More Duplicative, Wasteful Spending

Kelly Cobb

4/7/2011 10:52:00 AM - Kelly Cobb

For the past decade, the U.S. Department of Agriculture (USDA) has run the most unlikely of programs: handing out low-interest, taxpayer-backed loans to companies to build-out broadband Internet. Today, the program has hundreds of millions in cash – and it’s not the only pile of taxpayer money the government has to fund broadband infrastructure.

Right now, there is nearly $800 million taxpayer dollars for broadband development sitting unused and uncommitted in federal government coffers. As Congress searches for spending cuts with the deadline to fund government looming on Friday, this unobligated cash is low-hanging fruit for lawmakers trying to craft another short-term continuing resolution or looking to pare down the debt.

Unsurprisingly, the USDA’s broadband loan program, officially launching in the 2002 Farm Bill, is fraught with fraud, waste, and abuse. In 2005 the Department’s Inspector General found over half the money they reviewed was spent on unrelated projects or had been awarded to companies who didn’t even complete their applications. Many of the loans had also defaulted, costing taxpayers millions of dollars.

The loan program also picks winners and losers in the market; taxpayer-funded companies have a competitive advantage over others with only private capital. By 2009, over three-quarters of the loans went to communities that already had broadband service – and nearly 60 percent of the taxpayer money went to places with two or more providers.

A few days before government funding was set to expire on March 18, USDA sent out a notice encouraging companies to apply for $700 million in unobligated broadband loan funds sitting in the department’s coffers. Agriculture Secretary Tom Vilsack said at the time he was “keeping an eye on Congress relative to the flexibility they’ll give us on the budget.” Translation: get this money out the door before Congress notices.

Four days after the announcement, Congress passed another Continuing Resolution that zeroed out the program’s funding. While defunding the program ensures taxpayers are no longer on the hook for these loans, there still remains the $700 million in unobligated funds the USDA can continue to lend. Rescinding this money and putting it back into the Treasury offers an easy step in the right direction in paring back the nation’s debt.

The loan program’s multitude of failures didn’t stop Democrats from handing USDA and the Commerce Department’s National Telecommunications and Information Administration (NTIA) another $7.5 billion for the same purpose in the 2009 “stimulus” package – this time not just as loans, but also pure handouts with less oversight and no strings attached.

These costly and duplicative programs are plagued with the same waste and abuse – only this time no one is sure exactly how much. USDA’s Inspector General testified in February that the Department hadn’t yet reviewed what became of the money. NTIA has proposed to provide accountability by asking taxpayers for a multi-million dollar boost to their budget so they could go see what happened to the money they’ve already spent. The fleecing of taxpayers begets the fleecing of taxpayers.

Today, all the broadband stimulus money has been committed, but already over $70 million has been returned after projects that applied for the money folded. Communications and Technology Subcommittee Chairman Greg Walden (R-OR) held a hearing last week on legislation that would strengthen oversight of the broadband “stimulus” and ensure any returned funds go directly to the U.S. Treasury – not back out the door. This is a huge step in the right direction.

If Congress is serious about reining in spending, then costly, duplicative, and wasteful broadband programs should be near the top of the list. This is especially so since well over 95 percent of Americans already have access to broadband Internet. Congress should double-down on Rep. Walden’s work by pulling the $700 million for broadband loans out of USDA’s coffers.