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An Open Letter in Support of H.R. 3090, the “EDA Elimination Act of 2011.”

October 24, 2011

The Honorable Mike Pompeo
United States House of Representatives
107 Cannon House Office Building
Washington, DC 20515

Dear Representative Pompeo:

On behalf of the 362,000 members of the National Taxpayers Union (NTU), I write in support of your bill, H.R. 3090, the “EDA Elimination Act of 2011.” Your bill would phase out the Economic Development Administration (EDA), a well-documented money pit whose attempts at reversing stagnation in “chronically depressed areas” of the country have often done more harm than good.

The EDA was created in 1965 as part of President Johnson’s “Great Society” to help stimulate growth in economically distressed places by providing grants and loans to state and local governments. Despite the program’s high-minded intentions, the EDA, like many other grant-based federal agencies, was quickly co-opted by parochial interests seeking influence over the award determination process. The ensuing pork-barrel politics eroded the program’s original intent by watering down the definition of “depressed” in order to expand the number of districts that qualified for grants.

There is also little evidence to assuage taxpayers’ fears that the program too often operates as a glorified slush fund. In fact, the EDA’s claims of job creation and investment returns have been the subject of repeated criticism by several government watchdogs. A recent audit of 10 EDA funded programs by the Inspector General tasked with overseeing the agency found that 29 percent of the money was lost due to “various violations of EDA grant requirements such as financial accounting irregularities, conflicts of interest, and improper procurement procedures.” Furthermore, a recent Government Accountability Office report criticized the EDA for relying on questionable reporting mechanisms to assess the effectiveness of its grants, which may “lead to inaccurate claims about program results, such as the number of jobs created.”

Even if we accept the EDA’s claims as correct, it does not follow that the government should continue to have its’ heavy hand involved in trying to direct economic activity. Doing so ignores the invisible effects of taxpayer-financed “job creation” – namely, the jobs lost due to resources being taken out of the private sector through higher taxes and market distortions. Furthermore, as seen in the Solyndra debacle, these sorts of investment decisions, and the risks they entail, are best reserved for private businesses and industries, not central planners who often lack sufficient information and profit motive.

The Economic Development Administration is a program whose results cannot justify its exorbitant pricetag. NTU applauds your introduction of the EDA Elimination Act and urges your colleagues to work toward passage of this common sense defense of taxpayers’ hard earned money.


Brandon Greife
Federal Government Affairs Manager