Sunday, May 30, 2010

A Possible Hidden Cost to Obey Chairmanship

The Post Crescent reported on the WI congressional delegation and earmarks. For Steve Kagen's changing attitude toward earmarks, be sure to checkout Lakeshore Laments.

For my part, I want to highlight another piece of the story and ask the question of whether or not David Obey's position as Chairman of the House Appropriations Committee actually cost Wisconsin more than most people realize. From the Post Crescent:
When Obey announced in early May that he would not seek re-election, his staff issued a 14-page document highlighting some of the funding he’s brought home during his 41-year career. He said his absence would leave a big void in that respect — a notion not lost on Andrew Miller of Chippewa Falls.
Miller brought up earmarks during an online town hall meeting hosted by Minnesota Gov. Tim Pawlenty, a Republican, who had as his guest Sean Duffy, the Republican Ashland County prosecutor who wants Obey’s congressional seat.

“Let’s be honest,” Miller wrote. “Dave Obey brought a lot of money in for our district. Sean [Duffy], are you willing to stay in Congress for decades in order to gain a key chairmanship position and secure important funding for our district?”
The notion that Mr. Miller voices here is the typical attitude regarding the impact of having a congressional committee chairman among a state's representatives. While I don't think anyone would be surprised to find evidence that a chairman really can help increase federal funding to his district and state, there may be another side to this. There may be a hidden cost of having a committee chairmanship.

From Tyler Cowen at Marginal Revolution:

Here is an interview with Joshua Coval, of Harvard Business School, about his current research. I would urge caution on interpreting these results, but this is what the data toss back out at us:


Q: Perhaps the most intriguing finding, at least for me, was the degree and consistency to which federal spending at the state level seemed to be connected with a decrease in corporate spending and employment. Did you suspect this was the case when you started the study?

A: We began by examining how the average firm in a chairman's state was impacted by his ascension. The idea was that this would provide a lower bound on the benefits from being politically connected. It was an enormous surprise, at least to us, to learn that the average firm in the chairman's state did not benefit at all from the increase in spending. Indeed, the firms significantly cut physical and R&D spending, reduce employment, and experience lower sales.

The results show up throughout the past 40 years, in large and small states, in large and small firms, and are most pronounced in geographically concentrated firms and within the industries that are the target of the spending.

Cowen cautions against a too hasty interpretation of these findings and points us to some smart questions by Megan McArdle on these findings and this certainly isn't to suggest this phenomenon was any kind of a deliberate attempt by Obey.

Still, what if Obey's position as chairman had the unintended effect of decreasing hiring, R & D spending, and sales in Wisconsin. For those of us that also disagree with Mr. Obey's policy prescriptions, his departure may have a double benefit. But even those who agree with Mr. Obey will have to recognize that if these conclusions are correct, then his retirement could have a positive impact on business in Wisconsin.

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