Stop Sending Foreign Aid to the U.S.

If the Obama Administration is looking for places to make sequestration cuts, it can start with the Economic Development Administration (EDA).

In late August 1965, less than a month after terrible riots in the Watts section of Los Angeles, Congress passed and President Lyndon Baines Johnson signed a bill establishing the EDA within the U.S. Department of Commerce. Remarkably, nearly half a century and billions of dollars later, the EDA is still with us. Still handing out U.S.taxpayer money in the form of grants to a wide variety of politically connected domestic special interest groups. For fiscal year 2012 alone, the EDA received a budget of $420 million.

In 1973, Professors Jeffrey Pressman and Aaron Wildavsky made an interesting and apt comparison between the EDA and the U.S. Agency for International Development, branding the EDA as a form of domestic “foreign aid” and noting that both agencies had (and still have) the regrettable habit of throwing money at problems because they were always operating in crisis mode.

Fast forwarding to 2009, Tad DeHaven of the Cato Institute, in an article about the EDA, rejected the core concept that the federal government should subsidize underperforming regions as “misguided” and concluded that the EDA has remained a failure because of regulatory capture:

[R]egions that depend on government subsidies lose their productive edge.… [T]he optimistic 1960’s idea that the federal government can design and implement programs to aid local communities in an efficient manner has been shattered by four decades of experience. Policymakers inWashingtonhave proven to be very poor at central planning, and the EDA’s record since the 1960s is no exception to the rule. Like other programs for state and local aid, the EDA’s efforts are mired in bureaucracy and are often hijacked by politics and pork-barrel spending.

The EDA is an agency whose time never really came but is now absolutely gone.