"Pork barrel projects" have generally been viewed as a positive by local recipients.  Politicians have made careers out of bringing home enough bacon to be reelected. 

The traditional thinking is that incremental projects financed through external federal dollars are a boon to local economies.  Receiving more than one's relative share of allocated dollars through political gerrymandering is interpreted as good fortune.

A Dose of Economic Reality

A recent study debunks this idea with compelling logic.

Link to study by professors Lauren Cohen, Joshua Coval and Christopher Malloy.

The concept is a simple and intuitive.  Every state, county or city has a fixed and limited set of local resources consisting of individuals, companies and capital.  Left to their own devices these resources are productively deployed and efficiently ordered.  Businesses that are not profitable cease to exist, and human capital is redistributed to more desirable destinations.  Employees gravitate towards jobs that are profitable, and in doing so receive training and skills associated with activities that are socially desirable. 

Federal projects steamroll this dynamic.  Normal economic development and both the distribution and disposition of human capital are distorted.  Private sector activities are "crowded out" by public spending.

Pork projects draw companies, employees and capital away from productive, self-sufficient activities.  Businesses that could stand on their own are not formed or become dependent upon federal funding to survive.  Employees do not learn skills that may be applied towards meeting the needs of the free market, but instead develop capabilities which rely on Federal subsidies.

Even worse, federal projects make it harder for the private sector to operate successfully.  Pork absorbs employees from the limited pool of private sector labor creating relative shortages of human capital.  Additionally, federal projects traditionally pay wages above those determined by private sector market forces, making it difficult or unprofitable to operate. 

New business formation is stunted, existing companies have a more difficult time succeeding, some go out of business and others move to more favorable destinations.

The reality is that many pork barrel projects are not beneficial except in a short-term and superficial way. 

Case Studies

The Wall Street Journal recently featured two articles focused on this crowding out effect.

Zero-Sum Earmarks detailed the cited Harvard study and highlighted some of its conclusions.

"Increased federal spending causes local companies to lose sales and cut back on research, payroll and other expenses"

The research, which covered 1967 to 2008, found that "strong and widespread evidence of corporate retrenchment" accompanied Congressional seniority.  According to Mr. Coval, the research shows federal dollars "directly supplant private sector activity"

"The Harvard study suggests the Congressmen are really bringing home less economic prosperity."

Robert Byrd's Highways to Nowhere demonstrates the disastrously distortive effect of persistent pork barrel projects on the state of West Virginia. 

"Despite the $4 billion in pork that Byrd served his constituents over the past 19 years alone—not to mention the untold billions before observers started keeping tabs—West Virginia remains the third poorest state in the country. Government spending does not prosperity make."

Byrd's solution was to steer federal largess to his state. "What I'm doing is spreading good seed that will bear fruit a hundredfold," he told a crowd of West Virginians in 1994. "Prosperity flows along concrete rivers."

"Pork actually pushes private investment out of a state. When the federal government intrudes, it raises demand for the state's workers and real estate, jacking up prices. Often, companies can't compete, so they flee."

Adding Insult to Injury

In general, federally funded, pork barrel projects are not a blessing, they are a cruel curse the effects of which linger for years or generations. 

The implications of this study are profound when applied to ongoing stimulus spending.  Much of the Stimulus Bill was diverted to preserve local government employment and pay extended unemployment benefits.  But large sums of money were deployed nationally to "shovel ready" projects.

Not only has this money been wasted on marginally useful projects at a cost of trillions of dollars in debt, and failed to produce purported employment benefits, but it is also distorting the private sector in ways which may hobble local economies for years to come.