Earmarks, Definition and Importance in Economics

An earmark is the act of setting funds aside for a particular project — or for projects yet to come. Funds may be earmarked to pay down debt, for instance, or to cover civil servants’ salaries in the case of a country. Most commonly, the term describes money reserved to cater for one specific undertaking: “The Minister of Finance had earmarked 10 billion dollars for a new economy initiative.”

The Senate and the House call it a provision meant for a particular program. The White House’s Office of Management and Budget claims earmarks help the executive arm of government perform its responsibilities more effectively. Whichever definition you prefer, one thing cannot be denied: the earmark has been thoroughly abused of late.

So where does earmarked money actually go? Into almost anything, from military bases to agricultural research.

1. Military funding

   National security is the reason legislators see military funding as a safe choice. The money covers training facilities, barracks and other projects around the country deemed important to national defense. These projects are nonetheless controversial, because legislators tend to steer them toward their own constituents rather than toward genuine national-security need — and this form of earmark has been used to fund projects that would never otherwise appear on the President’s desk.

2. Highway transportation

   Earmarking has long been used to fund highway projects. Since nearly every congressional district has a highway on its wish list, nearly every district applies. Popular as they are, these “highway demonstration projects” are easily questioned: they bypass the normal funding channels, and states can top them up with additional funds that may — or may not — serve any actual transportation purpose.

3. National park services

   The United States’ national parks span up to 80 million acres of land across 49 of the states. Funding them, the argument goes, revitalizes both society and the economy: park construction provides jobs for contractors and gives recreational opportunities to local residents, developing the local economy in the process. The larger prize is tourism — vital to any nation — which is what makes this kind of earmark funding genuinely important.

4. Federal building construction

   Construction of federal buildings works much like military construction — and attracts plenty of critics, who argue it does little for economic development. Federal buildings cost more than ordinary ones because of everything that must be added to them; and unlike roads or military works, a government building takes years to complete, with money allocated to the project for every one of those years.

5. Agricultural research

   Funds for agricultural research are allocated by Congress to regional institutions — and this kind of earmark is known to flow to the elite corners of the United States. Because such funding has no real limits, legislators are fond of diverting it to the universities in their own districts. The research it pays for covers pest control, agricultural marketing, and assorted rural issues; much of it, whether conducted by universities, laboratories or private institutes, amounts to wasteful national spending. Precisely because of these loopholes, this research is of continuing interest to legislators.

6. Rural and urban development

   The purpose of this funding is to provide a good living environment and housing an ordinary citizen can afford. Like any earmark, it is handed out on the basis of demographics — population figures and the like — and is used for repairing rail stations, securing water sources, building housing, and delivering social services.

Want to see how the tool gets misused in practice? Start with why taxpayers worry about earmarks, or go straight to the watchlist of questionable programs.