Thursday, July 22, 2010

The Paradox of Earmark Reform

Earlier this year House Appropriations Committee Chairman Dbavid Obey (D-WI) announced a ban on earmarks for private for-profit companies in House Appropriations bills.  Like earlier earmark reforms--public disclosure of earmark requests, public posting of earmark requests, and listing earmarks in committee reports, to name a few--the aim of Chairman Obey’s dictum was to increase public confidence in the appropriations process by responding to a demand of Washington-based “watchdog groups.” Over the past several decades these groups have mercilessly attacked the practice of congressional earmarks arguing , without much supporting evidence, that they increase federal spending, are inherently wasteful, and inevitably lead to corruption.

Ink and indignation are predictably hemorrhaging from Washington, DC over the recent revelation that private firms have discovered loopholes in Obey’s ban allowing them to gain access to earmark funds.  Reporters from The New York Times and the Seattle Times cite cases where for-profit companies formed non-profit organizations eligible for earmarked funds, and other cases where for-profit companies have partnered with non-profits or universities that assist their research, allowing the companies to skirt the ban.[1] These strategies have been pilloried by watchdogs and the media as additional examples of the “corruptness” of earmarks, and the basis of repeated demands for further earmark reform or even a complete ban on the practice.

Obey’s ban while well-intentioned was ill-advised.  The Senate Appropriations Committee did not enact a similar ban, which provided an immediate alternative strategy for private companies seeking earmarks; just approach the Senate.  Further, favoring non-profit organizations over for-profit businesses is an arbitrary policy.  The marketplace of good ideas does not observe strict adherence to the for-profit/not for-profit distinction that Obey codified in the reform.  For-profit companies are often developing important products and technologies that are worthy of public support.  One example is the Mine Resistant Ambush Protected vehicle (MRAP) that is widely used in Iraq to protect soldiers from improvised explosive devices.  With only one customer (the Pentagon) the original designers and producers of the MRAP relied on earmark funding (in part) to develop and produce the first vehicles.  With design and production capability in place, when the need for MRAP vehicles in Iraq became obvious large-scale production could quickly ramp up.  In the absence of earmarks it likely would have taken years to design, test, and produce the MRAP vehicle that has saved the lives of thousands of soldiers.

The more fundamental problem with Obey’s ban springs from what we refer to as the “paradox of reform.”  The intention of the reform was to increase public confidence in the earmarking process by responding to one of the many objections of watchdog groups; the result, inevitably, is precisely the opposite. Opponents of earmarks use the imperfect results of the reform to intensify their attacks on congressional appropriations earmarks and their reports, amplified by the media, drive down public trust in the process. This paradox was evident following the first round of earmark reforms.  Rules that required listing earmarks in committee reports provided easy access to earmark data that, when combined with data on campaign contributions from the Federal Election Commission, could form the basis of a contributions-for-earmarks conspiracy, which is not well supported by the data (but disseminated by the groups and dutifully reported by the media).[2]  In this round of reform, for-profit companies skirt an ill-conceived and impossible to enforce reform; the resulting examples of the “failure of the reform” are presented as evidence of the “corruption” that sparked demands for the reform from the group in the first place. Watchdogs, in turn, demand new stricter reforms, supported by predictable public outrage,  with the eventual aim of driving Congress out of the earmarking business altogether (and, by the way, their loud objections do not hurt their fundraising efforts).

In the final analysis the only way to satisfy earmark critics is to ban appropriations earmarks altogether.  This would irreparably upset the Constitutional order envisioned by the framers of the Constitution who granted the power of the purse to the Congress to make government spending more responsive to public demands, and to balance congressional power against presidential power.  In the absence of appropriations earmarks the only recourse available for federal funding of local and national priorities are appeals by citizens to a faceless, non-transparent, and electorally unaccountable federal bureaucracy incapable of appreciating the priorities and concerns of people in communities across the country (except, perhaps, those cities, towns, and organizations with the resources to hire expert grant writers to help them jump through the hoops of the federal grants and contracts process).  Concentrating the power of the purse in the executive branch would further inflate the power of the executive branch and undermine the power of Congress, the people‘s branch.

Most of the cases of earmark abuse that were uncovered (and there are fewer than most of the public would believe) came to light through the legislative process itself; the legislative process has many of the features of a self-regulating system.  Reforms that improve transparency are good; most in Congress and most in the lobbying community supports reforms that improve transparency.  Reforms without a basis in policy, or that are meant to appease watchdog groups are ill-advised at best and, at worst, could erode the unique balance between the public and our political institutions that our founders sought to embody in the Constitution.

[1] Eric Lipton and Ron Nixon, “Companies find ways to bypass ban on earmarks” The New York Times, accessed July 4, 2010; David Heath “Congressman Dicks finds way around earmarks rule”
The Seattle Times accessed July 6, 2010.

[2] Scott Frisch and Sean Kelly
“Earmarks and campaign contributions: less than meets the eye.” accessed July 6, 2010.

Sunday, July 11, 2010

Interview on

We did our first interview about the book with hosted by Brendan Huffman.  Click the title above to give it a listen.  It runs about 20 minutes.

Friday, July 9, 2010

Cheese Factories on the Web

The Cheese Factory is now live on the web!  This is Version 0.1 "American Cheese."  If you have ideas about how we can improve the site, or ideas for additional content, please let us know.

Be sure to check out the Cheese Factory Outlet for all of your Cheese Factory essentials.

Wednesday, July 7, 2010

Four Myths About Congressional Earmarks

Never has a quote so accurately summed up the arguments of earmark critics, and rarely is a quote as demonstrably false as this one from a New York Times article published on July 4, 2010.[1]
Critics say spending on earmarks, which added $16 billion to the federal budget last year, diverts money from higher priorities, typically does not require competitive bids and is often directed to experimental research that will never be used.
The authors of the article echo the arguments made by “watchdog” groups failing to critically assess their statements.  In this essay we take on the four myths about congressional earmarks that are embedded in this quote.
When the appropriations subcommittees make spending decisions they begin with a pot of money, a 302(b) allocation. This is the pot of money available to the subcommittee to spend on the programs that are funded by their bill. It is up to the subcommittee to decide on what this money will be spent.  A small percentage of this money will be “earmarked” for some specific purposes.  The subcommittee has not “added” money to the pot.  Earmarks do not add spending the budget anymore than choosing to purchase a box of pasta instead of a pound of bananas (i.e., earmarking funds for pasta) adds to one’s bill at the supermarket.  In fact, Congress often approves spending levels lower than those requested by the president shifting some of the savings to earmarked accounts.
Critics argue that earmarks divert funding from higher priorities.  What constitutes a “higher priority” is a value judgment and the pivotal issue is: Who decides what constitutes a “higher priority”? Without explicitly stating it critics of earmarks argue that the president (relying mostly on unelected and unaccountable bureaucrats making decisions under less than transparent circumstances) should decide spending priorities and Congress should simply rubber stamp those decisions.  In granting the “power of the purse” to the Congress the framers of the Constitution sought to situate this power as closely to the people as possible, to make government democratically accountable for spending decisions for setting priorities.
Furthermore, critics of earmarks fail to support their contention that the executive branch makes “better” decisions about priorities than does the Congress. For instance, as the problem of Improvised Explosive Devices (IEDs) became apparent early in the Iraq War the lack of armor for military vehicles was defended by the Bush Administration.  Secretary of Defense Donald Rumsfeld famously said “you go to war with the military you have.”  Being kept alive by earmarks included in the Defense Appropriations bill—to the chagrin of the White House—was  an idea that might help soldiers in the field; the Mine-Resistant Ambush Protected (MRAP) vehicle.  MRAPs were not a “priority” of the executive (the repository of superior decision-makers), but Congress funneled funding into the project and ultimately saved soldiers’ lives in Iraq.  Likewise, the Predator Drone, which is used widely in Afghanistan and Iraq and is acknowledged for saving the lives of American soldiers, was resisted by the Pentagon and "pushed" on them through congressional earmarks.  Who wants an unmanned attack drone?  It is now one of the main arrows in the quiver of those fighting terrorism abroad.
Critics complain about earmarks being used for “experimental research that will never be used.”  To some extent this is probably true; some ideas will pan out while others will not; but that is why they are called experiments.  As academics we have hard drives full of data that were collected and never produced meaningful results; papers that were written and never published; grant proposals that were written and never funded; and the list goes on.  Experimentation and failure (and success) are natural components of the process of discovery.  Making precisely this point Albert Einstein famously said: “If we knew what we were doing, it wouldn't be called research, would it?”  Anyone engaged in research will tell you that there are no guarantees of success.  Are there any successes associated with earmarks?  What bigger gamble than to earmark initial funding to map the human genome—considered an impossibility by most of the scientific community in the 1980s—which ultimately produced medical and technological discoveries that will fuel biotechnology for decades to come.
            In one regard critics of earmarks are somewhat correct: Earmarked funds are often awarded without competitive bidding.  However even this requires some context.  First, the executive bureaucracy often grants money without competitive bidding (think here of the billions and billions spend on no-bid contracts associated with the Afghanistan and Iraq Wars).  Somehow the critics would have us believe that non-competitive grants from the executive are superior to congressional earmarks, despite the fact that no-bid contracts through the executive are far less transparent than congressional earmark awards.  Second, as we discuss at much greater length in our book, earmark requests do compete with one another within the appropriations process.  Despite popular belief not all earmark requests are granted.  Our research on requests for earmarks in the Interior and Military Construction subcommittees suggests that less than one in four earmarks are granted.  The earmarks that are included in appropriations emerge from a brutally competitive environment.
            We end this essay as we ended our first essay: “The use of appropriations earmarks is one political issue where the media consistently fails to exercise balance in their coverage.  While media outlets routinely take pains to seek out conflicting views on even the most widely accepted truths (e.g., global climate change, evolution), it is rare to hear dissenting voices on the issue of appropriations earmarks.”

[1] Eric Lipton and Ron Nixon, “Companies Find Ways to Bypass Ban on Earmarks” New York Times July 4, 2010.