Why be skeptical of Obama’s disclosure EO

Recently an acquaintance asked what reasons there would be against the draft Executive Order circulating around that would require government contractors to reveal their political spending and that of their employees as a condition of getting government contracts. There are a number of reasons worth mentioning, but then I want to turn back to the big picture, which in my mind provides the strongest arguments contra the proposed EO. 

First, bear in mind that corporate PAC contributions to candidates and parties, and corporate PAC independent expenditures (which are quite rare) are already disclosed. So are contributions by corporate officers and managers. Thus, the EO’s new disclosure would concern contributions by corporations or their employees and officers to groups that make politically-oriented expenditures without disclosing the precise identities of their donors. 

Remember that the proposed EO would require companies to disclose not only their own financial support for groups that later do political spending, but also the support of their employees. Thus, the law effectively mandates that government contactors actually monitor their employees’ political activities. This compelled invasion of employee privacy is an especially remarkable feature of the proposed order. 

It is sometimes assumed that political figures already know about these corporate expenditures, so disclosure merely makes the spending visible to the public. However, all the evidence suggests that political figures in fact do not know about these expenditures, but desperately want to find out. In fact, it is quite clear that those who spend money opposing incumbent officeholders or supporting their challengers often work very hard to keep the activity quiet, especially if they have significant business with the government or are heavily regulated by the government. For obvious reasons, these spenders do not want incumbents to find out about their opposition, and are willing to expend considerable monetary and political capital to keep their identities quiet. Certainly that has been the ongoing theme of the last year, and the fact that there have not been many allegations along the lines of “these are the corporations that have given to …” suggests that the politicians really don’t know who is spending. If that is true, then the case for disclosure pretty much falls out at the bottom—at that point, compulsory disclosure is clearly making “pay to play” easier, not harder, for the political class. 

In fact, even when spenders support incumbents (or challengers who become incumbents) and want them to know of their support, it is harder than it might seem. This requires the spender to make known information to the key congressional players, without letting it be publicly known. Maybe keeping secrets in Washington has become easier than it used to be. Regardless, because anyone can swear fidelity and claim that they supported groups making independent communications that an officer holder might have been grateful for, there is a major trust problem. This is less true if the spender is already publicly known as a supporter, but in that case there is no gain from compulory disclosure. Nor is it easy to convince the politician to take an unethical measure (really, most politicians have ethics) of promoting a contractor for political gain. Moreover, even unethical politicians cannot know if the spender is also playing the other side of the fence, another reason for skepticism and mistrust. 

In this situation, requiring disclosure dramatically lowers the transaction costs for those who would engage in “pay to play” politics. Indeed, this is true even for those contributions that are already disclosed through the FEC or the IRS. Now, all those will be listed in one easy to find and analyze place, as opposed to searching databases and teasing out the information, which is esecially time consuming if corporate managers do not list their employer, which is requested but not required.

From an enforcement standpoint, politicians will be virtually off the hook. Since all the information needed will be public and readily obtainable, no discreet inquiries must be made, no promises exacted, no follow up to assure fulfillment of the bargain required. These are the type of thing that traditionally trip up corrupt pols. 

Further, institutionalizing consideration of giving into the contracting process is likely to make it more, not less, political. It demands that politicians and procurement officials be conscious of political positions and influence, where often in the past they were not. It may also not be an improvement in terms of public understanding of government. There will be many, many false positives that result from the simple correlation of political speech and government contracting.

In short, institutionalizing “pay to play” and making it open and public, in the manner of the proposed EO, may or may not be an improvement. 

Adding to that is the fact that “pay to play” has historically been seen more as a state than a federal problem. States do far more unbid or open bid contracting than the federal government, and generally have less staff resources and expertise. If you look through the history of “reform” organization complaints, “pay to play” has rarely been high on the list at the federal level. Rather, the argument has historically been that influence is seen in the regulatory and legislative processes, and in policy. It may be that a policy will benefit a company by increasing contracting opportunities, but the alleged corruption has generally been alleged to occur in the course of determining that policy, not in the procurement that might follow. Almost all federal contracting is already undertaken in a manner that gives little room for “pay to play.” 

Which takes us to the big picture. Most companies large enough to engage in “pay to play” at a federal level are heavily regulated by the government in a myriad of ways. In other words, for most of these companies, contracting may be the least of their concerns in their dealings with the government. Beyond any “pay to play” issues, many of these companies are vulnerable to retaliation in numerous ways, including the awarding of waivers from the recent health care legislation, bailouts under TARP, and a host of regulatory decisions.   

In the current environment, we know that for over a year the Democratic party leadership has sought to deter political speech that it believes will be, on balance, harmful to its prospects. The President and several other prominent party officials have specifically mentioned the interests they wish to silence. Sen. Schumer has openly noted that “the deterrent effect [of disclosure] should not be underestimated.” Democrats have failed to pass restraints through Congress or the FEC. In short, we know that Democrats have been desperately trying to get this information for reasons unconnected from “pay to play” concerns. Now, with remarkably coincidental timing, along comes this proposed EO. 

In this environment, there is every reason to believe that the EO is itself a product of “pay to play” type politics—that is, the arguments put forward for it are in fact insincere, and it is an effort to facilitate punishing or intimidating opponents (and possibly rewarding supporters). Certainly the EO could facilitate that. There is not much reason to believe that “pay to play” is a particular problem now more than it was in the past. There is not much reason to believe that spending by non-profits using personal contributions from executives of govment contractors is more of a problem than it was in the past—particularly noting the use of soft money in the 1990s and the ability of non-profit corporations to make non-express advocacy expenditures more than 60 days from an election right through 2010, when Citizens United was decided.

The history of campaign finance reform is replete with efforts to use the law to silence or hinder political opponents. The current effort has every indicia of such an effort. Since the EO clearly has the possibility to be used to favor or disfavor contractors based on their political orientation or that of their employees, we  should be particularly suspicious of giving that power to government—especially to an administration that has been quite clear about its desire to limit opposition political speech in the 15 months since Citizens United came down. That’s the political reality, which in other contexts we are constantly told must be considered when looking at campaign finance. 

Skepticism and a presumption of unconstitutionality is called for when government begins to regulate political speech. This is in large part because of the realities of government, politics, and the enforcement process, which are vividly on display here.

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