Earmarking

What Is Earmarking?

Earmarking is the practice of setting specific money to the side for a specific purpose. The term can be utilized in several specific situations, for example, in congressional apportionments of taxpayer funds to individual practices like mental accounting.

Understanding Earmarking

The phrase has an agricultural beginning. Farmers would cut unmistakable scores in their animals' ears to mark the animals as belonging to them. In its most essential sense, to earmark is to flag something for a specific purpose. In practice, it generally means to set funds to the side for a specific project. A company could earmark a sum to spend on overhauling its IT system, or a city government could earmark the proceeds of a municipal bond issue to pay for another road or bridge.

In social science, the term earmarking has been associated with the economic humanist Viviana Zelizer, who distinguishes the practice of earmarking as pervading certain dollars with specific importance related to the social ties and social significance for what that money is earmarked for — guaranteeing the "not all dollars are equivalent."

In this way, money earmarked for a friend or family member will be treated more carefully than money for a companion. In like manner, individuals might be more able to loan money to someone they trust than an outsider. The behavioral economics concept of mental accounting is a case of personal earmarking by which individuals distribute money to specific tasks or purposes, making those funds non-fungible.

Earmarking Doctrine in Bankruptcy Law

In bankruptcy law, the earmarking doctrine permits certain borrowed funds to be excluded from a bankrupt party's assets, for however long they were loaned to the borrower 90 or less days before the bankruptcy filing and were loaned with the express goal of paying a specific creditor.

Earmarking guarantees that the funds will go to the planned creditor, as opposed to being subject to claims by different creditors who have preference in the bankruptcy procedures. The doctrine is based on the possibility that, since there was no net decline in the bankrupt party's asset base, the funds never truly belonged to the bankrupt party; they "borrowed from Peter to pay Paul."

Earmarks in Politics and Appropriations

Earmarking is a longstanding and questionable practice in the U.S. Congress, where gatherings have generally won support for petulant votes by offering or taking steps to disavow funds for projects specifically members' districts. Missing such earmarking, funds are distributed to agencies of the executive branch, which choose what specific projects to spend federal money on.

Say, for instance, that a party needs to pass a law banning a specific toxic substance, a move that would be famous with its supporters from one side of the country to the other. The party controls the base number of seats to pass the law, yet one member is reluctant to vote for it on the grounds that a factory in their district would need to cut positions assuming the substance were banned. To win the member's vote, the party could revise the bill to incorporate an earmark: a port in their district would receive federal funds for an upgrade, as opposed to a port a hundred miles up the coast.

Such earmarks, otherwise called "pork-barrel spending" or "pork" for short, are dubious. They are viewed as a form of corruption, permitting D.C. power brokers to trade in the fortunes of individuals they address and waste taxpayers' money on giveaways to specific districts.

The "Bridge to Nowhere"

The most renowned recent illustration of an earmark is the "Bridge to Nowhere," a $398 million bridge that would have connected an island housing an airport and 50 permanent occupants to a bigger island containing the city of Ketchikan, Alaska. In 2005, members of Congress pushed to undermine the bridge and redirect the money to modify a bridge obliterated by Hurricane Katrina, however Senator Ted Stevens (R-Alaska) took steps to stop Congress in the event that the earmark was rejected.

The bridge was not constructed, yet funds for a road leading to it kept on flowing, so the state fabricated a three-mile thruway from the airport that impasses at the shore, passing nothing coming.

Earmarking Moratorium

Shock over pork drove Congress to ban earmarks in 2011, with Republicans leading the work. Residents Against Government Waste, a fiscally conservative guard dog group, claims that this ban has failed in practice, writing in its 2017 Pig Book, "Pork-barrel spending is fit as a fiddle in Washington, D.C., notwithstanding claims in actuality." The group counted 285 earmarks worth $16.8 billion in fiscal 2021, up from 274 worth $15.9 billion the previous year and a 74.8% increase from the 163 of every 2017.

In Favor of Political Earmarks

Leaving to the side the ban's effectiveness, a few observers have called for earmarking to be reestablished. In a 2014 New York Times commentary, Columbia reporting teacher Thomas Edsall contended, "The preclusion on earmarks has never really reestablished respect for Congress. Just the inverse. It has contributed to legislative gridlock and increased the difficulty of winning institution of tax and migration reform."

Edsall likewise composed that earmarks' part in building larger parts was "fundamental," and that banning them would significantly affect the view of Congress as corrupt, due to the close to simultaneous relaxing of campaign finance laws (the Citizens United choice was given over in 2010).

One more contention for the practice of earmarking is that members of Congress are more accountable than the civil servants who any other way make choices about how to allot money allocated to their agencies. These members of the executive branch are appointed by the White House and can't straightforwardly be voted out of their positions.

At last, some consider the costs of earmarking to be insignificant compared to the costs of the gridlock Edsall portrayed. Eminently, $398 million for a problematic bridge fails to measure up to the monetary and nonmonetary costs of a broken movement system, tax code, or healthcare sector, the contention goes.

Features

• Earmarking is the cycle by which individuals or organizations suitable specific money for specific purposes.
• For individuals, earmarking can saturate money with representative value based on who or what it is earmarked for, with mental accounting being a special case of self-earmarking one's funds.
• In organizations, earmarking connects with how companies or governments budget spending.