Real Federalism Would Be Far Better Than Buy-Partisan Earmarks

A decade ago, President Barack Obama said in his State of the Union speech he would veto any bill that contained earmarks and the Republican Congress banned them. Now, Democrats want to bring them back. House Transportation Committee Chairman Peter DeFazio announced they would be allowed in the upcoming infrastructure bill.

Of course, Americans are being assured that Congress will get earmarks right this time with “new and improved” reforms that are supposed to ward off the stink of earlier waste and abuses. House Appropriations Chairwoman Rosa DeLauro made one of the main arguments for it, saying that it “will allow members to put their deep, first-hand understanding of the needs of their communities to work to help the people we represent,” and do it better than federal bureaucrats, which was echoed almost verbatim by DeFazio. The other is that “the practice smooths out the budget process and fosters bipartisanship.”

Unfortunately, those arguments are far from demonstrating that restoring earmarks will improve governance and the lives of Americans.

First, the sort of bipartisanship trumpeted, even though it is made to sound like it represents democracy in action, is a form of buy-partisanship to pass spending bills that cannot attract a majority in Congress without having to find extra buyable votes. In other words, the core “sausage making” deal by definition represents a minority position, which is not just far from the idealization attached to democracy, but light years from advancing Americans’ “General Welfare,” as laid out in the Preamble to the Constitution. Then getting them over 50% requires extra special interest “sweeteners,” even less focused on benefitting us all. That is not what anyone means when they extoll the “wonders of democracy,” and no supposed reforms proposed can turn that sow’s ear into a silk purse.

Perhaps even more important, the one constitutional argument those seeking to resurrect earmarks emphasize – that Congress, not the executive branch is given power over the purse – is true, but constitutional federalism, rather than more earmarks would benefit Americans far more. That is, earmarks that move transportation and infrastructure decisions, made artificially cheap because they are funded primarily with others’ taxes, to local representatives from executive agencies, will not do as much for citizens as giving states the authority over both the taxes and the spending.

This is illustrated by the Federal Highway Trust Fund (FHTF), created to finance the interstate highway system’s construction. With that construction finished long ago, there is no longer a need to subsidize construction through poor and thinly populated areas, making the federal redistribution across states no longer justified. That is why the FHTF’s original had a 1972 sunset date.

Instead, we continue to fight unjustified redistribution battles at the federal level, which adds costs, but not benefits, to Americans, as demonstrated by earmarks’ record in transportation funding.

Earmarks first appeared in the 1982 highway bill. Ten projects became 152 in 1987 (leading to a Ronald Reagan veto for “unjustified funding for narrow individual special-interest highway and transit construction”). It then rocketed to over 6,500, at a cost of over $24 billion, in 2005.

None of those earmarked projects solved a pressing need, and many became objects of well-deserved derision. And that is hardly a new revelation. A 1991 GAO review said: “Generally, demonstration projects … were not considered by state and regional transportation officials as critical to their transportation needs,” and often “not included in regional and state plans.” 

But that is how the FHTF evolved into an excuse for pork-barrel redistribution at the federal level. As Robert Puentes of the Brookings Institution wrote, “As far as Washington is concerned, transportation is all about money – how much and who gets it … That is why billions and billions of dollars of additional federal investments … do precious little to ameliorate the transportation problems.”

Consider what federal involvement does and does not add to highway investment. It does not add any new resources to those raised from state residents. But it does add inefficiency and bureaucracy, reducing what can be done.

Beyond the billions in pork projects, which by their nature don’t justify their cost, complete devolution to the states would reduce administrative costs, already estimated at 6.5% in a Reason Foundation study a quarter century ago. Doing so would leave more usable resources.

Additionally, the Davis-Bacon (prevailing wage) Act and other federal funding restrictions increase construction costs substantially. Years ago, former Federal Highway Administrator Robert Faris estimated the cost increase from Davis-Bacon alone at 30%, and the Associated Builders and Contractors put it at up to 38% in rural areas.

Even the official estimates of returns on taxes paid that were adopted were misleading, to make a bad deal look better. Measures of FHTF payouts were 10% higher than “contributions,” because the outlays included trust-fund interest earnings. But that overstated benefits, because states would have gotten that interest if it wasn’t routed through Washington. As a result, “donor” states are bigger donors than they thought and many “recipient” states turned out to be losers as well. Further, Congress can impose whatever added conditions it chooses on FHTF money, such as “buy American” and other restrictions.

Even though automobile and truck drivers are by far the primary funding source, FHTF dollars have also increasingly diverted away from roads to where non-road uses are now estimated at over one-quarter of spending. Mass transit funding, which subsidizes services so unattractive that passengers won’t even pay enough to cover operating expenses, much less capital costs, gets a major portion. It is also concentrated in big cities, resulting in substantial redistribution from everywhere else.

It is not time to expand national politician’s influence over transportation spending decisions, made clear by the paucity of people who extoll their current capabilities or achievements at anything. It is instead time to cut the federal middleman out of transportation spending decisions. Politicians may know better than federal bureaucrats what some of their constituents want, as they continuously trumpet, but they don’t know better than the states or the people directly involved. And Washington’s only additions are unjustifiable projects those directly affected are unwilling to pay for, while its Beltway detour subtractions through higher administrative and project costs, diversions of funds to non-road uses, and redistribution “surcharges” imposed on donor states are very large. If those dollars be raised directly and bypass the federal tithe, it could produce far more infrastructure for almost every states’ citizens.

Gary M. Galles is a professor of economics at Pepperdine University.