The Debate Over Earmarks

Blog Post
Wednesday, January 17, 2018

Lawmakers on Capitol Hill are debating whether to revive the practice of earmarks after President Trump expressed support for reversing a ban that has been in place since 2011. The ban was originally touted as a way to crack down on wasteful spending and reduce budget deficits. But earmarks’ impact on the country’s long-term fiscal health has always been quite limited.

“Earmarking” refers to lawmakers designating a portion of appropriated funding for specific projects. Appropriations that are not earmarked are instead allocated by the executive agencies that have been appropriated the money.

Supporters of the earmark ban argue that allowing neutral agencies to designate projects for funding makes it more likely that those decisions are grounded in good policy. Allowing politically motivated legislators to do so, ban supporters argue, opens the door to large amounts of wasteful spending.

The full story is more complicated. The prohibition of earmarks may alter how federal funding is allocated, but it doesn’t change the total amount spent.

For example, if lawmakers were planning to appropriate $10 billion to a specific department and they chose to earmark $2 billion for specific projects in their districts, that would leave the agency $8 billion to allocate at its discretion. It would not automatically result in $12 billion being spent instead of $10 billion.

Total spending levels are instead determined through two processes: annual appropriations bills, which comprise what is known as discretionary spending, and automatic spending based on formulas previously agreed to by policymakers in the past, which is considered mandatory spending.

Discretionary spending, which would include all earmarks should the ban be lifted, accounts for less than a third of federal spending and is actually growing slower than the economy. The nation’s long-term fiscal challenges are driven by more rapidly growing mandatory programs such as Social Security and Medicare, and by revenue levels that are insufficient to pay for them.

In the context of the federal budget, earmarks have been relatively small. They historically accounted for less than $20 billion a year -- that would be about 1.7 percent of discretionary spending and 0.5 percent of total federal spending in the previous fiscal year. Opponents of the earmark ban argue that this is a relatively small cost for reinstating a practice that was credited with making it easier for congressional leadership to corral votes for major legislation.

There are nonetheless other intangible benefits to banning earmarks. Many believe the ban reduces opportunities for perceived or actual corruption. The return of earmarks might also exacerbate a persistent myth that eliminating “wasteful spending” would address the federal government’s structural budget deficit.

Such tradeoffs should be thoroughly debated as policymakers consider whether or not to lift the ban on earmarks. But whether earmarks are reinstated or not, policymakers will eventually have to grapple with hard choices on taxes and spending if they want to contain growing budget deficits.