Curbing earmarks: Even with new restrictions, for-profits play a role

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By R. Jeffrey Smith
Washington Post Staff Writer
Monday, March 15, 2010

Twice in recent years, House Appropriations Committee Chairman David R. Obey (D-Wis.) helped obtain earmarks totaling $3.2 million for a home-state university to study how to make military jet fuel from plants. Standing behind that nonprofit work, however, is a for-profit Chicago firm that often partners with universities to reap part of their earmark benefits.

Similar collaborations between private companies and nonprofits will pose tricky questions under a policy intended to end earmarks to profit-making firms, which Obey helped shepherd through the House Democratic caucus last week. That new rule was widely touted as a crackdown, but in reality it could leave untouched almost 90 percent of typical earmarks.

The reason is that, like Obey's earmarks, most of the billions of dollars in earmarks approved by Congress each year involve handing out funds to state or local agencies or to nonprofit institutions, which then dole out part of the money to private contractors.

As a result, the new Democratic rule, and a proposal by House Republicans to stop all earmarks for one year, are unlikely to significantly curb Washington's booming earmark industry, experts said. Steve Ellis of Taxpayers for Common Sense, a nonprofit that has criticized earmarking, called the new limits important but compared them to "squeezing a balloon." Without more comprehensive restraints, he said, the money flow could simply move to new pathways.

In the wake of last week's announcement, road-builders, architectural and engineering firms, construction companies, scientific researchers and myriad private firms exploring obscure or unrequested projects will probably expand cooperative ventures with nonprofits, Ellis and others said. But the reach of the House Democrats' policy change remains unclear, raising questions about loopholes and how easily it will be to prosper from them.

In making their announcement on Wednesday, the Democrats estimated that about 1,000 earmarks -- or 11 percent of those in this year's appropriation bills -- would have been cut if their new policy had been in effect. That would have left in place around 8,400 earmarks, worth about $8.3 billion. Eliminating those requested solely by House Republicans would have cut another $800 million, leaving most earmarks unscathed, Ellis's group said.

Moreover, neither the Democrats' ban nor the Republicans' proposal would cover much larger, congressionally directed grants and contracts to major federal contractors, worth $5.9 billion in the 2010 appropriations bills. That is because lawmakers narrowly defined what constitutes an earmark to include only entities that did not compete for funds.

'Undisclosed earmarks'

That leaves out big-ticket defense programs expanded or kept alive annually by lawmakers to boost home-state employment or to meet less-than-urgent needs of the Defense Department. In 2010, these included 10 unrequested C-17 transport planes costing $2.5 billion, unrequested all-terrain vehicles costing $825 million, 14 other unrequested planes costing $732 million, and an unrequested, second engine for the F-35 jet costing half a billion dollars.

Ellis calls these "undisclosed earmarks" because they were added to the budget at the request of lawmakers and defense contractors who had nonetheless competed to win the initial contracts.

In another loophole, the Senate, which does not seem to share the House's anxieties about earmarks, can readily reinstate what the House has now banned and those seeking access to public funds could shift their earmark lobbying and related campaign spending to the Senate. "If the Senate doesn't go along . . . it will make these changes toothless," Ellis said.

Senate Appropriations Committee Chairman Daniel K. Inouye (D-Hawaii) affirmed last week that he sees no reason for change.

"The truth of the matter is that many, if not most, for-profit and nonprofit entities lobby for themselves or employ lobbyists," Inouye said. "In addition, it is no secret that many of these individuals make political contributions." But giving up earmarking would not be "in the best interests of the Congress or the American people," he added, because some earmarks had produced outstanding results.


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