Is There Life After Earmarks?

By Jeffrey H. Birnbaum
Tuesday, June 3, 2008

It looks as though 2008 will be a year of few earmarks.

Close observers of Capitol Hill predict that only a small number of these narrow home-state projects will be enacted this year, for two reasons: public outrage over "special interest" legislation and the bogging down of the congressional spending process itself, especially in the Senate. Most appropriations bills seem destined to be put off until 2009, leaving action on earmarks until next year as well.

Many voters will cheer. Lobbyists will not.

The trend, if it continues, could threaten the very existence of a number of lobbying firms.

Lobbyists who specialize in inserting earmarks into law prospered earlier this decade. In 2004, Congress passed 14,211 earmarks worth $53 billion, according to the nonpartisan Congressional Research Service.

But that won't happen again for a long time if Sen. John McCain of Arizona, the presumptive Republican nominee and a sworn enemy of "pork-barrel" spending, becomes president. His likely opponent, Sen. Barack Obama (D-Ill.), is no fan of earmarking, either.

So earmarking firms are looking elsewhere for revenue. A few are cutting out the middleman -- Congress -- and increasingly lobbying for goodies directly from the executive branch.

A pioneer of earmark lobbying on Capitol Hill, Cassidy & Associates, started a "federal marketing" division a few years ago and already is bringing in $1.5 million a year, said John P. Boylan, the executive in charge.

Cassidy, in fact, has diversified into all sorts of lobbying, from international affairs to communications. As a result, it has reduced the portion of its business devoted to appropriations to less than 50 percent from its traditional 70 percent, while keeping overall revenue roughly level.

The firm has especially high hopes for its work with federal agencies and the mega-contractors that serve them. "We've seen some great growth in the business," Boylan said about federal marketing.

Other lobby shops are not so sure. The Livingston Group, for one, doubts that selling straight to Uncle Sam is a promising a substitute for earmarking. "That's a very difficult route," said former congressman Robert L. Livingston, the firm's founding partner. "Finding somebody in the bureaucracy to actually make a decision has been very difficult for us."

Livingston, a former chairman of the House Appropriations Committee, naturally relied on legislated earmarks when he opened his firm in 1999. Earmarking started out as nearly 80 percent of the Livingston Group's total.

But it was always a precarious business and, early on, Livingston foresaw its decline. He has been working for years to branch out into other lines of lobbying, such as defense, high tech, education, health care and the representation of foreigners.

"We started shifting our business well before the latest controversies," Livingston said. "I wasn't satisfied that appropriations was enough to sustain a full lobby practice."

Earmarking at the Livingston Group now accounts for less than 30 percent of total revenue, and, with the anti-earmarkers on the rise, it could decline further. That is probably the fate of much of K Street.

As One Falls, Another . . .

One business that's burgeoning on K Street is lawyerly advice to corporations involved in international transactions.

The weak dollar has made the acquisition of U.S. companies by foreign companies ever more attractive. When those takeovers raise national security questions, a special set of government-imposed hurdles must be overcome.

And when U.S. companies want to do business overseas -- which they increasingly are seeking because the weak dollar makes exports relatively cheap -- they have to wend their way through a long list of trade restrictions.

As a consequence, law firms have been beefing up their international practices. The latest marquee hire, I hear, is at DLA Piper.

Rick Newcomb has joined the firm as chair of its international trade group. He jumped from the Washington office of Baker, Donelson, Bearman, Caldwell & Berkowitz, where he chaired the international practice.

Before entering private practice, Newcomb served for 17 years as director of the Treasury Department's Office of Foreign Assets Control, which oversees dozens of economic sanctions programs.

Interest Group of the Week

The political left, with backers that include billionaire George Soros, plans to launch a new organization today that will try to steer the federal judiciary in its direction.

The Constitutional Accountability Center will be headed by Doug Kendall, who for a decade has run the Community Rights Counsel, a public interest law firm and judicial ethics watchdog.

Hire of the Week (Green Edition)

Deana M. Perlmutter has joined the law firm Holland & Knight in Washington. Previously, she was senior vice president of Dutko Worldwide in Denver.

The firm said Perlmutter, 48, will focus on "sustainability," which is the latest environmental buzzword.

She'll be part of a division devoted (I kid you not) to "Green Technology and Public Policy." Clearly there's money to be made, the news release says, "as Washington and the world move to cleaner, greener and more cost effective energy."

Airlines vs. Hotels

You'd think that airlines and hotels are so interdependent that they would work hand-in-hand in Washington.

In fact, they are in hand-to-hand combat.

Last week, the Travel Industry Association, which represents all components of the hospitality business, released a survey that showed a quarter of U.S. consumers who fly chose not to do so at least once in the past year because of hassles such as flight delays and security lines.

Although the association's poll found that travelers' primary frustration was not with the airlines themselves, its release has nonetheless worsened already-strained relations between the travel industry and the airlines' lobby, the Air Transport Association of America.

"If the idea was to verify that our customers are dissatisfied, then I don't know that they needed to spend the money; it's kind of a waste," said James C. May, president of the ATA. "But if they want a real solution, we've been proposing it for some time and they haven't been players in the process."

Ouch. The Travel Industry Association declined to respond.

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