Wagner Ruling a Win for Transparency, But Concerns Remain

Earlier this month, the U.S. Court of Appeals for the D.C. Circuit issued a ruling in Wagner v. FEC upholding a longstanding ban on campaign contributions by federal contractors. The case questioned the constitutionality of a federal law that prevents individual contractors from making contributions to any “political party, committee, or candidate for public office” from the commencement of negotiations of a contract until its completion. While the result is a good one, contractors are still allowed to give unlimited money to outside political groups, some of which hide the names of their donors. President Obama should build on the Wagner decision by issuing an Executive Order requiring contractors to disclose all of their political spending.

The ruling is a fundamental win in the fight for campaign finance reform, reaffirming that government may regulate political donations by those seeking contracts funded by taxpayer dollars. When Congress passed the prohibition on contractor contributions as a part of the Federal Election Campaign Act of 1971, there were two important government interests, each of which are still relevant today. The first was prevention of “quid pro quo” corruption, or giving a contribution in return for a government favor, also known as “pay-to-play.” The second interest was “protecting against interference with merit-based public administration.” Both of these interests are important, and both aim to ensure the contracting process is fair. The court’s decision will serve these interests by continuing to prevent direct contributions from contractors to candidates.

Despite the prohibition on contributions from contractors, however, there is no ban on their independent political spending. Many times this spending is funneled through “dark money” groups, meaning that its original sources are undisclosed.  For example, contractors can donate to  501(c)(4) groups (tax-exempt groups identified as “social welfare organizations” by the IRS) that spend money in elections without disclosing names of the underlying donors, allowing contractors to skirt the disclosure rules and leaving voters in the dark as to who is trying to influence their elected representatives. 

Under Citizens United v. FEC and other rulings, independent spending cannot be limited, even if the spender is a corporation or individual who seeks a contract with the government. (The law preventing contractors from making independent expenditures is not enforced post-Citizens United.) Despite the Supreme Court’s holdings, most Americans would easily conclude that just like direct contributions, independent expenditures could influence the government contracting process and give an advantage to those willing and able to spend on politics. This risk of undue influence is a major reason why President Obama must issue an Executive Order calling for the disclosure of all campaign spending by government contractors.

Contractors have been big campaign spenders for decades. Their disclosed spending, coupled with an unknown amount of undisclosed spending, poses a very serious corruption threat to the contracting process. The proposed Executive Order would make it mandatory for all contractors to disclose their campaign spending, thus illuminating to the general public the entirety of contractor spending in elections. While it wouldn’t eliminate corruption altogether, transparency would allow voters to assess for themselves whether an inappropriate relationship exists between a donor and a politician with influence on the contracting process. It  would bring us closer to a truly “merit-based” public administration.

The federal government spends a lot of money on contracts — $460 billion in FY 2013 alone. Allowing government contractors to spend secret money in elections presents a lucrative opportunity for those seeking to win contracts based on their financial support of politicians, instead of their ability to do a better job than competitors. The Executive Order would give Americans the tools they need to hold accountable politicians who reward political donations with federal contracts.

Mitchell Brown is a law student at New York University School of Law