Tag Archives: earmarks

Earmarks: An Efficient and Economical Form of Corruption

By Jerry McDaniel

Congress is scheduled to return to Washington on Monday for its 2010 “lame duck” session. It is shaping up to be one of the most watched sessions in recent memory as everyone will be waiting to see whether Congress “got the message” sent by the voters on November 2. Next to the health care bill and tax increases, the practice of earmarks is likely to be one of the more contentious items on the agenda.

Earmarks have for decades been the safest, most economical and efficient form of the political art of corruption practiced in Washington. Democrats and Republicans alike will attempt to defend earmarks based on the relative low costs when compared with the overall budget. That is a good argument if we ignore the purpose of earmarks and do not measure it against the “gold standard” for Congressional actions, the Constitution.

Earmarks are the most efficient way for incumbents to “buy” the votes of their constituents without running afoul of election laws. One of the anomalies of American politics is the contradiction between the low approval level of Congress and the percentage of incumbents returned to Congress in election after election. Voters have been conditioned to judge their elected officials on their ability to “bring home the bacon”. When talking to voters, one of the most frequently given reasons why they like their own Congressman or Senator while disliking Congress as a whole is the perception they have of what their representatives have done for the state or community. That perception is primarily based on earmarks slipped into appropriation bills.

Next to the practice of allowing lobbyists to craft specifications for items purchased by the federal government that favor their own production capabilities at the expense of their competitors, earmarks are one of best methods for acquiring large campaign contributions. Contractors that supply the goods and services paid for by earmarks are always the primary beneficiaries of government largess. Earmarks for projects that utilize union labor give the politicians the most “bang for the buck”. In return, unions provide millions of man-hours to their political benefactors at election time for “get out the vote” drives, in addition to the millions in direct and indirect campaign contributions.

Last but not least, earmarks provide an efficient method for wealth redistribution among states and communities as elected officials compete for their slice of the pie. Doing away with earmarks would upset a system painstakingly built up over the years by the political parties for protecting the jobs of their incumbents. That may mean that politicians, in order to continue to enjoy salaries and perks unmatched anywhere in the world, would have to resort to actually keeping their oath of office and being faithful to their constituents and the Constitution.

Bailout or Socialist Takeover?

The Senate tonight passed the bailout bill rejected by the house on Monday.  In order to win over Republican support a number of “goodies” were added to make it more acceptable to them.  To bypass the Constitutional requirement that all revenue bills originate in the House of Representatives it was passed as an amendment to H.R.1424, a House bill to require parity in coverage by insurers of mental health and substance abuse cases.

The Amendment, titled, “Emergency Economic Stabilization Act of 2008” added over 200 pages to the Bill rejected by the House, including earmarks for Film and Television, wooden arrows for children and litigants in the Exxon Valdez oil spill of a few years ago.  In addition, there were also a number of enhancements for previous earmarks for such items as Puerto Rican Rum, wool research and Auto Racing Tracks, among others.  The House is expected to vote on it on Friday.

The four-hundred-page amendment establishes a Financial Stability Oversight Board made up of the Fed Chairman, Treasury Secretary, SEC Chairman, Federal Housing Finance Agency Director and the Director of HUD.  Primary authority for implementing the new law will rest with the Treasury Secretary, who will have almost dictatorial powers subject to oversight by the board and Congressional committees.  These committees, by the way, are the same ones that were overseeing Fannie Mae and Freddie Mac prior to their collapse.

The purposes of the Amendment are described as protecting home values, college funds, retirement accounts, and life savings, while preserving homeownership and promoting jobs and economic growth. In other words, it effectively nationalizes America’s financial institutions including, “banks, savings associations, credit unions, security brokers or dealers, or insurance companies.”

The “package” is filled with legal loopholes that are likely to promote all kinds of mischief.   For example, Section 101(e) prohibits the “sale of troubled assets to the Secretary at a higher price than the seller paid for the asset.”  However, “This subsection does not apply to troubled assets acquired in a merger or acquisition…”  If I read this right, the buyout of a failing institution by another permits the buyer to unload troubled assets purchased in the buyout on the taxpayers at a profit.  For example, an entity like Citibank can buy out a failing company like Wachovia and then sell off any bad mortgages acquired in the transaction to the Treasury at a profit.

Under Section 103(3), the Secretary may guarantee timely payment of principal and interest on troubled mortgages.  Under this protection a lender may accept otherwise risky mortgages with the assurance that, in the event of default by homebuyer, lender may still recover price of mortgage plus interest.  There is no cost to lender because the insurance premium will be passed on the homebuyer.  This provision, it seems, does nothing to discourage lenders from selling substandard mortgages.

There are other troubling provisions in this bill including “goodies” to environmentalists, tax increases on oil companies, health care provisions and a host of other items that have nothing to do with the “crisis” at hand.  The important thing is that we could all go to bed Friday night in a free market, capitalist economy and wake up Monday morning in a socialist economy.

We have only one day to get the message to our Congressperson that this bill is unacceptable to a free people who love liberty.  I did not emphasize violations of the Constitution because Congress has abandoned any deference to it long ago.

The number of the Congressional switchboard is 202-224-3121.  E-mail can be sent through your Congressperson’s website.