The CARES Act, signed into law on March 27, 2020, was the largest economic stimulus in history.  While a national emergency of this magnitude needs a substantial response, the CARES Act is, unfortunately, stuffed with wasteful and unnecessary spending.  One of the most egregious examples of funding unrelated to the coronavirus is the $1.5 billion allocated to the Economic Development Administration (EDA).  

The EDA was created in 1965 as part of the “Great Society” expansion of top-down, big-government programs that could supposedly solve the nation’s economic problems.  The EDA allocation in the CARES Act is nearly five times the agency’s 2020 budget of $333 million.  While such a substantial increase may have been justified if the agency could be effective in response to the coronavirus, the money will not help with the immediate effects of the pandemic.  An April 2 Congressional Research Service analysis stated, “Short-term responses to address budget shortfalls or proposals to address rural residential infrastructure needs are not likely to be competitive.”  

The report also noted that demand for the funds will be substantial, and the needs will be far different than prior emergencies.  A June 4, 2018 Department of Commerce Office of Inspector General report that reviewed how the EDA was implementing the use of $600 in disaster relief funds for floods and other natural disasters in 2017 found that the opportunity for fraud is higher than usual under these circumstances.  Moving the money out quickly reduces the efficiency of internal financial controls and creates increased risks.  The IG noted its findings of fraud and misconduct of EDA grants, including “the diversion of grant funds to purchase a property to use as a personal residence for the grant recipient and to make luxurious renovations to the property and false billing leading to over $1 million in fraudulent personal gain by a president of a contracting company.”  The $600 million was in response to a “normal” series of disasters.  The $1.5 billion is 2.5 times greater for an unprecedented disaster, thereby greatly exacerbating the chances that tens of millions of dollars will be subject to waste and fraud as it heads out of the door at EDA.

Moreover, the EDA is a waste of taxpayer money in the first place and  has been a target for anti-waste activists since its inception. As Citizens Against Government Waste has repeatedly pointed out, many EDA projects would be funded without federal intervention through state and local governments or private investors.  CAGW has long called for the elimination of the program in its annual Prime Cuts report.

There are numerous examples of the EDA spending money on programs and projects that are not within its purview, including “professional football practice facilities, model pyramids, wine tasting rooms, and other clearly wasteful projects.”  The agency has a long history of overestimating its effectiveness, ranging from exaggerated claims of job creation to distorted figures of economic impact.  

Former Sen. William Proxmire (D-Wis.) criticized the EDA on numerous occasions and said the agency “deserves to die.”  President Reagan tried unsuccessfully to kill the EDA, and one of his EDA administrators, Orson Swindle, called the agency a “congressional cookie jar.”  In its 2011 report on duplicative and overlapping federal programs, the GAO found that the “efficiency and effectiveness of fragmented economic development programs,” including EDA, “are unclear.” During his time as a member of Congress, Secretary of State Mike Pompeo introduced the EDA Elimination Act and offered amendments to appropriations bills to cut all funding.  The Trump administration’s fiscal year (FY) 2019 budget proposed eliminating the EDA because it has “limited measurable impacts and duplicates other Federal programs.”  The effort was repeated in the FY 2020 budget.

At its core, the EDA is ineffective, duplicative, and antithetical to the constitutional structure of federalism.  Instead of top-down micromanaging, the types of projects the EDA regularly funds can and should be handled at the local level.  Abolishing the EDA would reduce bureaucratic overhead, remove burdensome regulations, and do more to promote economic growth than anything the EDA currently does.  Though many years overdue, iInstead of using the coronavirus as an excuse to throw money at a broken system, Congress should take this opportunity to abolish the EDA.  

--Jack Fencl