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Backgrounder #1040

July 12, 1995

Restoring Integrity To Government: Ending Taxpayer-SubsidizedLobbying Activities

By and

To compel a man to furnish funds for the propagation of ideas he disbelieves and abhors is sinful and tyrannical.
- Thomas Jefferson

INTRODUCTION

The federal government subsidizes lobbying by tax-exempt and other organizations through grants and contracts to advocacy groups. Each year, the American taxpayers provide more than $39 billion in grants to organizations which may use the money to advance their political agendas.

Federal funding of private advocacy is not limited by ideological scope. Organizations to the left and right of the political center use taxpayers' funds to promote their ideas and positions. Almost every interest in America - from agriculture to zoology - has one or more organizations receiving government funding. Recipients range from the American Association of Retired Persons, which received over $73 million in a one-year period, to the American Bar Association, which received $2.2 million. Over the past forty years, Congress has helped create a vast patronage network of organizations that enjoy tax-preferred status, receive federal funds, and engage in legislative or political advocacy. The days of big city political machines disbursing patronage may be coming to an end, but the disbursement of financial dividends to political friends is a prominent feature of the federal budget. As Heritage Foundation Senior Fellow Marshall Breger has written:

Lacking the imprimatur of democratic consent, government subsidy of private advocacy can be seen for what it is - the public patronage of selected political beliefs. That these advocacy subsidies are rarely made openly but are often disguised through grants and contracts for legitimate public functions merely underscores the dangers inherent in a system of expansive government subsidy.1

Clearly, the right to petition government to redress grievances should not be infringed. Individuals and organizations using funds from the private sector should be encouraged to engage in the legislative and political process. It is an entirely different matter, however, to employ the coercive power of the federal government to force taxpayers to finance organizations which lobby Congress or other government entities. It is every bit as unjust to force liberal taxpayers to fund organizations on the right as it is to force conservative taxpayers to finance organizations on the left. The fundamental principle is that it should be anathema to force taxpayers to underwrite advocacy with which they disagree.

Taxpayer funding of advocacy organizations is wrong - fiscally, morally, and logically. It is fiscally irresponsible to spend federal revenues on activities that provide no meaningful return to the American people. It is morally wrong for the government to take sides in any public policy debate by assisting the advocacy activities of an elite few. And it is logically wrong for the government to fund activities that often result in lobbying for increased federal expenditures. The reasons are summarized aptly by George Mason University professor James T. Bennett and Loyola College professor Thomas J. DiLorenzo in their comprehensive study, Destroying Democracy:

A large number of individuals with strong views can express their preferences by contributing funds to a group that promotes that issue. With tax-funded politics, however, a small number of zealots with access to the public purse can obtain resources from government to advance its views even though few individuals in society share the group's philosophy. Whenever government funds any political advocacy group, it effectively penalizes those groups that advocate opposing public policies and provides a distinct advantage to the group or groups that it favors in the clash of ideas.2

THE FUNDING OF FACTION

The Founding Fathers recognized the dangers of factions in a republic. James Madison wrote in Federalist Number 10 that "Among the numerous advantages promised by a well-constructed Union, none deserves to be more accurately developed than its tendency to break and control the violence of faction." Madison defined faction as "a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community."

What the Founding Fathers referred to as factions we now call special interests. Instead of restraining factions, however, the federal government today subsidizes them. This distorts the political process by favoring one faction over another and by nourishing a network of special interests - a welfare-industrial complex - with a direct self-interest in the growth of the welfare state. The financial cost to the taxpayer is far higher than the amount funneled to these organizations. Each one not only lobbies for its contract or grant, but also advocates for bigger, more expensive social welfare programs, further complicating efforts to put the nation's fiscal house in order. Moreover, while these organizations often claim that the money they receive helps the less fortunate, the reality is that it bolsters their own political power, perks, and prestige.

The advocacy network and its leaders contribute to what author James Payne has referred to as a "culture of spending" in Washington which makes it extremely difficult to trim government programs: "Leaders of such federally dependent interest groups should not be seen as representing independent citizen opinion. They are quasi-governmental officials with a vested interest in the spending programs that benefit their organizations."3

Not every dollar given to an advocacy group goes directly to political advocacy activities. However, federal dollars are fungible. Every federal dollar frees private resources to be spent on political, lobbying, and other advocacy activities. Moreover, federal funds make the organization appear to be a larger force in the political arena than it would if it were totally reliant upon private contributions. For example, the National Council of Senior Citizens receives 96 percent of its funding from the federal government.


The NCSC is but one of many advocacy organizations receiving federal funds. Here are just a few other examples:

  • The AFL-CIO benefited from more than $2,000,000 between July 1993 and June 1994. According to the AFL-CIO News Online, the AFL-CIO used the Memorial Day recess to increase pressure on Members of Congress with its "Stand UP" campaign:
    In those [5 targeted] districts, the AFL-CIO provided radio ads and coordinators to work with local union officials and legislative action committees. Other activity included direct mail, jobsite leafleting, phone call drives using the AFL-CIO's toll-free hotline, petition drives, town meeting attendance, and letters and columns submitted to local newspapers.4
  • Recently, the Service Employees International Union produced a newspaper advertisement opposing tax cuts and efforts in Congress to slow the growth of welfare and Medicare. SEIU claims Congress is attempting to "loot" welfare programs and "steal" from low-income home-energy assistance to help finance "corporate special interests." The ad lamented the impact on Fannie Johnson and her family in Ohio.5 This labor special interest benefited from $137,000 in taxpayer funding in 1993 (for an "anti-discrimination public education campaign"). Terminating it would eliminate the tax burden of nearly 30 families just like Ms. Johnson's in Ohio.
  • Families USA - a driving force behind the Clinton big-government health care plan, including the failed last-ditch attempt to revive it last summer through a nationwide bus tour6 - received $250,000 from the taxpayers between July 1993 and June 1994.
  • The Child Welfare League of America received more than $250,000 in federal funding, then turned around and launched an ad campaign to increase welfare spending. The League ran an advertisement opposing the Contract With America's welfare reform bill which charged that "More children will be killed. More children will be raped."7
  • The National Trust for Historic Preservation received approximately $7 million from the federal government in FY 1994 - 22 percent of its budget. In the same year, the Trust "launched a lobbying campaign against the Disney project" in Northern Virginia.8 In 1993, it "lobbi[ed] Congress to expand the historic rehabilitation tax credit."9 The group's president, Walter Mondale's former chief of staff Richard Moe, said the full credit would cost "$1.4 billion over five years."10
  • The American Nurses Association received nearly $1 million between July 1993 and June 1994 from the U.S. taxpayers. In 1994, the ANA endorsed the Gephardt health care plan and actively lobbied for it. According to the union's own press release announcing this endorsement, "The American Nurses Association is the only full-service professional organization representing the nation's 2.2 million Registered Nurses through its 53 constituent associations. ANA advances the nursing profession by ... lobbying Congress and regulatory agencies on health care issues affecting nurses and the public."11 The Political Finance and Lobby Reporter revealed on May 12, 1995, that two new ANA lobbyists had registered.
  • The American Federation of State, County and Municipal Employees, which received nearly $150,000 in the most recent grant reporting period, denounced the House welfare plan, saying it "will drive more families into poverty and turns its back on hardworking Americans who fall on bad times. This is the small print in their evil Contract on America." AFSCME President Gerald McEntee went on to say that "AFSCME will continue to fight for real welfare reform that includes jobs at decent wages, child care, health care and education and training."12

Actually, however, government funding of advocacy organizations can hurt their cause. Well-grounded public policy institutions prosper from strong grassroots support backed by individual financial contributions. Much like a profitable company, they can measure support by looking at how many people were willing to open their checkbooks for the cause:

The plain fact is that political advocacy groups will not flourish on the basis of government subsidy. Rather they will prosper only insofar as they develop financial roots in the polity. Reliance on the government trough is no sign of the commitment of your adherents to your cause.13

NOT A NEW PROBLEM

Federally funded advocacy is not a new problem. Congress recognized the potential for abuse more than 75 years ago when it passed a law prohibiting the use of federal funds for political advocacy. Unfortunately, the prohibition was too vague, too lenient, and too weakly enforced. Put simply, auditing of federal grants by the government does not provide the level of scrutiny needed to root out abuse.

The scope of the problem can be seen by examining the Catalog of Federal Domestic Assistance, published every six months by the federal government. It details nearly every federal program from which eligible individuals, organizations, and governments can receive tens of billions of dollars in taxpayer funding.

For years, congressional offices have worked with constituents to help them find federal grants, in the process becoming very familiar with the Catalog as a guide to sources. But very few congressional staff employees have been aware of abuses in the grants process. These abuses are long-standing. In testimony before the House Committee on Government Operations in 1983, Joseph Wright of the Office of Management and Budget noted that the General Accounting Office had found problems as far back as 1948.14

In the early years of the Reagan Administration, the OMB attempted to revise OMB Circular A-122 (originally issued in the final year of the Carter Administration) to redefine limits on "allowable costs" by federal grantees. The revision, first released in January 1983, was widely criticized as overly broad, excessively burdensome, and unenforceable.

One of the focal points of the initial debates was the fact that the original OMB proposal apparently would have disallowed the use of any equipment, personnel, or office space for both federal grant and political advocacy purposes if at least 5 percent of the organization's resources was used for lobbying. For example, a copy machine could not be used to produce flyers for a rally on Capitol Hill if it was paid for - in whole or in part - by taxpayer funds. Many nonprofits objected to such clear separation between federal funding and political advocacy.

Months later, OMB Director David Stockman and General Counsel Michael Horowitz withdrew the original proposal and released a new draft with a more narrow definition of prohibited activities. This watered-down version no longer drew a clear line between allowable and unallowable costs. Instead, it specified a few examples of prohibited behavior, including a prohibition on reimbursement for conferences used in "substantial" part to promote lobbying activities.

Unfortunately, this effort to appease federally funded nonprofits and quell opposition in Congress was futile. Because Congress signaled its clear opposition to working with the Reagan Administration to curb federally funded lobbying activities, despite the fact that all parties acknowledged such behavior was inappropriate, A-122 failed to improve substantially the restrictions on lobbyists billing Uncle Sam for their activities.

EXISTING PROHIBITIONS AREN'T WORKING

Federal law prohibits the use of federal funds for lobbying (18 U.S.C. Section 1913). However, there is no clear set of guidelines as to specific prohibited practices. In addition, numerous appropriations riders have been offered and approved in the past in an effort to curb federally subsidized lobbying. The purpose of the Reagan Administration's attempt to create a more stringent version of OMB Circular A-122 was to tighten the gaping loopholes in existing law and to implement Congress's intent in passing lobbying prohibitions.

Circular A-122 drew on several distinct concepts to frame the new guidelines.

  • Taxpayers are not obliged to fund advocacy they oppose. The Supreme Court in 1977 ruled that taxpayers are not required, directly or indirectly, "to contribute to the support of an ideological cause [they] may oppose." (Abood v. Detroit Board of Education)
  • Freedom of speech does not depend on federal funding. In 1983, the Supreme Court unanimously ruled that the federal government "is not required by the First Amendment to subsidize lobbying .... We again reject the notion that First Amendment rights are somehow not fully realized unless they are subsidized by the State." (Regan v. Taxation with Representation)
  • The Internal Revenue Code does not alleviate the problem. The notice of the request for public comment on the second revision of A- 122 notes that current IRS rules threaten tax-preferred organizations only if they exceed defined limits on lobbying. However, the limits are not tied in any way to the receipt of federal funds, leading to many of the same problems from which the 1919 law prohibiting federally funded lobbying suffers.

Unfortunately, the firestorm created by the first proposed revision of A- 122 led to a second draft that watered down the tough initial provisions and failed to solve the problems outlined by the Administration in presenting its proposals. The notice for public comment on the second proposal stated that its "purpose [was] assuring compliance with a myriad of statuory provisions mandating that no federal funds be used for lobbying purposes, and to comply, in balanced fashion, with fundamental First Amendment imperatives." Despite the best of intentions, the revised A-122 did not meet these goals.

A particularly serious provision of the second revision was its enforcement mechanism. A popular maxim in the 1980s was "trust but verify." OMB Circular A-122 relied on trust alone:

[T]he federal government will rely upon [the nonprofit employee's] good faith certification of lobbying time below 25% .... Under the proposal, the absence of time logs or similar records not kept pursuant to grantee or contractor discretion will no longer serve as a basis of contesting or disallowing claims for indirect cost employees.

In essence, this lack of verification of time spent on lobbying activities permits the individual to state that he is complying with the law even if that is not the case. This is worse than the fox guarding the henhouse. If a nonprofit is willing to violate the restrictions on advocacy, surely it will have no qualms about certifying it is in compliance with the law.

TOUGHER RESTRICTIONS NEEDED

Tougher laws are needed to prevent the abuse of taxpayers' funds by federal grantees. There is no excuse for compelling John Q. Public to support political advocacy that he opposes. It is fiscally irresponsible and morally indefensible.

The following should be essential parts of any congressional efforts to curb current abuses:

  • Truth in Testimony. Witnesses testifying before Congress should be required to divulge in their oral and written testimonies whether they receive federal funds and, if so, for what purpose and in what amount. This will permit committees to view the testimony in an appropriate light.
  • No Federal Funding for Advocacy. No organization that receives federal funds should be permitted to engage in anything but incidental lobbying activities, except on issues directly related to its tax status.
  • No Bureaucratic Shell Games. No recipient of federal funds should be permitted to maintain organizational ties to any entity that engages in lobbying activity. All sub-grantees should be treated as if they received the funds directly from the federal government. Independent Sector, an organization representing hundreds of nonprofit advocacy groups, unwittingly indicated the need for this in a recent report: "Although the non-profit organization received a check from the local government, the local government may have received some or all of its funding for this project from a Federal Community Development Block Grant (CDBG)."15
  • Meaningful Auditing. The Inspectors General of the various federal departments and agencies must investigate more thoroughly any abuses of current law, as well as new laws passed by the Congress.
  • Tough Penalties. The consequences for violating the prohibition on federally subsidized lobbying must be sufficient to discourage organizations from violating the standards. Under no circumstances should any organization that willingly and knowingly violates the prohibitions receive further federal funding.

Representative Robert K. Dornan (R-CA) has introduced H. R. 1130, the Integrity in Government Act, which would prohibit a recipient or paid representative of any federal award, grant, or contract from lobbying in the following circumstances:

  • In favor of continuing the award, grant, or contract;
  • In favor of the actual program under which the funds were disbursed;
  • In favor of any other program within the broad department or agency; and
  • In favor of continued department or agency funding.

The Dornan legislation also prohibits tax-exempt lobbying organizations from receiving federal funds. Representatives Bob Ehrlich (R-MD), Ernest Istook (R- OK), and David McIntosh (R-IN) also are working on legislation to remedy this problem.

It is difficult to craft legislation that satisfactorily defines prohibited activities. Moreover, any bill designed to redress these abuses must prevent organizations from simply establishing separate bank accounts and separate names. To be effective, there must be a definite and complete physical separation between all federally and privately funded resources.

CONCLUSION

Taxpayer-subsidized political advocacy represents pure fiscal folly and moral injustice. No hard-working American should be compelled to finance lobbying activities with which he disagrees. The Founding Fathers would be appalled at current federal grantmaking. Thirteen years ago, The Washington Post editorialized:

[W]e agree that there is something disturbing about organizations that strongly advocate positions many sensible people find politically or morally repugnant, acting at the same time as administrators of government programs. It is easy to believe that the advocacy groups' employees will sometimes proselytize the program's beneficiaries in ways we would consider inappropriate (though not unheard of) for a civil servant. Advocacy organizations might also want to ask themselves whether they risk compromising their own purposes by accepting government money, and whether they want to assume the inevitable risk that it might be withdrawn suddenly for legitimate political reasons.16

Abuse of federal grant funds must be stopped. Tougher restrictions are needed to prevent lobbying organizations from obtaining some or most of their revenue from the American taxpayers. Auditing and investigation of federal grantees by the Executive Branch must be strengthened. However, a danger always exists that as long as government funds go to advocacy organizations, the "wall of separation" will be porous. Moreover, the less fortunate would be assisted more directly by eliminating the middleman who "does well by doing good."

Without restoring integrity to government by ending federally funded lobbying, Congress and the President will continue to squander millions of taxpayer dollars each year. Political patronage should have no place in the federal budget.

APPENDIX

The following case studies demonstrate the need to reform the federal grants process. The organizations analyzed were selected for illustrative purposes and do not represent the entire universe of the problem.17

American Association of Retired Persons (AARP)

AARP receives funding for approximately one-quarter of its annual expenditures from the federal government. Sources range from programs for the elderly to millions of dollars annually to provide clerical support to the EPA.

  • Senior Environmental Employment Program (EPA: 66.508) -- 20,000,000
  • Tax Counseling for the Elderly (IRS: 21.006) -- 4,600,000
  • Sr. Community Service Employment Program (DOL: 17.235) -- 49,000,000
  • Breast/Cervical Cancer Detection Program (HHS: 93.919) -- 75,000
    $73,675,000

American Bar Association (ABA)

The American Bar Association received $2.2 million in federal grants between July 1993 and June 1994.

  • Missing Children's Assistance (DOJ: 16.543) -- 1,242,000
  • Social, Behavioral, and Economic Studies (NSF: 47.075) -- 138,000
    -- "Resistance and Rebellion in Black South Africa: 1830-1920"
  • Juvenile Justice and Delinquency Prevention (DOJ: 16.541) -- 100,000
  • Nat'l Institute for Juv. Justice and Delinquency Prev. (DOJ: 16.542) -- 50,000
  • Justice Research, Development and Evaluation (DOJ: 16.560) -- 139,000
  • Drug Control and System Improvement (DOJ: 16.580) -- 125,000
  • Title IV - Aging Programs (HHS: 93.048) -- 200,000
  • Child Welfare Research and Demonstration (HHS: 93.608) -- 125,000
  • Child Abuse and Neglect Discretionary Activities (HHS: 93.670) -- 58,000
  • Disaster Assistance (FEMA: 83.516) -- 30,000
    $2,207,000

AFL-CIO

The AFL-CIO (and its affiliates) received $10.7 million in federal funding between July 1993 and June 1994. Following is an overview of this organization's federal funding:

  • Tripartite Construction Training Tech. Xfer (DOL 17.AAA) -- 1,119,000
  • Section 8 Rehabilitation (HUD: 14.856) -- 868,000
  • Occupational Safety and Health (DOL: 17.500) -- 70,000
    -- Targeted Training Program - Logging

    In addition, the following contracts were awarded to the AFL-CIO Appalachian Council:

  • DOL/ETA: Vocational-Technical Training -- 2,670,000
  • DOL/ETA: Other Ed/Training Services -- 5,974,000
    $10,701,000

Child Welfare League of America (CWLA)

The Child Welfare League of America received the following grants between July 1993 and June 1994:

  • Intergenerational Grants (Corporation for National Service: 72.014) -- 58,000
  • Adoption Opportunities (HHS: 93.652) -- 2,000
  • Special Programs for the Aging (HHS: 93.048) -- 200,000
    $260,000

Consumer Federation of America (CFA)

The Consumer Federation of America received more than $600,000 from the EPA. The code assigned to the award was not found in the Catalog.

  • Radon Projects (EPA: 66.AAC) -- 610,000
    $610,000

Environmental Defense Fund (EDF)

The Environmental Defense Fund benefited from more than $500,000 in taxpayer funding.

  • Drainage Management System (DOI: 15.BBZ) -- 50,000
  • Tradable Discharge Permits (EPA: 66.AAC) -- 15,000
  • Air Pollution Control Research (EPA: 66.501) -- 90,000
  • National Recycling Campaign (EPA: 66.AAC) -- 360,000
    $515,000

Families USA

Families USA received at least $250,000 from the Department of Health and Human Services.

  • Special Programs for the Aging (HHS: 93.048) -- 250,000
    $250,000

League of Women Voters (LWV)

The League of Women Voters benefited primarily from EPA funding for various environmental research projects.

  • Clean Air Act Policy Development (EPA: 66.AAC) -- 100,000
  • UV Index (EPA: 66.AAC) -- 21,000
  • Managing Solid Waste Training (EPA: 66.951) -- 39,000
  • Community Ground-Water Education Project (EPA: 66.AAC) -- 190,000
  • Nuclear Waste Primer (DOE: 81.065) -- 261,000
    $611,000

National Council of Senior Citizens (NCSC)

The NCSC receives 96 percent of its funding from the federal government.

  • Dislocated Worker Assistance (DOL: 17.246) -- 6,000
  • Senior Environmental Employment Program (EPA: 66.508) -- 9,988,000
  • Section 8 Housing Rehabilitation (HUD: 14.856) -- 522,000
  • Sr. Community Service Employment Program (DOL: 17.235) -- 61,000,000
    $71,516,000

World Wildlife Fund (WWF)

The World Wildlife Fund received $2.6 million in federal funding between July 1993 and June 1994. Following is an overview:

  • Undesignated EPA Grants -- 618,000
  • Global Marine Contamination Project (EPA: 66.501) -- 450,000
In addition, 31 federal contracts were awarded to "Resolve, World Wildlife Fund" during this same period. These contracts were from the EPA for "Other Management Support Services" and totaled $1.5 million.
$2,600,000

END NOTES

(1) Marshall Breger, "Halting Taxpayer Subsidy of Partisan Advocacy," Heritage Lectures No. 26, 1983, p. 10.

(2) James T. Bennett and Thomas J. DiLorenzo, Destroying Democracy: How Government Funds Partisan Politics (Washington, D.C.: Cato Institute, 1985), p. 388.

(3) James Payne, The Culture of Spending (San Francisco: ICS Press, 1991), p. 17.

(4) AFL-CIO News Online, June 7, 1995, downloaded from the AFL-CIO's Internet site on June 16, 1995.

(5) Advertisement, "Fannie Johnson Can't Afford Another Republican Tax Cut," The New York Times, June 15, 1995, p. B-11.

(6) "The $2 million [bus] trip is financed by Families USA, a liberal philanthropy, with unions and other groups." Families USA was the "chief sponsor of the caravans." Jennifer Campbell, "Caravan Met with Mixed Reaction," USA Today, July 29, 1994, p. 4A.

(7) Advertisement, "First neglect at home. Now abuse by Congress," The Washington Times, March 22, 1995, p. A19.

(8) Editorial, "The War of the Subsidies," The Washington Times, May 6, 1994, p. A22.

(9) James H. Andrews, "Historical Trust Uses Its Clout for US Heritage," The Christian Science Monitor, May 14, 1993, p. 12.

(10) Charlene Prost, "Historic Preservation Trust Seeks to Gain New Members," St. Louis Post-Dispatch, October 5, 1993, p. 13B.

(11) PR Newswire, ANA press release, August 11, 1994, obtained from NEXIS.

(12) PR Newswire, AFSCME press release, March 27, 1995, obtained from NEXIS.

(13) Marshall Breger, "Partisan Subsidies: Democracy Undone," The Washington Times, December 6, 1983, p. 2C.

(14) Joseph R. Wright, Jr., testimony in Hearing on Proposed Revisions to OMB Circular A-122, Committee on Government Operations, U.S. House of Representatives, 98th Cong., 1st Sess., March 1, 1983, p. 2.

(15) See "Impact of Federal Budget Proposals Upon the Activities of Charitable Organizations and the People They Serve," Independent Sector, June 1995, p. 314.

(16) Editorial, "Financing the Left," The Washington Post, April 26, 1982

(17) The dollar amounts provided are approximate, based on information provided by congressional offices from searches in the Federal Assistance Awards Data System (FAADS) database. All financial data cover the period from June 1993 to July 1994, unless otherwise specified. Numbers in parentheses are reference numbers for programs listed in the Catalog of Federal Domestic Assistance.

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