By Covering Business March 14, 2012
In the debate over earmarks in the federal budget, critics argue that empowered politicians set aside money for projects in their home states to improve economic conditions and curry favor among voters. Recent research suggests that tactic may be backfiring, at least in terms of improving conditions.
When a politician is appointed a congressional chairs, their home state or district usually receives a significant boon, but that influx of capital depresses local productivity and can lead to mass layoffs, according to a study published in the December issue of the Journal of Political Economy. In other words, politicians who attempt to improve their communities by funneling federal dollars into them are, on average, harming the private businesses of their constituents.
Among the study’s findings:
• Since 1969, in the year following a new congressional committee chair, that congressman’s home state has received an average of a 40% to 50% increase in federal earmark spending and a 24% jump in government contracts.
• In the year following the congressman’s appointment, private companies in his or her home state scale back capital expenditures by an average of 15%.
• For the median state, the average decline in capital expenditures in the year after an in-state congressman ascends to a chair is about $48 million. The average decline in research and development spending is $44 million.
Read the abstract here.
Columbia students, log in through the library and read the full text here.
