Take Community Block Grants to the Chopping Block

Should the federal government be involved in micromanaging city planning activities? And should it be using billions of dollars in funds collected from taxpayers across the country to target tiny projects in a few select areas? If your answer is no, I'm sorry to say you're too late: It's been engaged in this sort of targeted special interest spending for years through the Community Development Block Grant program.

But that program may now be in line for the chopping block. And, in a completely unexpected turn of events, the folks who get money from the program don't want to see its funding reduced.

Should we be worried? Woeful? Distressed? Here is your in-no-way biased opening line from today's Washington Post story on the proposed cuts:  "Community development block grants have been a vital source of federal anti-poverty money for decades, supporting affordable housing, job training and an array of other programs serving low-income communities." No deck-stacking here!

Anyway, the program is apparently (un?)worthy enough that both Democrats and Republicans are looking to cut it back. The question now is how much:

When President Obama, in his 2012 budget, proposed cutting funding for CDBGs, as they are known, by about $300 million, local officials across the country worried about their already-battered finances.

Then House Republicans offered their take on the nearly $4 billion grant program.

Not only did they urge cutting the program by more than half, to $1.5 billion, they also endorsed making the cuts in the middle of the current fiscal year, part of the $61 billion in proposed cuts that have helped set up the budget battle.

Here's an idea: Let's get rid of the entire program. As Cato's Ted DeHaven explains, it encourages wasteful spending, contributes to the fattening of our federal bureaucracy, and allows multiple layers of government to slice out a cut for themselves through administrative spending:

The city of Utica spent CDBG funds on a variety of improper uses, such as $902,799 on a marina and $255,158 on ski chalet renovations. The city of Troy used $1.6 million to lure a hockey team to the city. And Niagara Falls and Lockport used $12 million to build an amusement center, which shut down after just six months of operation.

Even if CBDG funds went entirely to "worthy" projects, federal funding is still an inefficient way to foster local economic development because of the excessive bureaucracy that results from funneling money through multiple levels of government.

Federal administration costs are about 5% of the value of CDBG grants, with local and state governments taking a 17% and 8% cut, respectively. A large share of the CDBG budget disappears before any actual work is done.

In the end, the program is basically a way to funnel money to narrow private interests. It's corporate welfare disguised as community development. According to the helpful primer at Downsizing Government, "the ultimate beneficiaries are usually private businesses and organizations working on particular projects, such shopping malls, parking lots, museums, colleges, theaters, swimming pools, and auditoriums"—in other words, places where federal funds clearly don't belong.