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Monday, March 13, 2006

PORKBUSTERS UPDATE: A Taxonomy of Earmarks, or The Intelligent Taxpayer's Guide to Identifying A Bridge to Nowhere

Mention "earmarks" and most people likely think of a smoke-filled backroom where a group of greedy politicians in Congress divvy up a pile of federal tax dollars to help their favorite special interests.

That image used to be fairly accurate but the porkers in Congress have gotten far more sophisticated in recent years. They've come up with nearly a dozen new ways to slip an earmark into legislation or a federal spending program that escape notice by anybody who isn't a Capitol Hill insider or a rocket scientist of legislative language.

But Dr. Ron Utt of The Heritage Foundation thinks everybody ought to be able to recognize an earmark for what it is, so he he has written a concise, easy-to-understand description of each of these new earmarks.

Before we look at the new ones, Utt defines traditional earmarks are those that are "generally found in parts of appropriations bills and in parts of the highway reauthorization bills that are enacted once every six years. For the most part, they appear in neat lists that enumerate exaact sums of money to be provided to tangible projects in specific locations.

"Typical of these is the infamous 'Bridge to Nowhere' that appeared in [the 2005 transportation bill) ... Also included in the list of 6,371 earmarks are similar types of locationally specific projects like the High Knob Horse Trail in Virginia, the National Packard Museum in Ohio, the American Tobacco Trail in North Carolina and the Sapelo Island Visitor Center in Georgia."

Thanks in great part to the Blogosphere, however, the old way of ladling out pork doesn't work so well now, so the politicians have come up with much more sophisticated ways of doing it, according to Utt. These include the following:

Transfer of federal land to private sector:

Uncle Sam owns more than 700 million acres, with much of it in the South and the West. Those lands often contain valuable resources but proposals to sell federal lands invariably spark protests. But that doesn't stop Congress, according to Utt:

"Despite near consistent opposition to land sale proposals that would benefit the broad public, Congress sometimes votes to give valuable parcels away to politically influential developers or to communities in their state or district that, in turn, sell or transfer the land to for-profit developers.

"Although federal spending remains unaffected by these transfers, the government loses valuable assets and the opportunity to raise more revenues for programs, tax relief and/or deficit reduction."

Research grants:

Traditionally, important basic research is funded by Congress via competitive bidding among qualified institutions for specific grants. Nowadays, it's easier to just do an earmark, according to Utt:

"Congress has increasingly intervened to insure that less qualified academic institutions in their states and districts get a share of federal research dollars. And increasingly they are absolving the grantee from the pesky requirement that they actually perform research on specific topics of interest to the federal government."

Utt notes as examples of such research grants the highway bill's earmarks designating Richmond, Virginia, as one of 51 cities that are to be investigated as potential grant recipients for Intelligent Transportation Infrastructure development, even though Richmond is "one of the least congested metropolitan areas of the country."

Product/Service Purchase Requirements:

Another way of getting around requirements for competitive bidding on federal contracts is for Congress to simply direct an agency to buy a specific product or service from a particular company "regardless of whether the government has a need for the product or the product performed satisfactorily in comparison with products of its competitors," Utt noted.

Example: Five years ago, Congress required the FAA to buy and install airport baggage screening machines made by a specific company. "The FAA had previously been reulctant to buy and install the company's machines because the U.S. Department of Transportation Inspector-General concluded the machine's performance was substandard in detecting weapons and bombs. Under the new law, the FAA was required to buy one of this company's machines for ever machine it purchased from a competitor."

Earmarked federal loans and guarantees:

Tax dollars can be earmarked and so can federal loans and loan guarantees. Utt notes the energy bill approved by Congress last year contained a bunch of such earmarks, including "a number of costly examples in which direct loans, loan guarantees, tax credits and/or grants are made available for the construction of energy production plants in certain specific locations."

Those specific locations included an "Integrated Coal/Renewable Energy System in the 'Upper Great Plains,' a Clean Coal Technology Plant near Healy, Alaska, a Western Coal Gasification Plant in a western state at 'at altitude greater than 4,000 feeet above sea level' and new research facilities at Southern Illinois University, the University of Kentucky and Purdue University to derive fuels from Illinois Basin Coal."

Legislation that directly profits Members of Congress and/or Members' families:

Hard to believe a Member of Congress would just help himself or herself to a bunch of tax dollars, but Utt demonstrates that is what often happens in Congress:

"Because there is no requirement or tradition for a Member of Congress to recuse himself or herself from involvement in legislation that provides them or their relatives with direct financial benefits, Members will often be called upon to vote on legislation that will provide them or their relatives with significant financial benefits.

"While the more typical connection would be between legislation and its influence on the value of a Member's investment portfolio, in some cases the connection is even more direct. In 2002, for example, nine Members of Congress received a total of $243,605 in federal farm subsidies and between 1995 and 2002 the same nine received a total of $2,177,491."

And they voted in 2002 to extend the subsidies another five years and to make them substantially more generous, Utt reported.

Private communication from Congress to a department/agency:

Congressmen send letters to federal agency officials every day, especially not long after a bill is approved. Those letters often "suggest" to a Cabinet Secretary or agency head that "a portion of funds so provided in the recent legislation be spent on a series of projects that are described in the letter. Although such letter requests have no force of law, department heads know that it is in their interests to accommodate the request of the congressional committees that control their budget," according to Utt.

Utt describes other methods of getting earmarks into legislation, including the "notwithstanding any law, regulation or grant assurance ..." provision of the highway bill that allowed Rialto Municipal Airport in Rialto, California, to avoid having to repay the $14 million it had received to improve and expand the airport.

But it didn't end there, as Utt explains:

"Instead, Rialto decided to shut down the airport and sell the land acquired with federal money to a private developer. Because this was an improper use of the federal grant money, the FAA demanded its return ... Instead, as the legislation allows, Rialto can sell the land for development, keep 55 percent of the proceeds for itself and reinvest the remaining 45 percent in a nearby airport."

I gathered the above mateial from an advance draft copy of Utt's paper. The final version should be published by Heritage later this week and will be available on the Heritage web site. I'll post the URL as soon as it is available.

The paper also provides an in-depth look at the various earmark reform proposals being considered by Congress and suggests ways in which all of them can be strengthened. Utt was the Reagan administration's "privatization czar" and is a veteran Washington analyst. You can read more about him here.