Cheese Factories on The Inner Loop

The Inner Loop is a new internet radio program on VoiceAmerica. It features two long-time Washington insiders--Howard Marlowe and Michael Willis--who are serious about helping people to understand how "really works."

The episode for June 18, 2012 focuses on earmarks. The program features an all-star cast including a discussion of Cheese Factories on the Moon, former Appropriator Jim Walsh, and Steve Ellis from Taxpayers for Common Sense. Our segment begins at the five minute mark.

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Things are heating up in the Cheese Factory

In his review for the Spring 2012 issue of the political science journal Congress and the Presidency (39:2, 219-221) Bruce Oppenheimer (Vanderbilt University), one of the giants of congressional studies, calls Cheese Factories on the Moon: Why Earmarks are Good for American Democracy "an easy-to-read, entertaining, and stimulating book...a heroic challenge to what is the nearly universally accepted wisdom about the evils of congressional earmarks...a valuable counterpoint to those who exaggerate and misconstrue the nature of earmarks."

Show Us the Money

Critics of earmarks frequently point to the presumed quid pro quo between earmarks and campaign contributions. They argue that members of Congress pursue earmarks in order to rake in campaign contributions from lobbyists who are scrambling to get earmarks for their clients.

If this is true then one would expect that members of the Appropriations Committees would be raising piles of cash. Membership on Appropriations should be the most valuable--or one of the most valuable--committee assignments a member could achieve from the perspective of campaign contributions.


This American Life is airing a program this week about money and politics. Part of the program focuses on this question: Which committees are most valuable in terms of campaign contributions? Lee Drutman, a Senior Fellow at the Sunlight Foundation (and fellow political scientist), crunched the numbers (covering multiple congresses and going back into the 1990s) for Planet Money.

Is an assignment to Appropriations number 1? No, that honor goes to Ways and Means. OK. Well that makes sense. Targeted tax provisions (tax earmarks) are worth a fortune--millions, even billions--to well-represented and well-financed corporations.

Surely Appropriations is number 2. No, that honor goes to the Financial Services Committee. Hmm. Well, OK. That makes sense, they write legislation that influences the bottom line of the financial services industry, the largest component of the American economy.

Well, you know, Appropriations is number 3, right? Sorry, that honor goes to the Energy and Commerce Committee. Again, this makes sense since the jurisdiction of the committee is the broadest in the House, covering everything from oil and gas to health care. Many, many corporations have legislative interests that fall within the purview of the committee.

Is it surprising that Appropriations is not in the top three; that it falls in the middle of the distribution? Not really. Critics of earmarks have been loud in their denunciations of earmarks, and shrewd in creating the quid pro quo narrative, but they have been (and are) wrong. They have diverted attention from the more important and less visible legislative activities in Congress that are infinitely more costly to American taxpayers.

In the meantime earmark foes have robbed our representatives of the ability to counterbalance the power of the executive branch to spend money by successfully hounding congressional leaders for an earmark moratorium. Furthermore, absent earmarks the legislative process has almost completely stalled. After draining the oil from the engine is anyone surprised when the engine seizes up during the cross-country trip?

With the legislative process stalled, and Congress pressured to pass authorizations and appropriations for infrastructure and water projects, it will become increasingly clear that earmarks are critical for Congress to fulfill its constitutional role.

Political Misdirection

Just before the Iowa Caucuses, with Rick Santorum surging in the polls, Rick Perry went on the attack criticizing Santorum's record on earmarks. Now neck-and-neck with Santorum in South Carolina, the Romney campaign has torn a page from the Perry playbook.

Romney has enlisted long-time earmark critic John McCain to likewise attack Santorum on earmarks. Invoking the names of South Carolina's two Senators McCain noted "I think [earmarks are] wrong for America and so does Sen. [Jim] DeMint and so does Sen. Lindsey Graham who have been staunch fighters against earmark and pork barrel spending." (The use of Graham's name is dubious given Graham's support for earmarks and his very public feud with DeMint over an earmark for the port at Charleston.)

Conjuring up one of his well-worn claims McCain argued on the campaign trail yesterday that "...earmark spending is the gateway to corruption...Sen. Santorum and I have a strong disagreement, a strong disagreement that he believes that earmark and pork barrel projects were good for America."

Misdirection takes advantage of the cognitive limits of the human mind. Typically we can only focus on one thing at a time. Misdirection works by focusing our attention on one thing, something likely to grab our attention, while a more meaningful objective is achieved unnoticed by the spectator. 

Political misdirection uses the same principle; distract the public with an issue of dubious policy importance like earmarks while achieving larger policy goals. While the public is frothing over earmarks much more costly tax loopholes are woven into the tax code for the benefit of favored constituencies (with the added benefit of then decrying the tax code as too complicated and filled with loopholes).

An example came to our attention by way of an NPR story that aired this morning.

A recent study University of Kansas professors Raquel Alexander, Stephen Mazza, and Susan Scholz examines the "return on investment" of lobbying expenditures on the American Jobs Creation Act of 2004. The AJCA created an amnesty for U.S. corporations with foreign earnings that were held off shore. Corporations could "repatriate" those funds at a substantial tax discount (15% on earnings compared to the 35% tax rate on the earnings). 

Alexander, Mazza, and Scholz estimate that companies spent about $288 million lobbying for the AJCA reaping tax savings of $62.5 billion; that is, for every $1 a corporation invested in lobbying on AJCA their average return on investment was $220.

This single tax loophole in 2004 cost about four times all of the earmark expenditures for that same year. A quick search of The New York Times for 2004 reveals almost 100 stories about earmarks and "pork barrel projects" and only one story about the $62.5 billion American Jobs Creation Act.

We are not suggesting that lobbying is corrupt. We are not suggesting that the AJCA was bad policy. We are not suggesting that the members of Congress who supported the AJCA were corrupt. 

What we are suggesting is that earmark critics like McCain create a tempest surrounding earmarks while more fundamental and costly issues get little or no attention. Likewise, when it comes to the Republican Presidential nomination what stories about Romney are being ignored while the electorate and the media are distracted with earmarks?

CHOICE Review of Cheese Factories

Scrolling through my (Sean) Facebook news feed this morning I was surprised to come upon CHOICE magazine's Top Review for the day: Cheese Factories on the Moon. The reviewer recommends Cheese Factories as

"...a worthwhile read for anyone interested in earmarks, the federal deficit, and the role of Congress and congressional spending decisions in the larger government/political picture."

CHOICE rates Cheese Factories "Highly Recommended." 

In the 'Battle of the Ricks' Earmarks Return as a Campaign Issue

A Rick Perry sponsored ad airing in Iowa attacks Rick Santorum for his record on appropriations earmarks. This conincides with an apparent Santorum surge in Iowa.

Perry highlights Santorum's vote in favor of the transportation funding bill that included the infamous "bridge to nowhere" project. Perry claims that Santorum was responsible for $1 billion in earmarks over his 16 year congressional career.

The Perry ad includes an audio clip of Santorum touting his earmarks: "I have had a lot of earmarks...In fact I'm very proud of all the earmarks I've put in bills."

By attacking Santorum for earmarking Perry is unearthing a tactic he used successfully against Kay Bailey Hutchinson in the Texas GOP Gubernatorial primary. During that campaign the Perry campaign produced a video/song based on ABBA's "Dancing Queen" titled "Earmark Queen" to criticize Hutchinson for her earmarks. (The lyrics are here; the video was quickly removed from the web due to potential copyright infringement).

Earmarks are a convenient device that can be used to highlight the "Washington insider" status of politicians like Hutchinson and Perry's current foe, Santorum. Perry and Santorum are competing for many of the same religious conservatives, and Perry would likely benefit from Santorum's defectors. Perry might decide to employ the same tactic against Michelle Bachman who also has appeal to religious conservatives and, like Santorum, can be tied to at least one specific earmark-like project. Bachmann's latest problems in Iowa may be enough to obviate an attack on her.

Earmarks are an easy device for governors to employ.  They do not have a direct hand in generating earmarks, allowing them to distance themselves from the projects, while benefiting from the results. Without a doubt Texas was a big winner in the earmark race. According to Taxpayers for Common Sense data for 2010 alone, Texas benefited from $1.9 billion in earmarks.

In a single year Rick Perry's state received almost twice the amount in earmarks that Rick Santorum generated in his entire 16 year congressional career. But, like Sarah Palin before him ("I said 'thanks but no thanks' to that bridge to nowhere"), Perry can claim that he opposes earmarks because his fingerprints are not directly associated with the earmarks, even though his state was clearly a beneficiary.

One can only wonder how much the "Texas Economic Miracle" benefited from the investment of federal dollars, including those that went to the state via earmarks.

That's an Earmark?!

In an desperate attempt to remain relevant in a world without earmarks Citizens Against Government Waste is releasing reports of "earmarks" in appropriations bills for FY 2012.

When the Republicans regained the majority in the House they reinstituted a ban on earmarks. The Democratically controlled Senate resisted, but eventually relented and adopted the same approach. Watchdog groups that raised money by getting people riled up over earmarks began getting nervous, no doubt; what would fuel their fundraising pleas?

It is a good thing that they define earmarks so broadly as to encompass any change in spending over the president's budget request. While CAGW lauds the Senate for reducing overall spending they accuse the Senate Labor, Health and Human Services Appropriations Subcommittee including 16 earmarks in this year's bill. According to their release analyzing the Senate Labor-H bill:

The following are examples of pork added by the Senate to the Labor/HHS bill:

• $111,779,000 for programs to prevent substance abuse.
• $42,914,000 for the Teacher Quality Partnership program (TQP).  A March 2011 Government Accountability Office report that analyzed duplication within the federal government found that the TQP is one of 82 redundant teacher training programs.
• $14,918,000 for rural hospital flexibility grants.
• $6,990,000 for the Rural Community Facilities program.
• $998,000 for the Training for Realtime Writers program, which provides grants to institutions of higher education to create programs to train closed caption writers.

In another release they claim that the Transportation, Housing and Urban Development bill contains 7 earmarks, including increased spending on rail projects.

Imagine that: The Senate has the audacity to disagree with the president. You would think that the Senate thought of itself as equal to the president! How dare they.

We are being sarcastic, of course.

It is worth pointing out that prior to the Budget and Accounting Act of 1921 the Congress--consistent with the US Constitution--had sole responsibility for constructing the federal budget. The Budget Act directed the executive to propose a budget but, since it is not a Constitutional Amendment, it did not rob the Congress of the "power of the purse," it did give the executive a handy tool for shaping the budget debate.

We oppose the earmark moratorium. We argue that the moratorium has achieved nothing.

These spending proposals are not earmarks. They are Congress asserting its Constitutional prerogative to have a hand in deciding the policy priorities of the country. We need to be careful. We may find one day that CAGW has defined Congress out of existence.