# What Is Earmarking? How It Works and Examples

> **Definition**
>
> Earmarking is the process of setting aside money for specific purposes. Individuals may earmark funds in personal budgets, while organizations or government agencies may earmark larger spending. The process of earmarking can be used as political leverage in order to pass spending legislation.

## How Earmarking Allocates Specific Funds

Earmarking is the practice of setting particular money aside for a specific purpose. The term can be used in several contexts, such as in congressional appropriations of taxpayer funds to individual practices like [mental accounting](https://www.investopedia.com/terms/m/mentalaccounting.asp).

### Key Takeaways

*   Earmarking involves setting aside funds for a specific purpose, used by both individuals and organizations.
*   In politics, earmarking is controversial and often associated with "pork-barrel spending."
*   The earmarking doctrine in bankruptcy law helps prioritize payments to specific creditors, ensuring funds reach intended parties.
*   Despite reforms, pork-barrel spending continues, sparking debates on the efficacy and morality of earmarks.
*   Some experts argue that banning earmarks contributes to legislative gridlock and stifles congressional negotiation.

## Understanding Earmarking

The phrase has an agricultural origin. Farmers would cut recognizable notches in their livestock's ears to mark the animals as belonging to them. At its core, earmarking means designating something for a specific purpose. Usually, it involves setting aside funds for a specific project. A company might earmark a sum to spend on upgrading its IT system, or a city government might earmark the proceeds of a [municipal bond](https://www.investopedia.com/terms/m/municipalbond.asp) issue to pay for a new road or bridge.

In social science, the term earmarking has been associated with the economic sociologist Viviana Zelizer, who identifies the practice of earmarking as imbuing certain dollars with specific meaning related to the relational ties and cultural meaning for what that money is earmarked for—claiming the "not all dollars are equal."

Therefore, money earmarked for a loved one will be treated more carefully than money for a friend. Likewise, people may be more willing to lend money to somebody they trust than a stranger. In behavioral economics, mental accounting is a form of personal earmarking where people earmark money for specific tasks, making those funds unique and non-interchangeable.

## The Role of Earmarking in Bankruptcy Proceedings

In [bankruptcy](https://www.investopedia.com/terms/b/bankruptcy.asp) law, the earmarking doctrine lets some borrowed funds stay out of a bankrupt party's assets if loaned within 90 days before filing and intended for a specific creditor.

Earmarking makes sure funds reach the intended creditor, not other creditors with claim preference in bankruptcy.The doctrine is based on the idea that, because there was no net decrease in the bankrupt party's asset base, the funds never really belonged to the bankrupt party; they "borrowed from Peter to pay Paul."

## Political Earmarks: Funding Mechanisms and Controversies

Earmarking has long been debated in the U.S. Congress, where parties have secured votes by funding projects in specific districts. Absent such earmarking, funds are apportioned to agencies of the executive branch, which decide what specific projects to spend federal money on. In other moments, members have sought to win favor by revoking funding for unpopular projects.

Say, for example, that a party wants to pass a law banning a particular toxic substance, a move that would be popular with its supporters nationwide. The party controls the minimum number of seats to pass the law, but one member is hesitant to vote for it because a factory in their district would have to cut jobs if the substance were banned. To gain a member's vote, the party might add an earmark, directing federal funds for a port upgrade in their district instead of a port further away.

Such earmarks, also known as "pork-barrel spending" or "pork" for short, are controversial. Many see them as corrupt, letting D.C. leaders use taxpayer money for projects in specific districts.

### The "Bridge to Nowhere"

The most famous recent example of an earmark is the "Bridge to Nowhere," a $398 million bridge that would have connected an island housing an airport and 50 permanent residents to a larger island containing the city of Ketchikan, Alaska. In 2005, Congress members wanted to redirect funds from the bridge to a bridge damaged by Hurricane Katrina, but Senator Ted Stevens (R-Alaska) threatened to resign if the earmark was removed.

The bridge was not built, but funds for a road leading to it continued to flow, so the state built a three-mile highway from the airport that dead-ends at the shore, passing nothing on the way.

### The Earmarking Ban: Impact and Critiques

Anger over pork-barrel spending led Congress to ban earmarks in 2011, led by Republicans. Citizens Against Government Waste, a fiscally conservative watchdog group, claims that this ban has failed in practice, writing in its 2017 Pig Book, "Pork-barrel spending is alive and well in Washington, D.C., despite claims to the contrary." 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 in 2017.

### Arguments Supporting Political Earmarks

Leaving aside the ban's effectiveness, some commentators have called for earmarking to be restored. In a 2014 New York Times op-ed, Columbia journalism professor Thomas Edsall argued, "The prohibition on earmarks has done nothing to restore respect for Congress. Just the opposite. It has contributed to legislative gridlock and increased the difficulty of winning enactment of tax and immigration reform."

Edsall also wrote that earmarks' role in building majorities was "essential," and that banning them would have little effect on the perception of Congress as corrupt, due to the near simultaneous loosening of campaign finance laws (the _Citizens United_ decision was handed down in 2010).

Another argument in favor of the practice of earmarking is that members of Congress are more accountable than the bureaucrats who otherwise make decisions about how to allocate money apportioned to their agencies. These members of the executive branch are appointed by the White House and cannot directly be voted out of their positions.

Finally, some consider the costs of earmarking to be negligible compared to the costs of the gridlock Edsall described. In summary, the cost of roadway improvements in a congressman's district or a new research project in a senator's state, pales in comparison to the monetary and non-monetary costs of a broken immigration system, tax code, or healthcare sector, the argument goes.

> **Article Sources**
>
> 1.  Los Angeles Review of Books. "[A Dollar Is a Dollar Is Not a Dollar: Unmasking the Social and Moral Meanings of Money](https://lareviewofbooks.org/article/a-dollar-is-a-dollar-is-not-a-dollar-unmasking-the-social-and-moral-meanings-of-money/)."
>     
> 2.  Maurice A. Deane School of Law at Hofstra University. "[From the Bankruptcy Courts: The Earmarking Defense to Preference Actions: The Requirements of the Bohlen Decision](https://scholarlycommons.law.hofstra.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=2028&context=faculty_scholarship)."
>     
> 3.  FactCheck.org. "[Bridge to Nowhere](https://www.factcheck.org/2008/09/bridge-to-nowhere/)."
>     
> 4.  New York Post. "[Bridge to the Big House](https://nypost.com/2008/08/03/bridge-to-the-big-house/)."
>     
> 5.  NBC News. "[Alaska Ends Plan for ‘Bridge to Nowhere’](https://www.nbcnews.com/id/wbna20908207)."
>     
> 6.  CNN. "[The Bridge Failed, but the ‘Road to Nowhere’ Was Built](https://www.cnn.com/2008/POLITICS/09/24/palin.road.to.nowhere/)."
>     
> 7.  Citizens Against Government Waste. "[2017 Congressional Pig Book](https://www.cagw.org/reporting/2017-pig-book)."
>     
> 8.  Citizens Against Government Waste. "[2021 Congressional Pig Book](https://www.cagw.org/reporting/2021-pig-book)."
>     
> 9.  Federal Election Commission. "[Citizens United v. FEC (Supreme Court)](https://www.fec.gov/updates/citizens-united-v-fecsupreme-court/)."
>     
> 10.  The New York Times. "[The Value of Political Corruption](https://www.nytimes.com/2014/08/06/opinion/thomas-edsall-the-value-of-political-corruption.html)."