Report: 'Stimulus' Wasted Billions of Taxpayer Money on Rural Internet Projects

Wasteful pork-barrel spending on Internet service for low-income communities isn’t new government folly; the evidence shows these programs favored by the Obama White House date back at least to the Clinton administration. However, the recently exposed magnitude of the waste is stunning. Politico’s new investigation, along with the Government Accountability Office, now agree with earlier reports from the Heartland Institute and Citizens Against Government Waste


At PJ Media I previously covered ConnectHome, the latest Obama White House program to link underserved communities and one Indian reservation for Internet service. The published costs are estimated to be at least $150 million to “initially reach over 275,000 low-income households,” which is about $545.45 per assisted family. That’s ludicrously high compared to available private sector solutions.

Yet ConnectHome is amateur hour waste when compared to Rural Utilities Service (RUS), the successor to the Rural Electrification Administration (REA). Politico reports that $3.5 billion has been allocated by RUS to connect nearly seven million people. Yet it turns out that no more than a few hundred thousand homes will likely be connected — and much of the money is unaccounted for, though it sure got spent.

For 200,000 homes, RUS would have spent $17,500 to connect each one. For 500,000 homes, they would have spent $7,000 each.

Compared to Connect2Home’s already-wasteful $545 per home, that’s outrageous.

This business-as-usual philosophy for RUS is longstanding. A 1998 GAO report (“Opportunities to Operate Electricity and Telecommunications Loan Programs More Effectively”) outlines the same sort of waste and moral hazard Politico found nearly two decades later in the same organization, though the cash involved has grown tremendously, especially since 2011. An examination of the GAO archives will find much more waste.


Tony Romm, author of the Politico report, highlights the many problems of the RUS: bad or non-existent management; well-connected political hack administrators; lack of oversight; private-sector vendors who proved far more clever than the RUS. Romm also describes how petulant D.C. administrators pulled the plug on programs they didn’t like, temporarily or permanently, along with myriad other wasteful bureaucratic nonsense.

It is important to note that a close read of Romm’s report is essential to separate facts from opinions. For example, Romm mentions that at least $277 million in program funds are not yet drawn by these various programs, and are unavailable after September (end of the federal fiscal year):

In other words, they may altogether squander as much as $277 million in still-untapped federal funds, which can’t be spent elsewhere in other neglected rural communities.

Most Americans concerned about waste would argue that not spending these funds constitutes savings, not squander. This use-it-or-lose-it philosophy inherent in baseline budgeting is pervasive in government, and you’ll find it in Romm’s report, too. Still, the rest of the report is worth a close read.

During the Depression, the REA truly did help bring electricity to an entire nation. Even through the 1950s, REA loans and grants built out sewers and telephone lines, benefitting the nation. So, what happened? In part, the older, streamlined model offered insufficient opportunities for graft, as Glenn Reynolds likes to say. The FCC’s Universal Service Fund (look at your phone bill; you pay it) is a slush fund of not-particularly-accountable money that can be thrown at well-connected cronies in the guise of internet for the poor.


Partially, it’s Pournelle’s Iron Law of Bureaucracy: those dedicated to the organization, rather than the organization’s goals, will crowd out the publicly minded. Another issue with these programs is “mission creep”: the REA transmogrified into the RUS, and needed new missions to justify its existence. “Internet for the poor” fit that bill.

The size of the waste, though, you can blame on the ideology behind massive growth in government spending. Only an alert, well-read, engaged public can starve this beast.


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