Deficit "Super Committee" Transparency - Will We Get to See the Budgetary Sausage in Production?

By Stefan C. Passantino and Benjamin P. Keane

 

Whether you agree with Justice Brandeis that sunlight is the “best of disinfectants” or with former American League of Lobbyists president Dave Wenhold that “too much sunlight causes cancer”, it should be readily apparent to the readers of this blog that public officials of all stripes have increasingly begun to listen to the chorus of voices calling out for more transparency in all levels of government. At PaytoPlayLawBlog, we often write about how the push for greater transparency at the federal, state and local levels is affecting the operation of government, as well as the interaction of the public with government officials. As strictly objective, rational observers (ahem), it seems to us that disclosure alone generally trumps both inaction and punitive regulation in the pay-to-play space. Over the past month or so, we have come to see new evidence of this welcome push for openness at the federal level, particularly with regard to the activities of the newly-formed Joint Select Committee on Deficit Reduction (or the so-called Deficit “Super Committee”).      

For those who have spent all of their time recently tracking satellite orbits and running calculations on their chance of having to make a potentially uncovered homeowners claim, the Super Committee is a balanced delegation of six Democrats and six Republicans (split evenly between members of the U.S. House of Representatives and U.S. Senate) formed in August of this year as a means of permitting Congress and the White House the opportunity to avoid responsibility for identifying an additional $1.5 trillion in federal budgetary cuts over the next decade. Whether one agrees with the premise of granting 12 Members of Congress such extraordinary authority over federal, fiscal decision making, it is readily apparent that the ongoing work of the Super Committee has drawn a great deal of attention from political organizations and commentators across the ideological spectrum. Given the nature of the current (entirely justified) cynicism with the political process, and the enormity of the task before the Super Committee, it should not surprise readers of this blog to learn that much of this attention across the political continuum has been focused on increasing the political transparency of the Committee’s activities. 

One of the more prominent efforts to accomplish this goal has been organized by the Sunlight Foundation, a non-profit organization dedicated to using the “power of the Internet to catalyze greater government openness and transparency.” On August 3, 2011, the Foundation issued a letter to congressional leadership urging them to adopt a series of recommendations that the Foundation believes will ensure the Super Committee operates in a fully open and transparent manner. Those recommendations included: (1) holding live webcasts of all official Committee meetings and hearings; (2) posting the Committee’s draft recommendations for at least 72 hours prior to a final committee vote; (3) promoting disclosure of every meeting held by Committee members with lobbyists and other “powerful interests”; (4) ensuring the immediate disclosure of all campaign contributions received by Committee members during their service on the Committee; and (5) demanding additional financial disclosure standards for Committee members and their staffers. In addition, the Foundation has teamed up with various transparency activists and supporters to launch a grassroots campaign designed to encourage greater accountability and openness from the Super Committee. The movement’s allies in this endeavor include such left-leaning organizations as The Brennan Center for Justice, the Project on Government Oversight, and Public Citizen.

Although not necessarily backing each of the Sunlight Foundation’s specific recommendations, many organizations and individuals on the conservative and libertarian end of the political spectrum have also echoed the Foundation’s calls for transparency in Super Committee activities. For example, Jim Harper of the CATO Institute and Rob Bluey of The Heritage Foundation’s Center for Media and Public Policy have both recently demanded that the Super Committee permit open public access to Committee meetings and legislative proposals as a means of ensuring that all citizens are kept abreast of the activities of this uniquely powerful legislative panel. Along those same lines, Harper and Bluey have also called for Committee transparency as a safeguard against the passage of expansive legislation that is subject to little or no debate or public input. 

All of this makes perfect sense. As we have previously observed here, efforts to govern matters such as this from behind closed doors can lead to embarrassing exchanges.

Bi-partisan support for greater Super Committee transparency has even begun to emerge within Congress itself. In fact, in early September, Representatives Mike Quigley (D-IL), Dave Loebsack (D-IA), and Jim Renacci (R-OH) introduced H.R. 2860, the Deficit Committee Transparency Act, which would implement six transparency reforms along the lines of those recommended by the Sunlight Foundation. Similarly, Senators David Vitter (R-LA) and Dean Heller (R-NV) have also introduced two separate bills, S. 1501 (the Budget Control Joint Committee Transparency Act) and S. 1498  (the Super Committee Sunshine Act), that are designed to ensure the openness of Super Committee meetings and greater transparency in the political fundraising of Committee members.

At present, none of the aforementioned bills have been acted upon in Congress, but there does appear to be growing support on both sides of the political aisle for a more open and forthright framework for Super Committee action. Recognizing the growing momentum in support of such transparency, the Committee has taken the initial step of keeping its three preliminary meetings open to the public (and also available for video review over the Internet). It remains to be seen, however, whether this policy will continue as the Committee gets deeper into the task of formulating its deficit-reduction proposals. Likewise, it remains to be seen whether any of the other aforementioned transparency proposals will gain any traction with the Committee itself. Stay tuned in the coming months to find out.

A Call for Contribution Limitations from the Bar

The American Bar Association (ABA) has weighed in on a proposal to prohibit federal lobbyists from contributing to, or raising money for, those they seek to influence on Capitol Hill. Yesterday, the ABA’s House of Delegates approved a resolution calling for several significant changes to the Lobbying Disclosure Act – the federal legislation governing lobbyist registration and disclosure.

Of significance to this blog, the resolution calls upon Congress to amend the Act to prohibit lobbyists from working their trade with any member of Congress for whom he or she has raised money in the past two years. The resolution also recommends a refinement of the definition of “lobbyist” to enhance registration and disclosure. With respect to contributions by such lobbyists, the resolution recommends mandating that a federally-registered lobbyist may not:

(a) lobby a member of Congress for whom he or she has engaged in campaign fundraising during the past two years;

(b) engage in campaign fundraising for a member of Congress whom he or she has lobbied during the past two years;

(c) make or solicit financial contributions to the reelection campaign of a member of Congress whom the lobbyist has been retained to lobby for an earmark or other narrow financial benefit; or

(d) enter into a contingent fee contract with a client to lobby for an earmark or other narrow financial benefit for that client.  

The proposal is likely to enjoy enhanced stature because of the high caliber, and bi-partisan bona fides of the task force issuing the underlying report recommending the changes this past January. Co-chairs to the ABA task force included former Republican FEC Commissioner Trevor Potter, noted Democratic attorneys Rebecca Gordon and Joseph Sandler, and former Reagan Solicitor General and current Harvard Law School professor Charles Fried. Nothing says “bipartisan” and “mood of America” like agreement between former counsel to Obama for America, John McCain 2008, the Gipper, and Stephen Colbert.

Already, the American League of Lobbyists (ALL) is responding to this shot across its bow with a promise to release a report of its own in response to the ABA’s proposals. ALL President Howard Marlowe has also signaled that the League may embark on an effort kill this portion of the proposal before it gains any traction.   As reported in Roll Call, Marlowe acknowledged “the significance of money in the policymaking process” represents a “significant” problem, but then pivots to signal an effort to kill the proposal with the backhanded compliment that while the leagues’ proposal will be similar, “[t]he ABA knows ‘that they are on the short end of the stick constitutionally when they’re doing that, and it’s not likely to pass muster.’” Marlowe also reached out to Politico to characterize the proposed contribution ban as “not practical at all.”

You have to give ALL props for trying, but there would appear to be far less constitutional infirmity in this proposal, which simply prohibits lobbyists from plying their regulated trade with those they have previously supported politically, than we have seen in other attempted bans on free association and expression covered and criticized by this blog in the past. 

There is an old legal saying that “good lawyers know the law, great lawyers know the judge.” The ABA’s proposal looks to refine lobbying effectiveness more towards “what you know” and less towards “who owes you.”  The ABA has captured the mood of the country with a sensible proposal that is as likely to enjoy as much legislative success as anything trying to make its way through an otherwise dysfunctional  legislative environment.

SEC Boots Kickbacks at Federal Level

Amid the storm of pay-to-play scandals and as pay-to-play has become an increasingly hot-button state issue, the Securities Exchange Commission (the “SEC”) stepped in on August 3, 2009 to propose measures at the federal level intended to eliminate or at least curtail “pay-to-play” practices. The measures are aimed to regulate the practice of money managers making political contributions or hidden payments in hopes of winning business from government officials and conversely government officials soliciting political contributions by guaranteeing an award of business. Although the SEC has initiated fraud cases in the past related to kickbacks in pay-to-play schemes, the proposed rules seek to comprehensively address the growth of the government pension plan market and the alleged evils related to its expansion.

According to SEC Chairman Mary Schapiro, “Pay to play practices can result in public plans and their beneficiaries receiving sub-par advisory services at inflated prices. Our proposal would significantly curtail the corrupting and distortive influence of pay to play practices.” As one commentator has stated “so Shapiro is trying to be proactive, reducing…the near occasions of sin.” The rule is intended to help ensure advisory contracts are awarded on professional competence and not political influence. However, as SEC Commissioner Luis Aguilar has cautioned, pay-to-play conduct “is incredibly hard to police.”

The new rule, which revisits a 1999 SEC proposal that was not finalized in part due to monitoring concerns, would prohibit an investment adviser from providing advisory services for compensation to a government client for two years after the adviser makes a contribution to certain elected officials or candidates. Like the 1999 SEC proposal, the proposed rule is modeled on rules G-37 and G-38 of the Municipal Securities Rulemaking Board (“MSRB”), which address pay to play practices in the municipal securities markets. The SEC has couched the rule as a two-year “time out” on conducting compensated advisory business with a government client after a contribution is made and not as a limitation or outright ban of political contributions.

The proposal would also forbid an adviser from providing or agreeing to provide, directly or indirectly, payment to any third party for a solicitation of advisory business from any government entity on behalf of such adviser. Additionally, it would prevent an adviser from soliciting from others, or coordinating, contributions to certain elected officials or candidates or payments to political parties where the adviser is seeking government business. New recordkeeping requirements that would require a registered adviser to maintain certain records of the political contributions made by the adviser are also proposed.

The implications of the proposed measures could be wide ranging. For example, the new recordkeeping rules may have the unintended effect of causing non-U.S. advisers to private pools not to accept investments from U.S. government entities in order to avoid onerous record keeping requirements. In addition, commentators have speculated that the proposed ban on the use of third parties (like placement agents) would make it difficult for smaller and newer funds to develop business because such funds would not have existing contacts with the managers of public pools of capital. The uneven playing field for small funds in turn could limit the investment choices of pension plan officials, who may not have the time and resources to evaluate potential investment opportunities. The SEC seeks comments to address these and other possible pitfalls associated with its proposal.