Oberstar Comes to the EDA’s Defense

When Rep. Jim Oberstar (D-MN) lost his bid for reelection in November, it brought to an end a congressional career that spanned nearly a half century. As a former chairman of the House Transportation Committee, Oberstar’s faith in the ability of the federal government to turn taxpayer water into wine was typical for a politician ensconced in the Washington Beltway bubble.


Oberstar reemerged this week to voice his support for legislation reauthorizing the Economic Development Administration, which is still being debated on the Senate floor. In an op‐​ed written for The Hill, Oberstar says that “It is disheartening to see that the agency I helped create more than 45 years ago which has had constant bipartisan support is now under unwarranted partisan attack in an economic environment when the kinds of jobs this agency helps create are needed more than ever.”


Oberstar says that it is “particularly troubling” that the EDA is receiving scrutiny after being unanimously reauthorized only three years ago. And without specifically naming him, Oberstar takes a shot at Sen. Jim DeMint (R-SC) for turning against the agency after having previously “supported and praised EDA investments in his home state.” Considering how rare it is for a member of Congress to admit to having made a mistake, I’d say that DeMint’s recent admission in the Wall Street Journal that he was wrong to have supported the EDA is refreshing.


DeMint correctly noted that the mistaken rationale behind the EDA’s creation during the Great Society is the same as the Democrat’s $814 billion stimulus bill: government programs can solve economic problems. Indeed, the longer the economic recovery remains sluggish and uncertain, the more the American people are questioning the ability of the federal government to simply turn on the money spigot and make the pain go away. For people like Jim Oberstar, that’s an unsettling development.


Many Americans are starting to understand what my colleagues and I have been repeatedly pointing out: there’s no free lunch when it comes to government programs. As a Cato essay on the Economic Development Administration explains, claims of the benefits from spending only look at half of the equation:

The EDA does create government jobs, and perhaps some private sector jobs, but that is only the visible effect. What is invisible, or ignored by policymakers, are the jobs never created because of the taxes that were raised to pay for EDA programs. Every dollar that the government extracts from the economy to pay for programs destroys more than a dollar of private sector economic activity. Taxation reduces the resources available for private sector job creation, and it also distorts the economy by altering price signals for working, saving, and other productive activities.

Oberstar offers anecdotal evidence of the EDA’s successes and trots out the familiar job creation and private sector leveraging claims often made by the agency’s proponents. For instance, he touts the EDA’s “exclusive mission of creating and retaining American jobs by leveraging private investment in the nation’s economically distressed communities and every dollar that the agency invests leverages another $6.90 in private/​public investment to create the economic environment for small business to grow and prosper.”


One of the examples Oberstar cites as an example of an EDA success is support for “Washington State’s growing wine industry which currently employs more than 14,000 people and generates more than $3 billion to the state’s economy.” That’s an odd choice after touting the EDA’s assistance to the “nation’s economically distressed communities.” Besides, why should federal tax‐​paying winemakers in states other than Washington have to effectively subsidize their competition? And as the Cato essay notes, if the EDA is “generating real returns” as Oberstar states, then “surely local entrepreneurs and venture capitalists would be interested in funding such projects without government help.”


Finally, Oberstar singles out Cato for citing “three decade old GAO reports” in our criticism of the EDA. Actually, Cato’s essay on the EDA cites reports going back three decades.