Earmarks: Myth and reality

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NEW YORK (CNNMoney.com) -- It's impossible to listen to debates about the federal budget without getting an earful about earmarks.

Earmarks are often -- but not always correctly -- branded as wasteful spending or pork. They are easy to assail, especially when the federal government's use of taxpayer dollars is on track to reach a new stratosphere this year because of the financial crisis.

Indeed, politicians on both sides of the aisle rail against earmarks.

The latest tirade has come from Republicans, who have sought unsuccessfully to amend the $410 billion fiscal year 2009 omnibus spending bill passed by the Senate on Tuesday night. That bill is estimated to have $7.7 billion worth of earmarks requested by lawmakers -- or about 2% of the total bill.

But when it comes to earmarks, the parties each take as good as they give.

In any given year, earmarks requested by members of the majority party typically account for 60% of earmarks, with the remaining 40% coming from members of the minority party.

"It isn't a partisan issue," said Steve Ellis, vice president of Taxpayers for Common Sense, a nonpartisan spending watchdog group.

The term earmark originated in ancient England when farmers tagged -- or marked the ears -- of their livestock mixed among the village herd.

Today, the meaning is a little less tangible.

Typically, when Congress appropriates federal funding to government agencies, it's up to the agencies to decide how that money gets doled out to projects in states, cities and counties, and those decisions are made through an application-and-review process.

Except when earmarks are involved.

Definitions of what constitutes an earmark vary widely, and government agencies have different ways of cataloguing them. Most typically, an earmark is defined as a slice of the money allocated to an agency that a lawmaker or the president has requested be set aside for a specific project.

So earmarks aren't additional spending -- they're a portion of the total amount lawmakers have agreed to spend for a given year.

"If earmarks go, the amount of money stays the same. It's more about who decides how the money will be spent," said Charles Konigsberg, a former assistant budget director in the Clinton administration and now chief budget counsel at deficit watchdog group the Concord Coalition.

Earmarks aren't always included in the text of a spending bill. Sometimes, they may only be included in the conference report that represents an agreement between the House and Senate about what will be in the final spending bill.

In that case, "technically they're not legally binding, but they're politically binding," Konigsberg said. That is, it's not in an agency's interest to anger the subcommittee that provides its funding.

To make matters more opaque, the language used to describe the request can be "imprecise" and requires "a subjective decision" on the part of an agency to figure out congressional intent, according to a 2006 Congressional Research Service report.

Earmarks aren't a new phenomenon. The Government Accountability Office has found examples dating back to the early years of the republic, including one from 1791 for $50,756.53 to be spent on "several objects" requested by Treasury Secretary Alexander Hamilton. The money was targeted for "converting the Beacon of Georgia into a lighthouse and for the purchase of hydrometers," among other things.

While there have always been earmarks, their number grew exponentially between 1995 and 2006. That's partly because lawmakers began to use earmarks as a way to help incumbents who risked losing re-election, Ellis said. And part of it was a feedback loop: as earmarks grew, so did the ranks of lobbyists to secure them.

"More earmarks begat more lobbyists begat more earmarks," Ellis said.

Today, earmarks can number several thousand a year. But in the end, their total dollar amount typically represents less than 1% of the federal budget.

"People think big chunks of the federal budget are being shoved into earmarks, and it's just not the case," Konigsberg said.

Still, less than 1% of a $3 trillion-plus budget is not a negligible amount of money. But is it wasteful spending?

That's in the eye of the beholder. Earmark beneficiaries -- which can be the citizens of a state or a city in need of a better transit system, for instance -- may not see it as wasteful at all.

"Some are worthwhile projects, but they're the product of a bad system," Ellis said.

It's a system based on "political muscle rather than merit," he said. Translation: Senior members of the House and Senate Appropriations Committees typically get the most earmarks.

Is there a better way?

Ellis believes Congress should set up an objective, merit-based earmark system that establishes a list of priorities. Transportation projects, for example, could be required to meet criteria that reflect national priorities such as improving traffic density, commuter safety or energy efficiency.

"Right now, no one can tell me why one project gets money and another doesn't," Ellis said.

On Wednesday, President Obama said he will press Congress to enact earmark reform this year.

"Done right, earmarks give legislators the opportunity to direct federal money to worthy projects that benefit people in their district," he said.

But he also acknowledged that some are far from pure in their intent. "On occasion, earmarks have been used as a vehicle for waste, fraud and abuse. Projects have been inserted at the eleventh hour, without review, and sometimes without merit."

He called for future earmark requests to be subject to several criteria. Specifically, they must:

• have a legitimate and worthy public purpose;
• be revealed in advance on lawmakers' Web sites;
• be open to scrutiny at public hearings;
• be subject to the same competitive bidding requirements as other federal contracts if the earmark is for a for-profit company; and
• never be traded for political favors.

Some experts say the biggest problem with earmarks is that their status as budget-bad-boy is overblown, detracting from the real trouble with federal spending.

As astonishing as the government's debt levels may be in the short-run because of the financial crisis -- well over a $1 trillion deficit this year alone -- the long-run picture is much uglier because of the pressures entitlement programs will place on the federal budget.

Left unchanged, federal spending on Medicare and Medicaid alone, which now accounts for roughly 5% of GDP, is projected to grow to more than 6% in 2019 and to 12% by 2050, according to the Congressional Budget Office. And that doesn't include the growing cost of Social Security and other government spending.

"The impact of earmarks has been overemphasized; they're a red herring," Konigsberg said. "So much attention is paid to them and so little attention is paid to our long-term fiscal condition."