House bans earmarks to for-profit companies

By Paul Kane
Washington Post Staff Writer
Thursday, March 11, 2010

Facing an election-year backlash over runaway spending and ethics scandals, House Democrats moved Wednesday to ban earmarks for private companies, sparking a war between the parties over which would embrace the most dramatic steps to change the way business is done in Washington.

Earmarks, which lawmakers use to direct federal money to specific projects, have long been a target of reformers seeking to limit spending abuses. Wednesday's announcement is considered a way to block no-bid federal grants to private firms that can afford to hire well-connected lobbyists to plead their cases, and although it will not have a major impact on overall spending, Democrats hailed it as a key step in restoring trust in Congress.

"It ensures that for-profit companies no longer reap the rewards of congressional earmarks and limits the influence of lobbyists on members of Congress," House Speaker Nancy Pelosi (D-Calif.) said, linking the move to earlier decisions to ban gifts from lobbyists and forbid privately financed travel.

Democrats made the move to bar earmarks for for-profit entities despite fierce resistance from many rank-and-file lawmakers who rely on them to spread federal money around their districts and consider them crucial to their political fortunes.

Republicans responded immediately by proposing a moratorium on all earmarks, even those for nonprofits such as universities. House Minority Leader John A. Boehner (R-Ohio) said voters would reward Republicans in the November midterm elections for taking on special interests.

"Are we really willing to put it all on the line to win this thing?" he told reporters Wednesday. The House Republican Conference is slated to debate the idea Thursday.

The moves will have little effect on reducing spending -- earmarks account for less than $16 billion of the more than $1 trillion a year Congress spends -- but leaders of both parties consider earmark reform a way to take a stand against K Street influence.

House Appropriations Chairman David R. Obey (D-Wis.) estimated that the fiscal 2010 budget included more than 1,000 earmarks for private companies. He also mandated that federal inspectors audit 5 percent of all congressional earmarks to ensure that money is not sent to "shadow" nonprofit groups, a tactic that Rep. Jeff Flake (R-Ariz.), the leading earmark opponent, has sought to highlight. Many nonprofit business hubs have been set up in the districts of senior lawmakers on the appropriations panels; those nonprofits then distribute their earmarked money to private contractors that employ lobbying firms with close connections to the lawmakers.

At this point, the Senate appears unlikely to follow the House's lead, as senators argue that changes intended to create more transparency are sufficient. "The truth of the matter is that many, if not most, for-profit and nonprofit entities lobby for themselves or employ lobbyists. That is how most of them make the Congress aware of their products and services. It is no secret that these meetings take place. In addition, it is no secret that many of these individuals make political contributions," said Senate Appropriations Chairman Daniel K. Inouye (D-Hawaii).

Independent watchdogs said they hope that President Obama -- who opposed for-profit earmarks while in the Senate -- will pressure his former colleagues.

"For-profit earmarks are ground zero for pay-to-play, and it makes sense to rein them in first. But much of this ground gained will be lost if the Senate doesn't step up to the plate. The campaign cash will just flow a little more heavily to the Senate," said Steve Ellis, vice president of Taxpayers for Common Sense, which specializes in researching earmarks.

The latest earmark reform efforts follow a wave of investigations focusing on House appropriators' actions. The Justice Department has looked into the earmarking activities of several lawmakers, and, relying on public documents, the House ethics committee investigated five Democrats and two Republicans on the Appropriations defense subcommittee, finding that the lawmakers steered more than $245 million to clients of a lobbying firm under federal criminal investigation. The lawmakers collected more than $840,000 in political contributions from the firm's lobbyists and clients in a little more than two years.

The ethics committee ruled last week that there was no "direct or indirect link" between the contributions and earmarks, a ruling that watchdogs mocked Wednesday in their praise of the new anti-earmark effort.

"The American public is tired of watching members of Congress trade earmarks for campaign contributions. This is a terrific first step in breaking the link between campaign dollars and legislation," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington.

Lobbyists said a prohibition against for-profit earmarks will shift their focus from Capitol Hill to the federal agencies, particularly the Pentagon and the Energy Department, whose annual budgets included more than $10 billion worth of congressional earmarks this year.

"There will likely be greater attention to making sure programs are protected in the [president's] budget," said Alan Chvotkin, a lobbyist for the Professional Services Council in Arlington County, an industry trade group for government contractors.

Staff writers Dan Eggen and Dana Hedgpeth contributed to this report.

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