Cut OPIC's Corporate Welfare

["Charles T. J. Bennington" <charles@essential.essential.org>]

  (reposted for jshields@essential.org)
  
  The following op-ed appeared in the Washington Times, Sept. 4, 1996:
  
  
  NOW END "CORPORATE WELFARE" AS WE KNOW IT
  
  by Janice Shields, Corporate Welfare Project, & James Sheehan, 
  Competitive Enterprise Institute
  
  When the Congress that "ended welfare as we know it" returns to Washington
  in September, members will vote on the re-authorization of a program that
  provides subsidized loans and insurance to large corporations for overseas
  investments.  A majority of Senators and Representatives recently voted to
  reduce welfare benefits for families and children.  Will Congress be willing
  to take the same budget ax to welfare for Union Carbide, Coca-Cola and
  Motorola?  All these "needy" companies currently receive government aid
  from the Overseas Private Investment Corporation (OPIC). 
   
  OPIC doles out corporate welfare through subsidized direct loans, loan
  guarantees and political risk insurance.  This aid supports U.S. business
  expansion in countries where conventional financial institutions often 
  have elected not to lend on such favorable terms. 
  
  OPIC's welfare for multinational corporations is very costly.  As of
  September 30, 1995, the agency reported more than $4 billion in
  outstanding loan guarantees and $10 billion in outstanding insurance. OPIC
  estimates that $14.6 million of its outstanding direct loans won't be
  repaid.  If borrowers default on the direct or guaranteed loans, or
  insurance claims are filed, the ultimate risk will be borne by the U.S.
  government (read: "taxpayers"). 
  
  To balance the federal budget and downsize government, Congress claims to
  be scaling back wasteful spending programs and eliminating others.  Not so
  for corporate pork, which has somehow survived the cuts and will even grow
  faster.  The bill to reauthorize OPIC through the year 2001 nearly doubles
  the ceiling on OPIC's investment insurance, to $25 billion, and more than
  doubles OPIC's financing authority, to $20 billion. 
  
  How does this restocking of the fodder in the corporate welfare trough
  compare to the recent welfare changes?  Children and families receiving
  federal payments must be poor.  Beneficiaries of OPIC-subsidized loans,
  loan guarantees and insurance, on the other hand, are rich.  Citicorp,
  which received more than $842 million of OPIC insurance in 1995, had net
  income that year of $3.5 billion.  OPIC awarded US West $100 million in
  financing last year, even though the company's net income was $1.3 billion . 
  
  Welfare recipients will be limited to five years of benefits.  Large
  corporations enjoy much longer time limits.  According to OPIC's Program
  Handbook, "The terms of loans will typically provide for a final maturity
  of five to fifteen years following a suitable grace period during which
  only interest is payable."  Insurance policies under OPIC may extend as
  long as twenty years. 
  
  The recently-enacted welfare bill eliminates cash assistance, food stamps,
  school lunches and Medicaid coverage for legal immigrants to the United
  States.  In contrast, foreign investors may own up to 75 percent of the
  equity in overseas projects that receive OPIC financing.  During 1995,
  OPIC provided loans to projects owned in part by companies from countries
  such as Russia, Colombia, Jamaica and Ghana. 
  
  OPIC's defenders vigorously deny that its programs constitute "corporate
  welfare."  In recent budget testimony before Congress, OPIC President Ruth
  R. Harkin claimed that "program users completely pay for the cost of the
  program."  Ms. Harkin failed to note, however, that 60 percent of OPIC's
  revenues come not from the users but from interest on U.S. Treasury
  securities. OPIC's net income would drop by 83 percent if this interest
  were excluded. 
  
  Ironically, Ms. Harkin's testimony claims that OPIC financing is necessary
  to support privatization of enterprises owned or subsidized by foreign
  governments.  Yet, if OPIC were located in Hungary, the agency would be a 
  prime candidate for privatization. 
  
  For several years, a broad coalition of liberals and conservatives,
  taxpayer organizations and consumer advocates has called for the outright
  elimination of OPIC.  How can this agency now come before Congress seeking
  to double its financing authority?  Surely, better uses can be found for
  the $72 million that OPIC spends on annual operating expenses and the $157
  million in interest accrued each year on OPIC's U.S. Treasury securities. 
  If, as OPIC testimony claims, there is strong business demand in many
  regions of the world for its loans, loan guarantees and insurance, the
  private sector, no longer the victim of subsidized competition, will
  quickly and willingly move in to provide these services.