Tuesday, 25 August 2009

Earmarks, lobbying, and payback

My students in Econ 336 sometimes ask me what the politicians get out of providing earmarks or other considerations. From today's Inside Higher Ed:
Conflict of interest issues continue to befuddle universities and their legislative patrons.

Last month, The Virginian-Pilot ran an article raising questions about the hiring of Phillip Hamilton, a powerful Republican member of the House of Delegates, to lead a new Center for Teacher Quality and Educational Leadership at Old Dominion University. The reason for the questions was that Hamilton had been the key legislator in obtaining state funds for the center. Both Hamilton and the university denied that there was any conflict of interest, telling the newspaper that discussions of his working at the center came only after the legislation had passed, and that he was well qualified and so couldn't be excluded.

While that argument didn't satisfy everyone, it turns out the argument wasn't even true.

The Daily Press, another Virginia newspaper, obtained and published e-mail messages between Hamilton and the university -- sent before the legislation moved -- in which he expressed interest in a job and duties and salary were discussed. The e-mails back and forth feature the lawmaker and senior university officials discussing both the salary and the prospects for the bill that he subsequently got through the General Assembly. Hamilton talks about the need to supplement his salary; the university officials are always encouraging, and sometimes they discuss the lawmaker's overall financial intake from the likely Old Dominion job and his other employment.


The hiring of legislators for public college positions that they helped create or over which they have influence used to be common, but is increasingly the subject of scrutiny.

In April, the president of Northwest Florida State College was indicted on charges related to the hiring of a powerful state legislator who had sent large grants to the college. A Florida state senator last year gave up her $120,000-a-year position at a Florida State University reading research center that she was instrumental in helping to create, four days after Inside Higher Ed first publicized the arrangement. A series of articles by The Birmingham News about cronyism and other wrongdoing in Alabama community colleges won the Pulitzer Prize for investigative reporting in 2007.

As for Delegate Hamilton, he's now running for re-election.
Note that universities are some of the biggest beneficiaries of earmarked funds; I've also seen work showing that they're especially likely to be successful in rent-seeking when their district's representative or state's senator is on the appropriations committee, and especially when that rep is an alumn.

Note that a new listing of top political donors over the last decade is now out. Is there anybody in the top twenty that is neither a union (public service, electrical workers, education, laborers, service, teamsters, carpenters, comm workers, teachers, UAW, machinists, UFCW), a heavily regulated industry (AT&T, trial lawyers, realtors, Altria (tobacco)), or a potential bailout recipient (Goldman Sachs, Citigroup, auto dealers)? My students should think about this when we come to McChesney's rent-extraction model later this year.

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