Cato's Mark Calabria summarizes new research on earmarks and private investment:
In an interesting new working paper, a trio of economists…measure the impact of increased earmarks on the local economy receiving those earmarks, and compare the impact to areas not receiving the increased earmarks, which allows t
hem to control for the overall macroeconomic environment. Their finding: even in a setting where government spending is "free" to the recipients (but not free to the rest of us), such spending reduces private investment.
More specifically, the authors examine what happens to a state when one of its senators becomes a chair of a powerful committee. First, the obvious, upon taking a power chairmanship, the value of earmarks increase almost 50%. This results in roughly a $200 million annual increase to the state. But the authors find this is not simply a transfer from the rest of the country to the state, it also depresses private capital investment and R&D spending in the state. On average, once a state has a senator obtain a powerful chairmanship, state level private investment in capital expenditures decreases $39 million annually and state private R&D decreases $34 million annually.
I've long viewed earmarks as a symbolic issue as much as anything else: Although they account for a lot of money in simple dollar terms—a little more than $15 billion in 2009—they make up only a tiny fraction of the federal budget. Yet even with broad bipartisan support for trimming earmarks, it's proven exceedingly difficult to get Cong
ress to significantly reduce total earmark spending. Given the political support and the comparatively small amount of money involved, earmarks are the sort of thing that Congress ought to be able to cut relatively easily. Yet it's still a struggle.
That's probably at least partially a result of the fact that they're so hard to track, and transparency-focused reforms haven't proven as effective as hoped. Jerry Brito, the director of the Mercatus Center's Technology Policy program, explains:
Congress recently changed its rules to require members to disclose their earmark requests online. Unfortunately, they don't disclose these in any consistent way. You have to hunt for where each member has decided to place their disclosure, so there's no way to systematically analyze earmark data. The White House has promised to give us a unified database of earmarks, but so far hasn't acted.
Brito, along with Gunnar Hellekson and Jim Harper (who also runs WatchingtonWatch.com), have started a new site, EarmarkData.org, which is intended to encourage government officials to make earmark data easier to track by releasing it in a single, standardized format. If Congress won't get rid of earmarks, the least it could do is make them more transparent.
