EDA Reauthorization

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The Senate is set to take up legislation reauthorizing the Department of Commerce’s Economic Development Administration. A relic of the Great Society, the EDA was created to help economically depressed areas of the country. Today it’s just another example of an unnecessary, unconstitutional program that lingers around because politicians like to demonstrate to the public that they’re “doing something.”

Politicians also like to present oversized U.S. Treasury checks to constituents.

The EDA’s forerunner was the Area Redevelopment Administration created by Congress in 1961. Sen. John McClellan (D-AK) presciently warned at the time: “if we ever begin permitting the government to enter into one area, one community, and foot the entire cost of a project, then we shall have every community in the country appealing to the federal government for the same treatment.”

Sure enough, when the EDA replaced the ARA in 1965, its scope expanded. Eligibility expanded as members of Congress fought to secure a piece of the pie for their constituents. Originally intended for depressed areas, over 80 percent of the nation eventually became eligible for EDA assistance. According to the Congressional Research Service (no link available), “An estimated 90% of counties in the United States qualify for EDA’s economic distress designation based on the per capita income criterion alone.”

The federal government now operates a small army of economic development programs. From a new Government Accountability Office report:

Our work involving 80 economic development programs at four agencies—Commerce, HUD, SBA, and USDA—indicates that the design of each of these programs appears to overlap with that of at least one other program in terms of the economic development activities that they are authorized to fund. For example, as shown in table 1, the four agencies administer a total of 54 programs that can fund “entrepreneurial efforts,” which include helping businesses to develop business plans and identify funding sources.

Comically, the Senate report to S.782 (the EDA reauthorization bill) notes that the legislation requires the GAO to report on duplication in economic development programs:

Section 21 requires the Government Accountability Office to report to the Environment and Public Works Committee of the Senate within 90 days after enactment with a list of programs or portions of programs from other federal agencies, including the Department of Housing and Urban Development, Department of Agriculture, and the Small Business Administration, that are duplicative of programs administered by EDA.

I guess the Senate EPW Committee isn’t aware of the 2006 GAO report that identified 86 federal programs in 10 federal agencies and various commissions that provide economic development funding.

Of course, the response from the EDA is that its programs are unique, special, etc. Government administrators are sort of like parents who swear to family and friends that their special Little Johnny is one day going to be president despite the fact he’s been repeatedly suspended from school for setting things on fire. Indeed, the new GAO report cites the EDA for continuing to do a poor job of collecting information on grant recipients:

Commerce’s Economic Development Administration (EDA), which administers eight of the programs we reviewed, continues to rely on a potentially incomplete set of variables and self-reported data to assess the effectiveness of its grants. This incomplete set of variables may lead to inaccurate claims about program results, such as the number of jobs created.

The EDA’s effectiveness is somewhat beside the point. The federal government has no businesses trying to direct economic activity through politicized subsidy vehicles like the EDA. As the current failure of massive deficit spending to get the economy humming shows, economic development is not a task suited for “do something” politicians and well-intentioned, but knowledge deficient, central planners.

With a budget of $500 million a year, which is the level of funding that the bill would authorize, the EDA would remain a tiny blip on the radar screen in a $14 trillion economy. (Thank goodness.) And getting rid of it obviously wouldn’t put much of a dent in the massive deficits the government continues to run up. But if we are ever to get our budgetary house in order by limiting the size and scope of government, central planning bureaucracies like the EDA have to (finally) go.

See this Cato essay on the Economic Development Administration for a more detailed argument for its abolition. Also see these blog posts (here and here) on the EDA.