PROGRAMS CREATE JOBS, ENERGIZE THE ECONOMY

When on the losing side of an economic debate, as they usually are, Democrats respond like an overmatched basketball team:

They start trash-talking.

And the dirtiest thing they can shout is "corporate welfare." The Republicans are cutting aid to the poor while lining the pockets of their rich friends, Democrats scream.

This argument misses the mark as badly as a Shaquille O'Neal free throw.

Contrary to the image Democrats paint, the money created by government tax incentives and subsidies is not direct-deposited into the bank accounts of corporate executives. Rather, these programs help U.S. businesses create jobs and energize the economy.

True, the occasional program falls short of this goal. But most government aid to businesses benefits rank-and-file workers more than the corporate elite.

Here's why: Publicly traded companies, the primary beneficiaries of these programs, usually pay their executives a base salary plus incentives tied to the company's stock price. Executive compensation falls only if the price of the stock drops. In addition, executives and directors have an obligation to protect the value of shareholders' stock.

If they lose government revenue, most companies will take one of two approaches to preserve the stock price. They can raise prices to generate revenue or they can lay off employees to cut expenses.

Each way, the middle class pays.

For example, look at Washington's largest employer. More than 20,000 Boeing workers have lost their jobs, in part because the government is spending less on defense. And Boeing is still vulnerable. Research tax credits and export-enhancement subsidies help Boeing build and sell commercial airplanes. Cut those programs, and more workers will lose their jobs.

No one wants that to happen.

What the Democrats really want is to tax the rich. But they don't know how. They need some remedial economics tips. Here are two:

Cutting "corporate welfare" probably will help reduce the budget deficit - but at a potentially steep price for workers and consumers.

The best way to tax the rich is to raise their personal income taxes.

And please, stop the trash talk.

Copyright 1995 Cowles Publishing Company
Provided by ProQuest Information and Learning Company. All rights Reserved.