On March 3, days after Present Barack Obama grandly unveiled a $3.6 trillion 2010 budget overview, Office of Management and Budget (OMB) director Peter Orszag testified to the House Budget Committee that this budget is “fiscally responsible,” and doesn't constitute “big spending.” The Congressional Budget Office (CBO) disagrees. On March 20, it predicted that the Obama budget would generate some $9.3 trillion in new red ink by 2019---and unsustainable, significantly greater annual deficits than the Obama plan projected. The U.S. House Budget Committee had not yet responded.
Moreover, the 2010 budget process has only begun. The budget could still end up harboring billions in earmarks---those pet projects Congressmen slip to buddies who miraculously avoid competitive bidding or oversight. The White House and OMB “blueprint” introduced February 26 isn't a true, line-by-line 2010 budget, explains Taxpayers for Common Sense (TCS) vice president Steve Ellis. Incumbent presidents unveil budgets in February. Until April, Obama benefits from the traditional “pass” Congress gives new administrations. Only then will his full budget appear. In May, Congress will start writing the bills that will fund the budget, Ellis says. This spring and summer, thousands of new earmarks will very likely bloom.
Indeed, the outline makes it seem that the 2010 budget will provide fertile ground for earmarks as Congressmen and Senators grapple over which cities and states will land the funds. The $4.5 billion Community Development Block Grant, for example, is supposed to rely on a new program formula “to better target economically distressed communities.” It doesn't specify who will write the formula or decide who gets the money. The Budget likewise proposes new Department of Housing and Urban Development funding to preserve “1.3 million affordable rental units” in multifamily properties.
And such housing grants have been massively abused in the past (along with many other department budgets), TCS' Ellis notes. Obama should know. As both a State and U.S. Senator, he blessed state and federal legislative aid for several developers who then received more than $700 million in grants, loans and tax credits for their projects. His Chicago law partner Allison Davis, Syrian developer Antoin “Tony” Rezko (now incarcerated on 16 political corruption charges) and Chicago slumlord Cecil Butler, for example, all profited greatly from federal funds to provide thousands of Chicago low-income apartment units---all of which were condemned or foreclosed within 10 years. Obama's 2010 budget overview offers nor regulatory or oversight measures to prevent such situations.
Obama campaigned heavily against Washington's heavy use of earmarks. Yet the $410 billion Omnibus law he signed on March 11 offers substantial evidence that billions of dollars in budgetary abuse could follow in 2010. The new law reportedly contained “only” 7,991 earmarks, to cost at least $5.5 billion. In fact, it includes more than 9,282 earmarks, TCS reports. The Senate had March 3 defeated Senator John McCain's proposal to strip over 8,500 original earmarks and $32 billion from the bill. Consequently, the law added 8% to fiscal 2009 spending, increases that bought less transparency than before. Congress publicly disclosed $500 million fewer juicy earmarks than last year, according to TCS. The visible earmarks are not comforting. Senate Majority Leader Harry Reid, for example, carved out $100 million in earmarks for Nevada, including $951,000 for Las Vegas “sustainability” (whatever that means) and $1.7 million for Las Vegas and Reno “dropout prevention.” By comparison, only three other cities got “dropout prevention” grants---Riverside, Ca. ($476,000); Scottsdale, Az. ($143,000); and Jackson, Ms. ($95,000). It's strange---unless Nevada's cities unaccountably cornered the U.S. market for high school dropouts.
TCS provides extensive lists of earmarks appropriated through U.S. departments overseeing agriculture, commerce, justice, science, defense, energy, water, financial services, homeland security, interior, U.S. legislature, military construction, Veteran's affairs, foreign affairs, and transportation. Hundreds of millions of earmarks for the Labor, Health and Human Services and Education departments alone take 211 pages to list. Thus we find that Nevada's $100 million in earmarks included $6 million from the Department of Education, for example, $143,000 for Reno to develop a comprehensive online encyclopedia---although many comprehensive online encyclopedias already exist---and $143,000 for a natural history museum in Las Vegas, whose horizon is neon.
Obama grandly promises to keep the 2010 budget transparent, “pay-as-you-go,” and return the U.S. “to honest budgeting.” But every federal budget is ripe for earmarks, says TCS V.P. Ellis. “People think budgets are about numbers, but they are about priorities. Where you put money shows where the priorities are. All program funding provides an opportunity for abuse.” This proposal, moreover, also has problematical “robust growth in spending” 10 years out, and increasingly enormous deficits, Ellis says.
It also suggests a reliance on nonprofit organizations. The $1.3 billion in loans and grants “to increase broadband capacity and improve telecommunication,” education and health services in rural areas---a laudable goal---could end up a nonprofit boondoggle. So could a “Social Innovation Fund” proposed to back “innovative non-profits” addressing serious national problems. Unfortunately, the 2010 budget outline offers no oversight on who decides “what works” or how Obama will control nonprofit spending.
Obama's February overview proposes new oversight mechanisms for financial institutions and markets, for-profit corporations and government agencies. Yet nonprofits clearly also need strict oversight---which this proposal does not provide. The Washington Post this week exposed a $250 million in earmarks to Electro-Optics Center---a supposedly innovative defense research non-profit, founded 10 years ago by Democratic Rep. John Murtha at the Pennsylvania State University to create new industry and jobs in Western Pennsylvania. Instead, Electro-Optics spent much of that funding at companies supporting Murtha. Likewise, the Omnibus law allocates $190,000 to a new New Orleans community center to be constructed by a nonprofit. Founded by Sen. Mary Landrieu's brother, that nonprofit organization no longer exists.
Unfortunately, Obama's $3.6 trillion plan also includes no strategy to limit the very haphazard way Congress “throws money at infrastructure, agriculture, energy, health care” and so on. In fact, the plan may well encourage more haphazard spending, which goes hand in hand with earmarks. So, don't expect earmarks to disappear soon.