No, not the tasty stuff that comes with the “other white meat” tag. We are talking about political earmarks:
Drawing on a database of more than 16,000 businesses, the study found that in the year after this big gain in earmarks, firms in a state cut back on capital expenditures by 15 percent, or $39 million, and research and development by 7 percent to 12 percent, or $34 million on average. Sales declined by 15 percent, and employment slumped by anywhere from 3 percent to 15 percent. The impact was most intense on firms that have much of their operations in a state and can’t easily shift production elsewhere. The effect was also greater when the economy is good and unemployment is low, for a reason that should be obvious by now: the surge in government funds, an economic shock, most likely set off an intense competition for workers and other resources, like real estate, among firms.
To illustrate how this works, consider the case of Alabama Senator Richard Shelby, who assumed the chairmanship of the Senate Select Intelligence Committee in 1997, the first major committee chair for the state in more than two decades. The appointment proved a federal pork boon for the state. Whereas before Shelby’s chairmanship, Alabama typically received some $6 million a year less than the national average in earmarks, afterward it typically received $90 million a year more.
Good news, right? Not for a local homebuilder, it seems. Among the big increases was some $15 million in earmarks for construction of subsidized housing. Not surprisingly, at least one large Alabama manufacturer of low-cost fabricated homes contained in the study’s database sharply cut its employment (by 30 percent) and its capital expenditures (down 80 percent) once the earmarks started, numbers that were far higher than what other construction firms experienced nationwide. A coincidence in this case? Perhaps. But the pattern repeats itself across decades and over thousands of firms, the study found, with one important exception. Firms that contract with government on average do not cut back when the earmarks start flowing.
Kudos to those who took the time to dig into this data and see what the pattern was. I’m sure that wading through all of that stuff wasn’t much fun.
Go and read the entire article and consider that this runs entirely afoul of the common belief that the more powerful a position one’s senator/representative holds in committee, the better off one’s state is as a result.