Showing posts with label earmarks. Show all posts
Showing posts with label earmarks. Show all posts

Friday, March 13, 2009

President Obama promises to rein in earmarks. Soon.

He'll Quit Tomorrow. WaPo Editorial
President Obama promises to rein in earmarks. Soon.
WaPo, Friday, March 13, 2009; A16

LIKE A DIETER who allows himself just one more slice of cake before starting to count calories, President Obama signed the $410 billion omnibus spending bill, then pledged to get tough on congressional earmark spending -- next time. "This piece of legislation must mark an end to the old way of doing business," Mr. Obama announced. As with the dieter, skepticism is appropriate. The old way was supposed to have ended already. After all, Mr. Obama, in his inaugural address, proclaimed that "those of us who manage the public's dollars will be held to account, to spend wisely, reform bad habits."

The political demands of the moment led Mr. Obama to sign this measure despite its imperfections. That's understandable, but the same pressures will arise next time, too, as members of Congress will be well aware as they consider whether to take the president on over earmarks. Tradeoffs come with the territory, but Mr. Obama is accepting them after holding himself out as -- indeed, while continuing to hold himself out as -- the avatar of a new way of doing business. "Barack Obama is committed to returning earmarks to less than $7.8 billion a year, the level they were at before 1994, when Republicans took control of Congress and the level of earmarks began rising dramatically," the Obama campaign proclaimed. "I've pledged to slash earmarks by more than half when I am president of the United States," Mr. Obama said in September. Somehow, that commitment was missing from Wednesday's announcement of future restraint. The dieter didn't set a weight-loss goal.

Earmarks account for only a sliver of spending, and the Constitution does give Congress the power of the purse. As Mr. Obama said Wednesday, "Done right, earmarks give legislators the opportunity to direct federal money to worthy projects that benefit people in their district." Moreover, some ugly excesses associated with them have already been curtailed. The amount of earmarked funds has been brought down in the past three years, and disclosure has improved. Mr. Obama's after-the-omnibus-has-left-the-barn proposals would expand on these changes by requiring lawmakers to identify not only the earmarks they receive but the ones they request. Earmarks for private, for-profit companies would be subject to competitive bidding.

But earmarks are symbols of broader indiscipline, and they also are conducive to corruption. So it was disappointing that Mr. Obama shied away from a tougher stance even as he congratulated himself for doing more. He called earmarks for private companies "the single most corrupting element of this practice." Why, then, not do away with such earmarks entirely? As a senator, Mr. Obama eventually renounced private-sector earmarks. Likewise, Mr. Obama said that he would work to strip out unjustified earmarks from future bills -- but he proposed no mechanism for giving him that authority. "He looks forward to working through a process that allows that to happen," press secretary Robert Gibbs said. So do we.

Monday, March 9, 2009

Brookings Institute: Put Earmarks in Perspective

Put Earmarks in Perspective. By Thomas E. Mann
Brookings Institute, Mar 06, 2009

March 06, 2009 — It is hard to take seriously a political opposition whose major antidote to the most serious and frightening financial and economic crisis since the Great Depression is a rhetorical crusade against congressional earmarks.

Sen. John McCain took to the Senate floor Monday to unleash his fury at the 9,000 earmarks — “wasteful, disgraceful, corrupting ... pork barrel spending” — that are included in a $410 billion omnibus spending bill for the current budget year. McCain was particularly incensed that President Barack Obama decided not to veto this legislation in spite of his campaign promise to reform the earmark process and go through the budget line by line to make sure we’re not spending money unwisely.

McCain has long been a passionate opponent of congressional earmarks, and his jeremiads against them never fail to stir a public whose level of trust in government to spend its tax dollars wisely has never been lower. And there is merit to much of what he says. The number and cost of earmarks exploded in the late 1990s and early 2000s. New lobbying shops, often working on commission for private contractors and local governments, used their experience on Capitol Hill and access to policymakers to deliver projects outside of the regular grant-making and contracting processes, threatening the quality of resource allocation. Standards for scrubbing earmark requests in the appropriations committees declined. Campaign fundraising took on aspects of pay-to-play systems for those seeking earmarked projects. On occasion, this descended into criminal quid pro quo exchanges.

The excesses of earmarking have been acknowledged and addressed in the past several years. Most important, new transparency measures were adopted to make possible public accountability. Members of Congress will be increasingly sensitive to the potential political costs as well as benefits of directing project funds to those who pay to play. In addition, the congressional leadership has stopped the precipitous growth of earmarks and begun to reduce their number and cost. Both of these developments — increasing transparency and declining volume — should and almost certainly will continue as work begins on the 2010 budget. An increase in the Department of Justice public corruption investigation budget would also help discipline the most egregious abusers of the earmarking system.

But dramatic calls for an abolition of earmarks, by law or presidential veto, are futile and counterproductive. Congress has the constitutional power of the purse and legitimately defends its authority to allocate public resources. Given the enormity of the economic and financial problems facing the country, Obama would be foolish to engage Congress in a battle over earmarks.

Earmarks constitute less than 1 percent of the federal budget. In most cases, they don’t add to federal expenditures but merely allow Congress to direct a small fraction of program funding that would otherwise be allocated by formula or grant competition. Abolishing all earmarks would therefore have a trivial effect on the level of spending and budget deficits. While earmark reform and reduction is a worthy cause, it is a relatively minor one. It would do nothing to slow the rate of federal spending or improve our long-term budget outlook. Moreover, hyperbolic attacks on earmarks do a disservice to the public, encouraging people to concentrate way too much attention and energy on a largely symbolic issue and ignore the critical decisions that we face in the months and years ahead.

In an effort to stimulate an economy threatened by deflation and severe recession, federal spending will increase dramatically over the next several years. The challenge is to see that these new funds are expended in the most responsible way possible. Beefing up our public management capacity — in contracting, financial accountability, program evaluation — and developing oversight systems are the highest priorities. Same with efforts under way to stabilize the financial markets. Then there are the daunting challenges of designing and implementing new systems to restrain the cost and increase the coverage of health care and to shift to a low-carbon economy, to say nothing of grappling with a huge, long-term fiscal imbalance.

In this most threatening and challenging policy environment, it is time for earmarks to be put in their proper perspective and for politicians in both parties to get serious with the public about what really lies ahead.

Wednesday, February 11, 2009

In Obama's Press Conference on the Stimulus

Obama's Press Conference on the Stimulus Was Not Reassuring. By Philip I. Levy, Wednesday, February 11, 2009

The most interesting aspect of President Obama's prime time press conference yesterday was not the substance but the style. Without introducing any new plans, the president was making the case for the stimulus bill as best he could. I was disturbed by some of the rhetorical approaches he has adopted.

1. The Straw Man

"[T]he one concern I've got on the stimulus package, in terms of the debate and listening to some of what's been said in Congress is that there seems to be a set of folks who--I don't doubt their sincerity--who just believe that we should do nothing."

It's hard to rule out the possibility that there are such folks, but they are well-hidden. As far as I can see, there's pretty broad agreement that we have a crisis. There's pretty broad agreement that we should at least run a record-setting deficit of over $1.2 trillion this year (before any stimulus package). Then there are arguments over how we should spend trillions on some combination of spending programs, tax cuts, fiscal resuscitation, or housing market revival. Yet at least since his George Mason speech of early January, President Obama has made the argument that those who oppose his version of the stimulus favor inaction.

2. Fear

The President has argued repeatedly that if his plan is not adopted, disaster will ensue. This led to the first question last night, from Jennifer Loven of the Associated Press:

Earlier today in Indiana you said something striking. You said that this nation could end up in a crisis, without action, that we would be unable to reverse. Can you talk about what you know or what you're hearing that would lead you to say that our recession might be permanent when others in our history have not? And do you think that you risk losing some credibility or even talking down the economy by using dire language like that?

Obama backed off a little, but not much. This is a particularly dangerous game. Some of the time, the administration pretends that they are responding to the crisis with scientific precision ("$800 billion... wasn't just some random number that I plucked out of a hat"). Other times, there's a recognition that public sentiment is playing a major role. $800 billion over several years is fairly small relative to the size of the economy; the goal is to lift public spirits. But the cries of impending doom can have the opposite effect. John Taylor argues that such cries from then-Secretary Hank Paulson and Fed Chairman Ben Bernanke, coupled with an inadequate response, helped bring on the worst of the crisis last fall.

The president's message seems to be that we should be so scared that we should not stop and subject the proposal to scrutiny. This was the sort of approach the president's supporters roundly denounced when it emerged in national security debates during the Bush administration.

3. Taxes and the election

Arguing against alternative proposals that rely heavily on tax cuts, the president said:

"What I won't do is return to the failed theories of the last eight years that got us into this fix in the first place, because those theories have been tested and they have failed. And that's part of what the election in November was all about."

My recollection of the November election was somewhat different. I recall promises of a tax cut for 95 percent of the public. I recall large posters on street corners in Northern Virginia that read "Obama-Biden: Lower Taxes." Neither then nor afterward do I recall the argument about how lower taxes brought on the current crisis. One might make that argument with respect to the deductibility of mortgage interest--a large subsidy to housing--but I don't believe the president has done so.

4. Earmarks and waste

"But when [critics] start characterizing this as pork without acknowledging that there are no earmarks in this package--something, again, that was pretty rare over the last eight years--then you get a feeling that maybe we're playing politics instead of actually trying to solve problems for the American people."

Here the president either misunderstands the concerns about wasteful spending or has succumbed to the peculiarities of Capitol Hill thinking in his short time there. He is correct that one can define an earmark as a spending suggestion tucked into a bill by a single lawmaker and not subjected to broad scrutiny. That's a more technical definition. A broader description, one more likely to drive public concern, is wasteful spending. Greg Mankiw cites an example from Milwaukee, which was to receive $88.6 million for new school construction in the stimulus package, even though it had vacant schools and declining enrollment.

That example is small relative to the overall package, but the lack of hearings and planning raise legitimate concerns that bigger ticket items, like approaches to renewable energy, could be equally misguided. The president is sidestepping the substance of the concern by focusing on the procedure: whether it is wasteful or not, it will receive a full Congressional vote and will be monitored to make sure the funds are spent as intended. That's not so reassuring.

5. Four million jobs

The key selling point, to which the president kept returning, was the jobs impact of the stimulus package. As he said ast night: "So my bottom line when it comes to the recovery package is send me a bill that creates or saves 4 million jobs...."

The implication is that White House economists can turn the dials and adjust the levers so as to achieve a particular level of employment in the economy. They cannot. He is basing the jobs estimate on an analysis by Christina Romer and Jared Bernstein. Romer is a highly respected economist and the numbers they provide are a reasonable guess. But they're just that--a guess amidst enormous uncertainty. A little history shows why it is misleading to think we can call up 4 million help wanted ads with a calibrated stimulus plan.

As Ben Bernanke noted in a 2004 speech, the economy in an average year creates 17 million jobs and loses 15 million, for a net gain of 2 million jobs. The President says he wants to "create or save" 4 million jobs, and this will be the key measure of his package's success. Given both normal and extraordinary labor market turmoil, such a change would be very difficult to measure. If the economy revives, 4 million gross jobs will seem small. If the economy does not, one can always argue that it could have been worse.

Last year the economy suffered a net loss of 3.6 million jobs. One of the striking features of that job-loss was that it occurred at a time when the economy was growing by 1.3 percent. This divergence between jobs and growth led to the breakdown of the old rule of thumb: a recession occurs when there are two consecutive quarters of negative growth. Yet it is exactly that broken-down relationship between spending and jobs that underlies the analysis promising the new jobs. The numbers are far more tenuous than the president lets on.

6. Bipartisanship

Throughout the press conference, the president was repeatedly asked about his pledges of bipartisanship. He noted that he had gone to visit Republicans on Capitol Hill and invited them to the White House. Perhaps a better measure of bipartisanship is the willingness to treat an opponent's arguments with respect.

Tuesday, January 6, 2009 No earmarks

No earmarks, by Dan McSwain, Tuesday, January 6, 2009 02:24pm EST

President-elect Barack Obama said today in a meeting with members of his budget team that he will ban earmarks from the American Recovery and Reinvestment Act that will soon go before Congress.

The President-elect also said he expects his administration to inherit a budget deficit of up to $1 trillion.

He was joined in the meeting by Peter Orszag, Director-designate, Office of Managment and Budget; Christina Romer, Christina Romer, Director-designate, Council of Economic Advisors and Lawrence Summers, Director-designate, National Economic Council, among others.

Below are pictures and video from the event.