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End Pet Projects: Earmarks are a Presidential Problem, Too

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After the president signed the fiscal 2008 spending bill last month he held a press conference and stated: "Congressional leaders ran in the last election on a promise that they would curb earmarks. And they made some progress and there’s more transparency in the process, but they have not made enough progress." He added that he had asked the new Director of the Office of Management and Budget, Jim Nussle, "to review options for dealing with the wasteful spending in the omnibus bill."

There are a number of curious aspects to this statement. First of all, why would a president who presided over a huge increase in the practice of earmarking get upset about the practice after it had begun to shrink? According to the Congressional Research Service there were 997 earmarks in the fiscal 2000 defense appropriation bill. The first defense bill signed by Mr. Bush, which funded the department for fiscal 2002, contained 1,409 earmarks, a 40 percent increase.

By fiscal 2004, the number of earmarks in the bill that Bush signed into law had grown to 2,208—an increase of 56 percent above 2002 levels. By fiscal 2005, the bill that became law by virtue of the president’s signature contained 2,506 earmarks—more than two-and-a-half times the number contained in the fiscal 2000 bill.

An even more dramatic increase took place in the largest domestic spending bill, which funds the departments of labor, health, and human services and education. In that bill, the number of earmarks grew from 491 in 2000 to 1,606 in 2002, 2,036 in 2004, and 3,014 in 2005. During Mr. Bush’s first term in office the number of earmarks in that bill increased by fivefold.

But perhaps the most egregious and best known example of earmarking gone wild was the 2005 Highway Bill. Here’s how former Republican Speaker of the House Dennis Hastert explained what he had done to break the impasse with the administration on the bill: "I dealt with the president. I don’t deal with his people anymore."

Bush not only signed the bill, which contained 6,371 earmarks—50 percent more than all previous highway bills combined—but traveled to the Speaker’s district in Illinois to perform the ceremony to praise the legislation, which was one of the most outrageous examples of special purpose political pork in the entire bill. “Here in Illinois…one of the key projects… is what they call the ‘Prairie Parkway,’” said the president. Despite the fact that the $207 million add-on was not supported by either the U.S.or Illinois departments of transportation, Bush said as he signed the legislation that this particular piece of pork was “crucial for economic progress.”

While one might wonder what has brought about the sudden change in the president’s feelings about congressional earmarking, it is also important to consider whether this newfound animosity toward wasteful and politically motivated pet projects extends beyond those that are added by the Congress. As Barry Anderson, a former top official at the Office of Management and Budget under Presidents Carter, Reagan, George H. W. Bush, and Clinton, told Jackie Calmes of the Wall Street Journal two years ago: “Presidents use earmarks as much as members of Congress ‘to reward political supporters, campaign contributors and sometimes members of Congress’ for votes on a presidential priority.”

If the administrations Barry Anderson served under were fond of “executive earmarks,” the current administration seems utterly enraptured. These expenditures take many forms: Some are contained in the annual budget request that the president sends to Congress. There are thousands of highly specific (earmarked) expenditures contained in each annual budget.

Three years ago, for instance, the president requested that $1.4 billion be appropriated in the Energy and Water Appropriation Bill Corps of Engineer Civilian Construction Projects. In materials sent to the House and Senate Appropriations Committees following the budget submission, the administration forwarded a list of scores specific projects that they wished the $1.4 billion to be spent on. Among the proposed projects was a request for $16.9 million for major rehabilitation of the Herbert Hoover Dike around Lake Okeechobee in Florida. Another item on the administration’s project list was $5.8 million for repairs on the powerhouse at Buford Dam in North Georgia. Also on the list was $5.5 million for the improvements on the Chain of Rocks Canal on the Mississippi River near St. Louis.

Are these requests based on merit? Do they represent the best value to the taxpayer? Were there political considerations at play when the White House decided to single out these particular projects to receive federal money?

The answer is some were and some weren’t. The Corps of Engineers has a yearly process of identifying specific projects that are most deserving of funds and ranking them by “remaining benefits divided by their remaining costs.” Generally, projects that are to be funded are selected from among those that score “3.0” based on administration judgments as to which will provide benefits at least three times greater than the expected cost. The administration selects from the list but does not place all available funds in the highest scoring projects. As a result, projects with significantly lower scores can receive significant funding even though projects with higher scores are not fully funded. But sometimes the wide latitude this process grants to administration decisionmakers in placing politics ahead of merit in project awards is insufficient. This is where “special category” projects become part of the process. In the 2006 budget, there were 16 such projects that did not qualify for funding based on the administration’s own criteria. Two of the three mentioned above, the Buford Powerhouse repair and the Chain of Rocks Canal, were special category projects with score below 3.0.

An example of those was a $15 million request for Columbia River Channel Improvements, which had a score of 2.5. The administration was requesting considerably more funding for the project, however, than many projects with a score well above 3.0. The reason for the request is that five months earlier, in August of 2004, the president made a campaign stop in Portland, Oregon and promised the funds.

But perhaps the best part of being president is that many of the nonmerit-based favors that can be provided to friends, supporters, or those whose help you might need in the future don’t have to be placed in any budget document at all. If you are brash enough you can simply give them money without any formal decisionmaking process, any merit-based review, and possibly without any oversight from Congress. That was clearly what went on for years in the Labor Department’s Employment and Training Administration, an agency with a $10 billion-a-year budget.

Last spring, Senator Tom Harkin (D-IA)’s staff on the Senate Appropriations Committee asked the Inspector General to look at grant procedures being followed by ETA with respect to one specific grant program, the president’s highly touted “High Growth Jobs Initiative.” In October the IG reported that of the 157 grants awarded under the program, 134 had been awarded without competition. Those grants accounted for 87 percent of the total $271 million passed out by ETA under the program.

Even worse, 90 percent of these non-competitive grants that the IG examined in detail (35 out of 39) were done in a manner that did not conform to any standard process for the awarding of grants where there is no competition. The IG identified 69 procedural errors, including:

  • Failure to adequately justify the decision to award a non-competitive grant
  • Failure to consistently document the reviews of such proposals
  • Failure to document conflict of interest certifications
  • Failure to ensure that matching funds required as a condition of the grant were actually provided by grantees

Repeatedly large grants were handed out to organizations that were active participants in President Bush’s re-election campaign and have remained strong financial supporters of his party. In May of 2003, for instance, a grant of $5,065,000 was made to the National Retail Federation Foundation. Like the vast majority of the grants awarded under this program, there was no competition and no clear understanding of what the government would receive in return for the grant.

This pot of money was also used to reward members of Congress who toe the line on administration priorities. One high growth job grant went to a junior college in North Carolina at the recommendation of Congressman Richard Burr (R-NC), only four months before he won a tight race to become the United States Senator from North Carolina. Secretary Elaine Chao took an oversized check to North Carolina for benefit of photographers from local news papers and television stations and began her speech by saying:

I am delighted to be joined this afternoon by Congressman Richard Burr and Forsyth Technical Community College President Dr. Gary Green. Congressman Burr first introduced Forsyth to the Labor Department in 2002. Thank you, Cong. Burr, for your vision for biotechnology jobs.

Beyond helping the White House with its agenda and members of Congress with theirs, these grants can also be used to further the agendas of the hundreds of career political types who run or assist in running the agencies that control them. The Assistant Secretary of Labor for Employment and Training recently left the administration to take a job with the National Association of Manufacturers. The Washington Post recently posted a photo of her taken a few years ago presenting a half-a-million dollar check to that same organization.

How typical are the High Growth Job Initiative Grant abuses of federal grant programs generally? It is difficult to say, because there have been few careful reviews of other such programs. There are rumors of such abuses among several of the faith-based initiative programs. The Wall Street Journal identified a Pentagon health research grant that:

Showed up on the House Republicans’ campaign committee blog. It copied a Louisville, KY, news report crediting Republican Rep. Anne Northup, a target of Democrats in this year’s midterm elections, for securing a $3.5 million research grant for a local surgical team. The funds came not from congressional earmarks but from Pentagon accounts, according to the report; administration officials said the surgeons’ hand-transplant work could ultimately benefit wounded troops.

Other programs where serious concerns have arisen with respect to grant awarding include the $6 billion “Reading First” program at the Department of Education, where the Inspector General testified last year that he has already made several referrals to the Justice Department involving possible criminal abuse in the use of the funds. The truth is that only a small number of programs where such practices might have occurred have been examined and those only superficially.

It may be years before we know the full extent of the non merit-based awards of federal grant recipients whose success in attracting federal dollars had more to do with their political contacts at the White House than the merit of their programs or the quality of services that they might provide the taxpayer. But the big opportunity the executive branch has for providing special purpose favors out of the federal budget is neither in their ability to negotiate for those funds in the budget process or to award grants to those they wish to help. It is through the federal procurement process.

In 2005, the federal government spent $377 billion in purchasing goods and services from various vendors—an amount equal to 40 percent of all federal discretionary spending. In May 2007, I published a report entitled A Return to Competitive Contracting outlining some of the information about how the entire procurement process had become increasingly more vulnerable to political abuse. I pointed out that overall contracting had grown by 83 percent over the course of only five years, but that non-competitive contracting was growing at a much faster pace.

By 2005, non-competitive contracting had grown $145 billion, or 115 percent more than the $67 billion spent in 2000. Subsequent to the release of that report statistics for fiscal year 2006 became available showing that non-competitive contracting had leaped yet again, accounting for more than $200 billion in federal outlays. Among the concerns raised in the report was:

  • A statement made by the current Secretary of Housing and Urban Development inferring that he would not award contracts to qualified bidders if they did not support the president
  • Briefings conducted by the White House political office for the government’s lead procurement office, the General Services Administration, on marginal congressional districts in the 2006 election
  • The testimony of the Corps of Engineers lead procurement officer that the contract awarded to Halliburton’s former Kellogg Brown and Root division saying, “I can unequivocally state that the abuse related to contracts awarded to KBR represents the most blatant and improper contract abuse I have witnessed during the course of my profes­sional career.”

The report also raised the concern that there appeared to be a government-wide effort to block investigations of wrongdoing and cover up reported abuses. Examples of such efforts included:

  • The Inspector General at the Department of Homeland Security was not reappointed after he made allegations of widespread contract abuse
  • The Administrator of the General Services Administration attempted to severely cut the budget of her agency’s IG after serious favoritism in the awarding of contracts was uncovered
  • The Defense Department IG wishing to avoid in political backwash with the White House sent a copy of his agency’s report on the Boeing Tanker scandal to the White House counsel’s office to have politically inconvenient names deleted from the official accounting of the biggest contract scandal in history before the report was published

The White House has posted the following definition of the term earmark on the Office of Management and Budget website:

Earmarks are funds provided by the Congress for projects or programs where the congressional direction (in bill or report language) circumvents the merit-based or competitive allocation process, or specifies the location or recipient, or otherwise curtails the ability of the Executive Branch to properly manage funds.

It is a reasonably good definition with one exception. It is clear all of the politicians with authority over government spending are not exclusively members of the legislative branch. The executive branch contains not only the nation’s top politician but much of his former campaign staff—or in the case of future presidents, current campaign staff—and a whole host former elected officials, campaign workers, and aspirants to future political office.

The amounts they control and the discretion they have in using those funds greatly overshadow the few crumbs redirected by the Congress. It would be ironic that in a period in which executive spending powers have been abused beyond any previous precedent that the focus for reform were directly solely at the Congress.

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