May 10, 2019 4:45PM # Does Bureaucracy Count as Economic Development? By [Chris Edwards](https://www.cato.org/people/chris-edwards) --- SHARE The Economic Development Administration ([EDA](https://www.eda.gov/)) is a small agency within the Department of Commerce. Its purpose is to give money to governments and businesses to fund local activities, such as $2 million to “[repurpose the West Frankfort Mall](https://suburbanchicagoland.com/2019/04/11/feds-invest-2-million-in-frankfort-illinois/)” in Illinois and $150,000 for the Brick River Cider company in St. Louis to make “[authentic hard cider](https://www.eda.gov/success-stories/small-business/stories/brick-river-cider.htm).” The EDA has never made sense, as Tad DeHaven and I discuss [here](https://www.downsizinggovernment.org/commerce/eda), and the Trump administration is right to [propose](https://www.whitehouse.gov/wp-content/uploads/2019/03/com-fy2020.pdf) eliminating it. Funding local activities from the federal level creates unneeded bureaucratic costs, which are a loss to the overall economy. According to the [federal budget](https://www.whitehouse.gov/wp-content/uploads/2019/03/com-fy2020.pdf), the EDA handed out $240 million in grants in 2018 for various local and business activities. The agency’s expenses for salaries, benefits, and other office costs were $39 million. That spending did not go to “economic development,” but rather to support the comfy lifestyle of inside-the-Beltway bureaucrats. Thus, the federal “overhead” costs of the $240 million were 16 percent. The chart shows the overhead cost ratio in recent years. In an upcoming Cato study, I discuss 18 reasons why federal aid for state and local activities should be cut. One of the reasons is the bureaucratic costs. In 2018, taxpayers living across the nation sent $279 million to D.C. to fund the EDA, of which $39 million stayed in D.C. and only $240 million was distributed back across the nation. Why don’t communities just keep their own money and spend the whole amount? By the way, if billionaire [Wilbur Ross](https://suburbanchicagoland.com/2019/04/11/feds-invest-2-million-in-frankfort-illinois/) wants to invest in malls and cider companies, he can afford to do so with his own money. ![Media Name: eda.png](/sites/cato.org/files/styles/pubs_2x/public/wp-content/uploads/eda.png?itok=TGlqwbmK) ##### Related Tags [Tax and Budget Policy](https://www.cato.org/tax-budget-policy) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).