We Should Care This Much About Earmarks? Really?

We Should Care This Much About Earmarks? Really?


If you've been following some of the recent coverage of the $410 billion federal appropriations bill, you might be forgiven for thinking that there is little more to the federal budget than a plague of roughly 9,000 "earmarks," all wasteful and deceitful. After all, both the mainstream press and congressional Republicans have been relentlessly focused on earmarks — and not generally in the kindest of terms.

But how concerned should the public really be about earmarks? Actually, not very, say political scientists who study earmarks and pork-barrel politics.

For one, earmarks (i.e. specific targeted requests for funding separate from the normal appropriations process) account for roughly 2 percent of all appropriations expenditures. (By contrast, the military budget accounts for more than half of all federal discretionary spending).

And while some projects might sound silly when taken out of context, most actually serve legitimate local needs that otherwise fall through the cracks of normal funding mechanisms (which, by the way, would disburse the same amount of money even without earmarks)

"I think people should take a deep breath and stop worrying, and look at other things we're spending money on as a society," said Scott A. Frisch, a professor at Cal State University, Channel Islands, who is working on a book called Why Earmarks are Good for Democracy and is also the author of The Politics of Pork. "I'm much more worried about entitlement reform, contracting reform, election reform, campaign finance. But earmarks are a convenient target to distract people."

"The thing I'm struck by is that everyone seems to be starting from the premise that all earmarks are bad," said Amy Steigerwalt, a professor of political science at Georgia State University who has also studied earmarks. "Like most things in the world, a simple black-and-white perception isn't true. There are certainly abuses ... but the reality is that earmarks are really the only mechanism that members can ensure that money goes to their districts in ways that are not part of larger bills."

One of the challenges of the modern legislative process, Steigerwalt notes, is that Congress no longer allocates funding for local projects by what used to be called private bills. Rather, these days, the only opportunity for individual House and Senate members to address the local concerns often is the earmarking process, in which members request funding for specific projects from the appropriation committee chairs.

After all, the House and the Senate are not about to vote separately on 9,000 stand-alone bills, each covering an intensely local project. Such a process would take forever. But bundling all the projects together in a single bill is not only much more efficient, said Diana Evans, a professor of political science at Trinity College, it also helps to get an appropriations bill passed. After all, if everybody has a local project in the bill, everybody also has a stake in the bill passing. (Evans makes this point in more detail in her recent book, Greasing the Wheels.)

"It's an inevitable part of the process," she said. "It's too useful. It helps members to get re-elected, and it helps leaders to put together support for their bills."

And it's a bipartisan part of the process. Both Republicans and Democrats are active earmarkers. And for good reason, notes Jeffrey Lazarus, a professor of political science at Georgia State: "Members who score more federal spending get higher vote shares, and tend to have an easier time winning re-election."

Then again, it might make a little sense for Republicans to be the ones complaining now, since, according to Evans, "the general rule that everyone agrees to is that the majority gets 60 percent of earmarks, so when the Republican party was in power, they got 60 percent of the earmarks, and now the Democrats are in power and they get 60 percent of the earmarks."

But, then again, it was under the period of a Republican majority Congress that the practice of earmarking really boomed. In 1994, the last year Democrats were in power, the watchdog group Citizens against Government Waste found 1,318 earmarks worth $7.8 billion. By 2006, the last year of Republican rule, that had ballooned to 9,963 earmarks worth $29 billion.

When Democrats returned to power in 2007, they instituted new rules making earmarks more transparent ("It used to be that, until the past Congress, you really had to go through the reports and dig through them," said Frisch.) Such rules, however, did little to slow the earmarks.

"Making earmarks public doesn't shame members," Evans said. "They want constituents to know about their awards. They talk about them in newsletters and press releases. I'd say most constituents like them pretty well if they're coming to their district."

Of course, the process still could be more open. "The way the process is done right now is not terribly transparent," said Steigerwalt. "And anything that seems untransparent can also be portrayed as sneaky, underhanded, and certainly unfair or only aiding those in power." (Obama has floated new rules to improve transparency even more.)

Moreover, earmarks have also gotten a bad name from a few high-profile cases with corrupt lobbyists, like those surrounding now-jailed Rep. Randy "Duke" Cunningham, R-CA, or the lobbying firm PMA Group, which is under FBI investigation for improper campaign contributions.

But just because lobbyists are involved, doesn't mean that they are not representing legitimate local concerns. Lazarus has found in his own research that earmark requests are generally very responsive to the concerns of particular districts. "Members of Congress tend to seek out earmarks which comport with the finds of federal spending that their districts request," he said. "So it's not like it's as totally useless as it's made out to be. There is actually some effort to target spending to what a district wants and what it needs."

Sure, lobbyists often insert themselves into the process, helping local institutions navigate the confusing folkways of Washington, exacting what might be an unnecessary toll. But that shouldn't tarnish otherwise defensible projects, say scholars. "Sometimes, it's easy to pick out abusive earmarks," noted Steigerwalt. "But you get into trouble when you start critiquing volcano monitoring, which, to the people of Seattle, is extremely important since they're waiting for a volcano to explode."

And what of the supposed "eruption of spending" that these earmarks are producing?

"Earmarks are simply taking money we've decided to spend on community development or agriculture, and instead of allowing the bureaucracy or some type of static formula to decide it, it's allowing the elected representatives of the people to," said Frisch. In other words, earmarks do not represent new spending, but rather money that would have been allocated otherwise under bureaucratic formulas that can ignore sometimes idiosyncratic local concerns.

Ultimately, none of the political scientists think that earmarks are going away any time soon, even if Obama succeeds in adding further transparency to the process. "As long as voters are rewarding it," said Lazarus, "politicians will keep doing it, no matter how nationally unpopular. Unless something fundamental about the political landscape changes, you're never going to see the avenue for this kind of spending completely shut off."

So, we are left with yet another paradox of American democracy: opportunistic politicians railing against a process they willingly participate in and benefit from, knowing very well that there is actually very little they could do to change it even if they wanted to, and voters rewarding behavior — at the individual level — that they supposedly dislike at the national level. Pork-barrel politics are as old as the system of geographic representation enshrined in the Constitution, and it doesn't appear things are going to change anytime soon. But maybe, say scholars, that's just fine.


http://www.miller-mccune.com/politics/we-should-care-this-much-about-earmarks-really-1064.print

Can the private sector save the banks?

Lee Drutman: Can the private sector save the banks?

Tuesday, March 3, 2009

LEE DRUTMAN

WASHINGTON

THESE ARE HARD TIMES on Wall Street. All those big banks that once towered so high are now basically insolvent, and the only solution left seems to be for the U.S. government to inject a hefty sum of taxpayer money to prop up the banking system.

But . . . one small problem: Too much government ownership could be a gateway to “nationalization,” which, apparently, is un-American. You see, we in the good U.S. of A. believe in free enterprise, and we are not going to let a little thing like the massive failure of a sizeable chunk of private banking system fool us into letting the government start running our economy.

Ah yes. The private sector. And, speaking of which, shouldn’t that distinguished private sector be coming to the rescue of our once-grand banks any minute now, snapping up those “toxic” assets at market prices and getting our credit system humming again?

Okay, so the branding on these assets could be a little better, but come on! All you folks on Wall Street, who don’t like this whole nationalization thing: Don’t you want to show those crazy liberals in Washington that the private sector is not dead, that the free market still works, that government is not the solution?

After all, what would J.P. Morgan do? Well, back in 1907, Wall Street got caught up in a bit of a panic not entirely dissimilar to this one, and some large banks wound up insolvent. Morgan showed that the private sector was up to the task. He got a bunch of banker friends together and they pumped capital into the troubled banks alongside the U.S. Treasury, restoring solvency and confidence.

Unlike a century ago, of course, there are no strong banks left to help out the weak ones. But what we do have today are a lot of individual people who made an awful lot of money working on Wall Street. Surely, they could do their part for the free market?

Let’s do some brief accounting. The top 25 hedge-fund managers for 2007 each earned at least $360 million. And the top earner, John Paulson (no relation to Henry) earned $3.7 billion. Then you have the Wall Street CEOs. Merrill Lynch’s John Thain took home $83 million in 2007 (plus that fancy commode for his office). Goldman Sach’s Lloyd Blankfein took home $54 million. Then there’s Countrywide’s Tony Mozilo, who earned $410 million over several years by being at the center of the exploding mortgage business. But high-level compensation went pretty far down the organizational chart. And don’t forget about the bonuses: $18 billion even in 2008, $33.2 billion the year before. Wall Street made a lot of people millionaires.

And by the way: what, exactly, did they do in return for this money? As far as I can tell, Wall Street over the last 10 years consisted mostly of a sort of collective mania in which supposedly very smart people bought and traded insane amounts of complex financial products that they didn’t really understand, any more than they needed to understand the complex computer algorithms (designed by a bunch of even-smarter economics Ph.D.s) that told them they should be doing it.

Moreover, the more buying and selling they did, the more money they made. And as we all know, when you’re making millions in bonuses and compensation, you don’t ask silly questions like whether it is a good idea to leverage your assets 30- or 40-to-1 on the premise that home prices go up forever in excess of real income and people with no assets and no job can of course pay off a mortgage. Especially when it’s not even your own money you’re gambling with.

And so we are in a funny situation these days. We have a lot of people who got very rich on Wall Street during this disastrously delusional decade. And now, while the already deep-in-debt federal government struggles to clean up the sprawling mess the investors and bankers left behind, Wall Street still complains: Don’t nationalize!

Well, how about this for a solution: How about all those smart Wall Street bankers and investors who got so rich ruining the financial sector get together some of their own money and show us all how great the private sector is in correcting its own failures by setting up a fund to buy up the toxic assets and pump liquidity into the banks?

It’s good for taxpayers (less money for the bailout). It’s good for preserving private enterprise (no specter of socialism). And it might even be good for Wall Street (at the very least, Wall Street can improve its reputation by showing some spirit of civic responsibility; and who knows, maybe its denizens can even make some money buying up cheap assets).

For years now, conservatives have been talking up the importance of both personal responsibility and the power of private enterprise, while warning of wasting taxpayer dollars on big government. Well, if this isn’t a chance to put all those principles into practice, I don’t know what is. Come on, private sector! You can do it! Right?

Lee Drutman, a frequent contributor, is a research fellow at the Brookings Institution ( ldrutman@brookings.edu).

http://www.projo.com/opinion/contributors/content/CT_drut3_03-03-09_RUDEEQT_v14.3e69832.html