Be careful about jumping to conclusions.
When disproportionately large unearned government contracts come into a district, the entire business community loses. Since I deliver quality (and have far more demand than I have the resources to meet), I don't play the connections game.
This is digging deeper.. but it isn't a reason for the community surrounding the target of the earmark to suffer specifically, just a general philosophic argument that doesn't propose a mechanism.
However, do the trick of attempting to think how a person could be right.. in their choice..(that being you) and then attempting to think how.. I came up with a possible explanation that I posted to you as Post #16 in this thread.
That a large number of earmark and even bid based Government jobs encourages folks to vote Democrat for their Congress Critter and if they don't ticket split and go for the Democrat ticket.. they screw themselves like Detroit did with higher government spending, taxes and regulation. Killing their local economy.
Here is a mechanistic thought for you: one, the people who get rewarded for who they know over what they know tend to reward others for knowing them rather than what they know. This means the projects are mis-managed or less effectively managed than they would be if the market driven mechanisms for distributing capital were in play.
Two, government money floods distort labor, real estate and other local market factors, increasing costs to other businesses in the vicinity. Those businesses respond be either cutting back or moving their activities to more cost effective locations. Because the government projects are poorly managed and have poor economic return for the resources consumed, the local economy is diminished.
Too often we confuse money (the means) with economic activity (the ends). Money is supposed to smooth transactions so that mutually beneficial trades occur to increase productivity and increase the standard of living. Just because more money is in the system doesn’t means the best trades are happening. When that money is being used to consume productive resources to create unproductive resources that do not improve the standard of living then economic activity is naturally reduced.