NY Times: For-Profit Earmark Ban Easily Circumvented

In March of this year, the House Appropriations Committee announced a ban on earmarks spending directed at for-profit entities.  Building on the disclosure rules put into effect by Democrats when they took over Congress in 2007, the new rule from the Appropriations Committee was intended to restrict the earmarking process.

But if you think about it, it's a dumb idea, and our lawmakers know better.  In the corporate world, the line between non-profit and for-profit is often blurred to the point of non-existence.  For-profit corporations have non-profit subsidiaries or affiliates all the time (and sometimes the other way around).  Just look at the health insurance industry.  Of course, it turns out that lawmakers did know better - especially some Democrats who are unashamedly pushing the newly formed non-profit subsidiaries of their corporate benefactors.  The New York Times reports that companies have found their way around the ban, and lawmakers are only too happy to push for pork.

Just one day after leaders of the House of Representatives announced a ban on earmarks to profit-making companies, Victoria Kurtz, the vice president for marketing of a small Ohio defense contracting firm, hit on a creative way around it.

To keep the taxpayer money flowing, Ms. Kurtz incorporated what she called the Great Lakes Research Center, a nonprofit organization that just happened to specialize in the same kind of work performed by her own company — and at the same address.

Now, the center — which intends to sell the Pentagon small hollow metal spheres for body armor that the Defense Department has so far declined to buy in large quantities and may never use — has $10.4 million in new earmark requests from Representative Marcy Kaptur, Democrat of Ohio.
So to recap, Rep. Kaptur is pushing a $10.4 million earmark to her home district company for a product the Pentagon doesn't really want.  What the hell is this?   It doesn't end there, of course.  Rep. Kaptur is defending this out in the open, with absolutely zero shame.
The congresswoman, who has received tens of thousands of dollars in campaign contributions from Ms. Kurtz’s family and her business’s lobbyists, thought the quickly hatched nonprofit organization was a convenient solution.

“They met the requirements of the reform,” Ms. Kaptur said in an interview. “Yes, they did.”
This is a 14 term member of Congress, with a mixed record otherwise.  As the Times further reports, her request is part of a total of more $150 million of these types of requests that would earmark federal funds for nominally non-profits but would ultimately benefit the same for-profit companies that have always played this game.  Kaptur is simply emerging as the poster child of these types of deceptions, including in yet another such earmarking request.
Ms. Kaptur’s office encouraged Ohio companies whose earmark requests were in peril to quickly line up deals with nonprofit organizations. Members of her staff even called University of Toledo administrators to ask about forming partnerships with local defense contractors, said Frank J. Calzonetti, the university’s vice president for research.

As a result, Ms. Kaptur is seeking at least $12 million for the university for programs that this budget year were allocated directly to profit-making companies, with the understanding that the university will pass on most of the money to the companies previously involved.
Not only is this not good government, this is dishonest, deceptive pay-for-play politics at its worst.  It pains me even further that most all of the requests of this nature documented by the New York Times, they come from Democratic members of Congress.  But for me, where I sit is not where I stand.  I am not going to excuse this behavior just because it's coming from Democrats.  I'm deeply disappointed at this behavior.  For this year (FY 2011) at least, House Republicans have announced that they will not request any earmarks.

However, I do want to put things into perspective.  As you can see from this OpenSecrets.org chart, neither party has a moral or objective monopoly over pork barrel projects.  Just in June, Citizens Against Government Waste, an earmarks watch dog group, designated Alabama Republican Sen. Richard Shelby as "porker of the month" for his attempt to protect defense contractors (and naturally, campaign contributors) in his state.



As for parties on control of Congress, have been no greater champions of earmark spending than Republicans.  In fact, with Democratic disclosure rule reforms in place, the dollar amount approved for for-profit companies had dropped by 50% in FY 2009 (that's before this "non-profit" shell-game started) from FY 2006, the last year Republicans controlled Congress.  Significant reforms were passed by Democrats when they took over Congress in 2007:
In 2007, Democrats suspended all earmarks until a reformed process could be put in place. New House rules were adopted that required robust earmark disclosures – including detailed lists of every earmark and its sponsor, a public certification from every Member that they have no financial interest in any earmark request, and identification of earmarks “air-dropped” in conference. Additionally, the House prohibited the conditioning of any earmark on any vote cast by a Member of Congress.
By 2009, all members were required to post their earmark requests online.  These were good, solid reforms to rein in the runaway, pay-for-play earmark spending under Democratic leadership.  As a result overall earmark spending (non-profit and for-profit) has dropped by 15% in FY 2010 from just last year, and is down 40% from FY 2006 levels.  This is significant improvement, and objectively establishes Democrats as better stewards of taxpayer money than Republicans.

I also want to caution that those who believe that elimination of earmarks (a policy I support) is the silver bullet to solving our budget crisis are seriously wrong.  The Office of Management and Budget estimates the FY 2008 earmarks to total $17 billion - real money by any accounts - but out of a $2.9 trillion budget - or about six-tenths of one percent of the federal budget.  Looked at another way, if all earmarks were eliminated that year, the federal deficit would go from $239 billion to $222 billion, cutting the deficit by 7 percent.  Nothing to be ignored no doubt - but not nearly enough.  Therefore, while reducing and eliminating pork (to the extend possible) should be a hallmark of achieving fiscal balance, it simply is not large enough to be the only solution.

To be sure, members of Congress have every right to legitimately feel that a certain project in one's home district or home state is worth funding on the merits.  What they should not do is abuse the appropriations process in order to pass that judgment along to taxpayers.  Congress should invest in the areas of national need, and bind the executive agencies to award contracts based upon a competitive bidding process.  What Congress shouldn't do even more is enact meaningless rules like the for-profit bans when they know all along the ban would be contravened easily.

That said, Congress' power of the purse is the most vital power granted it by the US Constitution.  Barring an outright ban of the earmarks process - for which the political courage seems to be absent - the best disinfectant is sunlight, not "rules" full of loopholes.  To that end, Citizens Against Government Waste is supporting a bipartisan transparency bill in Congress that would improve upon the 2007 transparency reforms.
In the Senate, Sens. John McCain (R-Ariz.), Tom Coburn (R-Okla.), Kirsten Gillibrand (D-N.Y.), and Russ Feingold (D-Wisc.) have introduced S. 3335. In the House,Reps. Bill Cassidy (R-La.) and Jackie Speier (D-Calif.), have offered the companion bill, H.R. 5258...

The Earmark Transparency Act of 2010 would create an online, searchable, user-friendly database that would allow taxpayers to view all earmark requests in a centralized location. The database will provide details on projects, including amount of the initial request, amount approved by the committee, amount approved for final legislation, sponsor name, sponsor state or district, project name and other relevant information.
Official CAGW press release here.  The bill has also garnered support from the Sunlight Foundation, a progressive group dedicated to bringing cutting edge ideas to government.  Carl Levin (D-MI) is now blocking the bill in committee.  If we are not going to end the process, at least let us know who's requesting what, and let us find that information easily.  Let us act as a good, informed citizenry and hold members of Congress accountable.  Currently Sen. Levin is blocking Contact your members of Congress and Senators (House.gov and Senate.gov) and tell them to support The Earmark Transparency Act of 2010.  Good government and the right to hold our leaders to account is the essence of democracy, and it starts with transparency.

Allow me to say why I, as a liberal, care so much about earmarks.  Beyond the principles of fairness, transparency and good government, every dollar spent on an undeserving pork project is one less dollar we have available to invest in public education, in anti-poverty programs, in public safety - in other words, in social justice.  As Howard Dean said, "Social justice can only be achieved through a balanced budget."  That is why fiscal prudence is the building block of the progressive agenda, and while earmark reform isn't the end-all of fiscal prudence, it is an integral part.