If a major study by the nation’s most prestigious educational institution is correct, politicians who steer their states above-average amounts of federal money make them lose private-sector jobs and investment instead of gaining those benefits.

The finding clearly calls into question the value of large “earmarks” directed by congressional leaders to specific projects in their home states. Such earmarks amount to tens of billions of dollars nationwide every year.

Earmarks differ from the majority of federal spending, which is allocated by recipient agencies toward priorities selected under general guidelines.

Researchers from Harvard University School of Business released a study in March titled, “Do Powerful Politicians Cause Corporate Downsizing?” The answer, the study says, is a very definite “yes.”

The Harvard researchers studied what happened when members of a state’s delegation became the chairs of powerful committees and used their positions to direct substantial earmarks to their home states. Job growth and investment rates by private industries in those states were significantly reduced, the study said.

The finding was “an enormous surprise,” said Joshua Coval, one of the study’s three principal authors.

The study found that, on average, after a congressman became chairman of a powerful committee, “firms residing in that state cut their capital expenditures by 8-15 percent, reduced R&D by 7-12 percent and increased payout by 4-13 percent. Employment and sales growth are also impacted, as corporations scaled back employment growth by 3-15 percent, and sales growth fell by up to 15 percent.”

The authors believe that companies cut back because the increased federal funding competes for workers and resources, driving costs up to uncompetitive levels. Some nationwide businesses may redirect spending to other states, but that doesn’t apply to firms with only in-state operations.

Thus, earmark spending appears at best to be a wash for states, and may be doing more harm than good.

This may not cause Congress to change its spending habits, but it might help to persuade voters that elected officials who boast of their ability to bring home the bacon have less to brag about than they want their constituents to believe.


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