The budget is full of spending that benefits the wealthy, like agriculture subsidies, green energy subsidies, and subsidies for research and development,” said Mitchell, a research fellow at the Mercatus Center at George Mason University. “If we can’t agree on getting rid of favors to the rich, what can we agree on?”

Though some subsidies are explicit spending items in the budget, others are disguised because they appear as credits, deductions, or exemptions in the tax code, he said. A real step in the right direction would be for both Democrats and Republicans to give up subsidies to the corporations they favor.

“Ideally, we’d close these loopholes and lower tax rates,” he said. “That would be both more equitable and efficient, and I also think it has a chance of obtaining bipartisan support.”

"Although eliminating corporate welfare won't, by itself, solve the problem," said Mitchell, "it does make sense as a natural place to start negotiations. And it will help until we can get consensus on entitlement reform."