- The Washington Times - Thursday, February 25, 2010

Question: What is President Obama’s proposal to freeze a portion of the federal budget for three years?

Answer: A good start.

Policymakers serious about erasing the $13 trillion federal deficit projected for the next 10 years will have to go much further than a partial, short-term spending freeze, however.

Step two would be to implement several excellent proposals, one of which was made by both Candidate Obama and President Obama to reform the earmark process. In fiscal year 2009, earmark spending totaled nearly $20 billion. That’s 33 percent more than the first-year savings that would accrue under the president’s proposed freeze.

Earmarks have become a popular way for members of Congress to reward influential constituents and lobbyists. Sometimes they are vehicles for corrupt — even criminal — behavior. That was certainly the case with former Rep. Randy “Duke” Cunningham, California Republican, who is now serving time in federal prison. Under the best of circumstances, earmarks divert federal dollars to projects of trivial value to the nation.

Members of Congress use earmarks to force the president and state and local leaders to fund pet projects. Such force is necessary because sensible people would otherwise reject these projects as unworthy. Indeed, the chief purpose of earmarking is to circumvent the usual process of competitive selection and rigorous cost/benefit analysis.

How utterly useless are many earmarked programs? Past reports from the government indicate that less than half the projects authorized by earmarks are actually undertaken, simply because the communities that would supposedly benefit from them refuse to waste their own money required to “match” the federal funds.

The president has proposed many earmark-reform proposals. Among them are these key commitments:

1. The annual cost of earmarks should be no greater than $7.8 billion — the level prevailing in 1994, when the Republicans took control of Congress.

2. Any earmark for a for-profit company should be subject to the same competitive bidding requirements as other federal contracts.

The first commitment — if implemented — could have reduced FY 2010 earmark costs (and federal spending) by as much as $12.2 billion from FY 2009 levels.

The second commitment would also yield significant savings. Competitive bidding almost always leads to lower costs than work performed under a sole-source, sweetheart contract. It’s difficult to project just how much savings could be realized by bidding out earmarked projects, but extensive studies conducted by the Defense Department found that competitive contracting typically produced savings of between 25 percent and 35 percent.

A detailed analysis of the FY 2010 Defense Department appropriations bill revealed that nearly half of all its earmarks (532 of the 1,083 earmarks requested by the House, and 382 of the 781 requested by the Senate) channeled money to private companies located in the district or state of the member requesting the earmark.

Each of these 914 earmarks fund some sort of defense-related research, service, and/or product. However, by using earmarks as the funding mechanism, Congress circumvents the federally required competitive-bidding process.

Essentially, lawmakers are mandating that Department of Defense award sole-source contracts to favored businesses. The practice gives these businesses a monopolistic control over vital research and products.

Yes, it is wholly appropriate for Congress to direct the Defense Department to focus resources on specific types of research, services and products that could enhance national security. But, as Mr. Obama has pointed out repeatedly, requiring competitive bidding will ensure that the nation receives the best products at the best prices.

With the defense bill’s earmarks totaling $5.3 billion, a 25 percent saving through competitive bidding could save as much as $1.3 billion per year — funds that could be used to ameliorate the shortfall in defense funding. And while the defense legislation is used as an example here, earmarks are pervasive across all appropriations bills.

The president’s competitive-bidding mandate should also be extended to the many not-for profit entities receiving earmarks. There is simply no reason why universities or other not-for-profits should be exempt from competition and allowed to exercise monopoly control over vital research.

With the deficit looming ever larger, the president must engage in a determined effort to restrain the out-of-control spending. His freeze proposal is a useful start, but the proposal to reform the wasteful and sometimes corrupt congressional process of earmarking is one of the many necessary additional actions needed to get spending under control.

Ronald D. Utt is the Herbert and Joyce Morgan Senior Research Fellow in the Heritage Foundation’s Roe Institute for Economic Policy Studies.

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