House Democrats ban earmarks for private contractors

WASHINGTON — House Democratic leaders Wednesday banned the practice of doling out no-bid contracts to private contractors, a move that will shake up the lobbying industry that has come to rely on securing these so-called earmarks for their corporate clients.

At a meeting of the Democratic caucus, leaders unveiled the new rule that forbids private contractors from receiving earmarks, part of the party's effort to reclaim the reform mantle it used successfully in its 2006 midterm campaign to regain the majority.

House Appropriations Chairman David Obey, D-Wis., whose panel issues thousands of these line-item grants each year, estimated the fiscal 2010 budget included more than 1,000 earmarks, worth billions of dollars, to private companies. Most were culled from the Pentagon's annual budget.

Rep. Norm Dicks, D-Bremerton, on Tuesday officially assumed the chairmanship of the defense-appropriations subcommittee, responsible for Pentagon spending.

George Behan, Dicks' spokesman, said the earmark ban largely was Obey's initiative but that Dicks "supports the provision at this time."

Asked if Dicks eventually might back a total ban on earmarks, Behan said, "No," adding that the practice can be used to boost smaller firms or new technologies.

The Senate seems unlikely to follow the House lead. Senate Appropriations Committee Chairman Daniel Inouye, D-Hawaii, expressed strong opposition to the House ban, issuing a tartly worded response defending the current system and calling Obey's move "quizzical."

Earmarks are federal dollars that members of Congress dole out — often to campaign donors. In the process, lawmakers advocate for the companies, helping them bypass the normal system of evaluation and competition.

A sliver of more than $1 trillion in annual discretionary spending by Congress, earmarks have become a source of criticism.

The biggest uproars have been over projects such as Alaska's $200 million-plus "bridge to nowhere" that was to connect Ketchikan to an island of 50 or so people, as well as the community's airport. But critics say earmarks more importantly skew the spending process to favor contractors who hire the right lobbying firms and make donations to lawmakers on the appropriations committees.

"For-profit earmarks are really where the rubber meets the road as far as corruption," said Steve Ellis of Taxpayers for Common Sense, a Washington, D.C.-based watchdog group.

The 2010 spending bills included $16 billion worth of earmarks to public and private entities, many of which were inserted into the appropriations legislation at the discretion of one lawmaker.

House Republicans praised Democrats for taking the step and also are considering swearing off the practice.

"We're going to have to make a decision," House Minority Leader John Boehner, R-Ohio, told his colleagues at a closed-door meeting Wednesday, according to one attendee. "Are we really willing to put it all on the line to win this thing?"

They have scheduled a gathering Thursday to debate whether they are willing, on their own, not to seek earmarks. Previous efforts by Republicans — who oversaw the dramatic rise in use of earmarks during their 12-year majority — have failed.

Democrats reached this point after a string of scandals, including the admonition of Rep. Charles Rangel, D-N.Y., for accepting corporate-financed trips and the resignation of Rep. Eric Massa, D-N.Y., amid allegations of sexual harassment.

Democrats said these scandals have drowned out any political goodwill from their reform efforts, including a ban on lobbyist gifts and more disclosure of lobbyist activity.

Inouye, however, used these disclosure rules to defend Congress' right to earmark.

"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," Inouye said.

"It is no secret that many of these individuals make political contributions. All lobbyists file disclosure reports. These contributions are all fully disclosed and available for all to see on the Internet."

House Speaker Nancy Pelosi's leadership team had considered calling for a one-year moratorium on all earmarks or even just a one-year ban on earmarks to private companies. But they settled on eliminating earmarks involving for-profit companies.

Lawmakers still can steer six- and seven-figure grants to local nonprofits and municipalities, as President Obama and White House chief of staff Rahm Emanuel did when they served in Congress.

The House Ethics Committee, in an investigation of five Democrats, including Dicks, and two Republicans on the subcommittee that funds the Pentagon, found that the seven lawmakers steered more than $245 million worth of earmarks to clients of a single firm and collected more than $840,000 in political contributions from the firm's lobbyists and its clients in little more than two years. Most of those clients were for-profit contractors.

Even as the Justice Department continues a criminal investigation of this practice, the ethics committee found no "direct or indirect link" in the earmarks-for-contributions allegations, saying the lawmakers each made decisions independently of the donations.

Critics said the ethics report was a whitewash, and Democratic leaders effectively rejected the ruling Wednesday by declaring the need to forbid such earmarks, although some are pushing for further steps.

"It's not enough to swear off some of the earmarks that lend themselves to corruption — we need to get rid of all earmarks if we have any hope of regaining taxpayers' trust," said Rep. Jeff Flake, R-Ariz.

Kyung Song of The Seattle Times Washington bureau contributed to this report.