American Elephants

Congress Loves Earmarks, But They May Hurt Their Districts! by The Elephant's Child
June 5, 2010, 8:30 am
Filed under: Capitalism, Economy, Politics, Taxes | Tags: , ,

When your Member of Congress becomes a committee chairman, it is a big deal. It means more power to spend in earmark funds for their home districts. That’s the common wisdom and sometimes the reason for retaining people in office — because they deliver government goodies.  According to new research from Harvard Business School, the increased federal spending causes local companies to lose sales and to cut back on research, payroll and other expenses.

Harvard professors Joshua Coval, Christopher Malloy and Lauren Cohen were surprised at the results.  They had expected to find that firms with political connections prospered from receipt of federal largesse.  According to Mr. Coval, their research showed that federal dollars “directly supplant private sector activity — they literally undertake projects the private sector was planning to do on its own.”

I’ve seen that many times in my state. There is a project, long in the planning, and then the district Representative or a Senator gets interested and comes up with federal money.  Senator Patty Murray, sinking in the polls, is suddenly deeply interested in a big project in my district.  Not a coincidence.

Public spending seems to increase demand for factors of production like competition for labor and real estate, for example. Federal money comes with federal rules, as well.

Chairmanship of a Senate committee, particularly a powerful one like Finance or Appropriations typically brings an increase of 40% to 50% in earmark spending for the home state.  In the House, Chairmen take an average of 20% more to their states.  Yet in the first year after the chairman’s accession to the chairmanship, the average firm in his state “cuts back capital expenditures by around 15%.  The behavior continues as long as the money keeps flowing, or the Chairman steps down.

The same side effects are demonstrated by funds from the  federal stimulus program. In the first quarter of 2010, according to USA Today, private paychecks made up the lowest share of personal income in history as government spending ramped up to the highest levels ever.  That trend leads to higher taxes and more economic harm.

Democrats and Republicans have long promised earmark reform, but they don’t really mean it.  The closer it gets to election time, the more interested they suddenly are in bringing home the pork.  This study suggests that they are really reducing prosperity.

Maybe it’s better if they just stay away. by The Elephant's Child

The Wall Street Journal reports today on the 110th Congress’s finest hour. They have passed fewer laws than any Congress in the last two decades, a mere 294 laws. On the other hand they took time to consider 1,932 resolutions favoring such notable causes as National Watermelon Month.

This is good. We want them to do a lot less. Particularly in an election year, politicians want to DO SOMETHING, and that something is usually ill-advised and done in haste. There is a tremendous incentive to tack nice little earmarks for their districts onto any available bill. Legislators are busybodies by nature and must be restrained.

The things that they managed to get passed were ill-advised, and will probably weigh on taxpayers in the future. The college loan fiasco, and the mortgage bailout are strikingly bad examples.

There is something in the air that suggests to legislators that it is their duty or pleasure to regulate the most minute parts of our lives. Who would have ever dreamed that Congress would take it upon themselves to decide what kind of shower heads we may have, or that we must abandon the kinds of light bulbs we use in favor of a more expensive imported kind that, if dropped, requires us to call in the Haz-mat team. And toilets, for heaven’s sake! Where in the Constitution does it suggest that they regulate our toilets? Our Founding Fathers must be spinning in their graves.

Much of this lunacy can be laid at the base of the environmental altar. Much is done in the name of “saving the planet”, when the planet is just fine, thank you, warming and cooling as it has always done. All in the name of carbon dioxide, a harmless, colorless gas that has no influence on global warming but does all sorts of good things like making plants grow. It stopped warming about 10 years ago, but Congress is still anxious to legislate its demise.

If we get very, very lucky, perhaps members of Congress will extend their vacation, and so do nothing, nothing at all.

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