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Thursday, November 11, 2010

Budget earmarks and marijuana: Two publicly scorned but useful items that could benefit from limited legalization

Right after election day, earmarks shared headlines with marijuana, at least in California. Proposition 19 would have legalized the possession and cultivation of limited amounts of marijuana for personal use. Proponents of the measure claimed that it would facilitate medical use, create a new tax base, and reduce costs associated with drug law enforcement. Prop 19 failed.

Prompted by Republican success in congressional races, future House speaker John Boehner suggested in a Wall Street Journal opinion article “What the Next Speaker Must Do”.
He listed four items as his high priorities
• No earmarks.
• Let Americans read bills before they are brought to a vote.
• No more "comprehensive" bills.
• No more bills written behind closed doors in the speaker's office.

He saw these as necessary steps to restore voter confidence in the congressional lawmaking process. He may be waiting for the two bi-partisan commissions that are working on deficit reduction recommendations before he identifies his spending cut priorities. But why are earmarks, of all the ways it which the federal budget is built and manipulated, such a worthy target for reform or even elimination?

One answer is that earmarks make popular targets. They are relatively easy to understand and they are popularly understood to be selfish, corrupt grabs at public funds easily lumped in disrepute with pork barreling and log rolling.

Earmarks and marijuana tend to draw similar reactions from elected officials. Both probably have socially redeeming attributes but the political risk of publicly supporting even their limited use is too high. Just ban them.

What are earmarks?

There are no standard government definitions, but here are a couple of attempts from federal agencies:

In The Honest Leadership and Open Government Act of 2007, a conflicts of interest disclosure program, congress calls earmarks  “congressionally directed spending items” and defines them as:
“a provision or report language included primarily at the request of a Senator providing, authorizing, or recommending a specific amount of discretionary budget authority,
credit authority, or other spending authority for a contract, loan, loan guarantee, grant, loan authority, or other expenditure with or to an entity, or targeted to a specific State, locality
or Congressional district, other than through a statutory or administrative formula-driven or competitive award process."

The Office of Management and Budget defines them as:

"congressional direction (in bill or report language) [which] circumvents the merit-based or competitive allocation process, or specifies the location or recipient, or otherwise curtails the ability of the Administration to control critical aspects of the funds allocation process"

A more expansive notion of congressionally directed spending would importantly include tax expenditures. In fact the Honest Leadership act also sought to enhance disclosure of congressional handouts of  ‘limited tax benefit’ defined as:
‘‘(1) any revenue provision that—
(A) provides a Federal tax deduction, credit, exclusion, or preference to a particular beneficiary or limited group of beneficiaries under the Internal Revenue Code of 1986; and 
(B) contains eligibility criteria that are not uniform in application with respect to potential beneficiaries of such provision.”

Regardless of definition, the underlying earmark concept is easy to grasp: extracting money from the policy driven process and assigning it to recipients picked by elected officials.

Taxpayers for Common Sense is one of several policy analysis groups that specialize in earmarks. Their review of Fiscal year 2009 spending bills found 11,286 earmarks worth $19.9 billion.

Their objection to earmarks is rooted in their finding that “In too many cases, these line-item provisions siphon off cash from important national needs for more parochial political benefit in the district of powerful lawmakers. In addition, earmarks remain a petri dish for corruption. In addition to well-known earmark scandals of the past...  Funding decisions should be made in the open and based on competitive, merit, or even formula funding processes that Congress develops, monitors, and oversees with the Executive Branch.”


For many voters, channeling federal dollars into their state, or preferably to their congressional district is one of the ways for legislators to earn re-election. As with most election campaigns, this year’s congressional incumbents were criticized for failing to bring home enough federal dollars to prevent jobs losses - even by voters who objected to excessive spending. In other words, they didn’t secure enough earmarks.

Explanation for such a paradox may have several sources:

1. Voters only dislike earmarks that are heading for states and districts other than their own.
2. Citizens don’t know enough about how federal dollars are distributed back to their localities to be clear on the difference in fairness or effectiveness between earmarks and regular funds.
3. Furthermore, most people don’t know how much money is from Washington, D.C., the state capital or their town’s own sources.

Using a narrow definition the share of federal funds that might be called earmarks are too small to matter in a discussion about deficits. In fiscal year 2009, they are about .6 % of the total on-budget federal outlays and equivalent to 4% of federal grants. But more importantly, earmarks are not additions in spending. They  re-channel funds that have in effect already been spent. In other words, eliminating earmarks does not change the deficit. Boehner doesn’t suggest that it does although others have.

Some elected officials question whether congress’ formula funding process is necessarily more effective or fairer than earmarks.
Many federal projects by their very nature would tend not to spread money evenly across congressional districts and are delayed when appropriated moneys are funneled away:

   1. National high speed rail network
   2. Superfund toxic waste cleanups
   3. Terrorist threat deterrence

Earmarks may be just a way of making sure the home district gets its proper share. Not surprisingly, both earmarks and general federal spending track similar patterns. Disproportionate shares tend to flow to less populous states with senate representatives in appropriating congressional committees.
On the other hand, as mentioned in an earlier posting ("Shovel-Ready" Stimulus Projects and "Earmarks") earmarks can facilitate access to federal funding programs. Some earmark cash is used to prepare the environmental impact statements, preliminary engineering studies and other expensive components of grant applications. It might also be used to meet matching fund requirements.
Like marijuana, earmarks have a dubious image, but can serve a useful purpose and in many cases have few suitable substitutes.
One alternative resolution for both “scourges” is limited legitimization. A limited number of dollars could be allocated to each member of congress based on population. Each representative could get identical amounts since their districts are roughly the same in population, and each senator would get an amount based on the population of their state. There might be restrictions on who could receive it: private v. public; profit v. nonprofit, etc. State delegations could pool assets for certain purposes.

One final Note
Under certain definitions, most defense- related procurements are earmarks. That’s why the Pentagon can wind up with weapons systems it didn’t ask for: because Congress “directed spending” toward their favorite contractors. Boehner’s elimination of earmarks could very well make reduced Defense Department spending an important contribution toward balancing the budget.

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