• 21 May 2009

Ending the Endogeneity of Earmark Rules

Rebecca Kysar - Brooklyn Law School

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For centuries, livestock owners have marked their animals by clipping their ears.  Paradoxically, the term we give to special interest provisions—”earmarks”—conflicts with its origins in this agrarian practice.  Far from revealing ownership, earmarks actually conceal their supporters and beneficiaries.  Undetected, these provisions are less costly because they face less opposition in the legislative process.  Although a few special interests are named explicitly in statutes, most special interest beneficiaries remain hidden. 

The Tax Reform Act of 1986 (the “Act”), for example, contained “transition rules” that selected one or a very few number of taxpayers for reprieve from new tax increases.  One such transition rule exempted Merrill Lynch from the Act’s repeal of the investment tax credit.  This  meant that the company could take the credit, in spite of its repeal as applied to other taxpayers, for a lease on a future building that would serve as its new global head office.  Instead of naming the investment bank outright, the exception applied to the following:

[T]he lessee or an affiliate is the original lessee of each building in which such property is to be used, such lessee is obligated to lease the building under an agreement to lease entered into before September 26, 1985, and such property is provided for such building, and such buildings are to serve as world headquarters of the lessee and its affiliates.1

One cannot ascertain the true beneficiary of this provision from its face.  In what has been a remarkable response to unearthing hidden special interest provisions like this, the Senate and the House each recently enacted internal “earmark rules” requiring their members to disclose such provisions, including their special interest beneficiaries, in both the tax and spending contexts.  In my article Listening To Congress: Earmark Rules and Statutory Interpretation, I discuss these earmark rules and detail why their problems stem largely from Congress’s constitutional power to interpret and enforce its own rules.  I then examine the possible use of extra-congressional forces to strengthen the rules.  Given the constitutional limitations upon such means, I arrive at a method of statutory interpretation—that judges should interpret ambiguous legislation that falls within the ambit of the earmark rules as if Congress had followed the rules.  In so doing, judges should assume Congress has disclosed any special interest provisions and identified all nominally intended beneficiaries.  Thus, any ambiguous special interest legislation that has not been adequately disclosed by legislators should be narrowly construed, against the beneficiaries, imposing costs on lawmakers, as well as the special interests they support, if they defect. 

Earmark Rules

Simplifying a bit, earmark rules require disclosure of any special interest provisions, defined as earmarks or limited tax benefits.  Both the House and Senate define “earmarks” as providing a specific amount of spending for an entity, or targeted to a specific locale, other than through a competitive process.  “Limited tax benefits” are like “tax earmarks” and are defined to provide tax benefits to fewer than a small number of beneficiaries, among other requirements.  In the Senate, this means that benefits are provided “to a particular beneficiary or limited group of beneficiaries” and in the house, to “ten or fewer beneficiaries.”

Earmark rules are examples of legislative rules or internal rules that govern congressional lawmaking.  Why do legislators agree to be bound at all to such rules that curtail their future lawmaking options?  Legislative rules are akin to what Jon Elster has labeled precommitment devices.  That is, actions a person takes in order to ensure that she will perform a certain act, by making it either impossible or costly to defect from the committed path.  To illustrate the concept of precommitment, Elster uses the example of Ulysses ordering his crew to tie himself to the mast, sealing all of their ears with wax, to avoid the temptation of the sirens’ song.  Earmark rules, like many precommitment devices, also help to overcome classic collective action problems.  Although each member of Congress may value transparency for the collective whole as a means to deliberation and accountability, any given member may be incentivized to defect from the rules because she will reap all of the benefits of defection and only her disproportionate share of the harm.  Collective action problems may worsen as other members detect their colleagues’ defection.  By agreeing as a whole to disclose hidden interest group deals, earmark rules serve to bind congressional members to the common goal of transparent legislation. 

Predictably, however, individual members may later find the constraints imposed by the earmark rules undesirable, and hence may develop methods to evade them.  Circumvention from legislative rules is easy; each house adopts its own set of rules and has enormous flexibility over them—few constitutional limitations exist upon their content, and each house can unilaterally change or waive the rules.  Generally, legislative rules are enforced only within Congress.  The Ulysses metaphor thus fails in the legislative rule context because legislators, lacking external checks, can afterward defect from the rules without much cost.  It is as if Ulysses had discovered tools to later untie himself. 

The Endogeneity of Earmark Rules

The largest threat to the proper functioning of the earmark rules is simply that lawmakers will not follow them.  The Senate majority leader and the House Appropriations Chair have taken the position that they can falsely certify as to the contents of legislation—for example, by simply stating that there are no earmarks or limited tax benefits—and Senators can only object if the majority leader failed to provide certification altogether, not if they believe the certification is false or incomplete.  Senator McCain bemoans this state of affairs, stating that although “earmarks should be disclosed in theory,” the disclosure can only be “policed” by the committee chair or the majority leader.2  If these members “say all the earmarks are identified,” McCain argues, “[Congress] take[s] it as gospel.”3

The House Appropriations Chairman David Obey has also aggressively interpreted the rules in other ways by arguing that the earmark rules do not apply to provisions inserted by himself.  When a representative sought clarification about the omission of a NASA earmark from a disclosure list in a bill, the Chairman responded, “The fact is, that an earmark is something that is requested by an individual member.  This item was not requested by any individual member.  It was put in the bill by me!”4

Congress needs assistance to stay the course in their precommitment to transparent special interest legislation.  Under our constitutional scheme, however, opportunities for extra-congressional involvement in the lawmaking process are quite limited.  The Rulemaking Clause states that “each House may determine the Rules of its Proceedings.”  Courts generally interpret this clause to mean that legislative rules are beyond scrutiny from the other branches unless the legislative rules ignore constitutional restraints or violate fundamental rights of non-congressional members.  Thus, direct challenges against deficiencies in the earmark rules or defections from the rules are not available to plaintiffs.

My Proposal

As an alternative to direct review of the earmark rules, I propose another form of extra-congressional involvement—namely, that courts should reinforce Congress’s rulemaking authority by interpreting ambiguous legislation that falls within the ambit of the earmark rules as if Congress had followed the rules.  In other words, courts should construe narrowly, against special interests, ambiguous statutory benefits that were not disclosed in accordance with the earmark disclosure rules.  Courts should do this even though we have every reason to believe that legislators will seek to avoid the application of the rules when they confer targeted benefits on special interests. 

The proposal will apply primarily in certain tax and spending litigation scenarios.  A special interest defendant in a tax enforcement proceeding may claim offsetting tax benefits or relief from a provision enforced by the IRS.  For instance, suppose that a corporation, Corp. X, sues the government for entitlement to investment tax credits, either by claiming a tax refund or a reduction in taxes owed.  Suppose Corp. X relied upon the transition relief provision mentioned above to argue that the lease on one of its buildings, entered into in the 1960s, was exempted from the Act’s repeal of such credits.  In response, the government argues that the provision is only applicable to newly constructed world headquarters, citing the provision’s prospective language, including “is to be used,” “agreement to lease,” and “are to serve.”5

Assuming the court concludes that the statutory language is ambiguous, then the next step under the proposal would be for the court to determine whether or not the provision—as interpreted by the taxpayer seeking relief—would fall within the ambit of the earmark rules.  If so, then the court would look to see whether Corp. X actually was disclosed as required under the rules.  If not so disclosed, the proposal prescribes an interpretive presumption against a construction of the statute in which Corp. X receives a limited tax benefit, in this case the investment tax credit, covered by the rules.6

Note that this result should follow even if Corp. X had lobbied its representative to include language ambiguously drafted in its favor.  In this manner, the proposal strengthens congressional adherence to the rules by imposing costs upon lawmakers, as well as the special interests they support, when the lawmakers do not adhere to their own rules.  It does this by providing that judges should refuse to interpret ambiguous statutes in ways that would create undisclosed special interest deals. 

Doctrinal and Theoretical Support for the Proposal

My approach to statutory interpretation in this context is consistent with the caselaw regarding the Rulemaking Clause of the Constitution.  First, the D.C. Circuit has stated that it “must assume that [a house of Congress] acted in the belief that its conduct was permitted by its rules, and deference rather than disrespect is due that judgment.”  Thus, like in my proposal, many courts assume that Congress had followed its rules.  Second, courts generally do not second-guess Congress’s determination of the validity of its documents.  In Marshall Field v. Clark, the Court refused to question the truthfulness of the presiding officer’s certification that a bill presented to the President was the same as the one enacted by the House.  Similar to the Court’s conclusion in Marshall Field, my proposal requires simply that judges accept as true the Majority leader’s or committee member’s certification of a bill’s composition and its compliance with the earmark rules. 

Direct judicial review of the rules poses separation of powers concerns.  Many argue that judicial incompetence concerning the legislative process justifies the conclusion that each house has authority over its own rules, or that Congress’s lawmaking power relies on such authority.  My proposal recognizes that courts are not necessarily better suited to inject their own view of the ideal legislative process by judging the content of the earmark rules or to strike down legislation not passed in accordance with the rules.  Instead, the proposal avoids separation of powers concerns by simply using the legislature’s own internal rules to cure the problems Congress perceives within itself.  One might even argue that a court’s interpretation of a statute to confer special interest benefits when Congress had not by its own rules disclosed it as such, would be a greater intrusion upon the legislative function.

In addition to having doctrinal support, my proposal fits within several academic views of statutory interpretation.  Textualists would presumably object to the use of non-statutory materials in interpreting statutes.  However, one of their primary objections for using such materials—that consulting legislative history encourages members to insert hidden or vague provisions at the benefit of special interests—falls away because the purpose of the earmark rules is to highlight the insertion of such provisions.  Additionally, unlike committee reports or other examples of legislative history, the rules were adopted by the entire house and are not undemocratic—use of the earmark rules in the proposal actually prevents a defecting minority from co-opting the statute.  Finally, although textualists argue that society is governed by law rather than legislative history, procedures that govern lawmaking, like the earmark rules, exert profound influence over the laws that ultimately determine the rights and obligations of the citizenry and should not be ignored when Congress does not so wish.

Intentionalists will also likely see the virtues of this proposal.  By consulting materials that are central to Congress’s chosen lawmaking process, judges, under the proposal, defer to the accuracy of Congress’s own statement regarding the content of legislation thereby illuminating congressional intent.  Through the earmark rules, Congress has attempted to settle upon a collectively shared, explicit meaning of enacted statutes.  My proposal simply counsels judges to defer to that intent, as expressed in the disclosure lists mandated by earmark rules. 

Other scholars divide the statutory interpretation literature into two strains, influenced by pluralism or republicanism.  Pluralists suggest that interest group competition for scarce resources results in a political equilibrium; hence courts must enforce statutes as if they were contracts between private parties and lawmakers.  At first glance, my proposal offends such thinkers by refusing to uphold certain interest group deals—that critique falls away, however, when the deals are invisible to all of the participants and if the lawmakers have put in place rules that mandate disclosure of such deals.  In such an instance, there simply is no legislative bargain, according to Congress’s own rules of bargaining. 

By contrast, republican theorists generally embrace the notion that laws be supported by reason and do not accept out of hand the products of the political process.  Republicanism strives towards deliberation and the suppression of hidden deals between lawmakers and special interests.  Accordingly, republicans argue for the adoption of canons of statutory interpretation that promote such modes of lawmaking.  By supporting a congressional precommitment to shine light upon such special interest deals, my proposal is one such canon.   


In summary, I propose that courts should defer to the certifications of Congressional members, as required by earmark rules, when interpreting ambiguous legislation.  At the risk of over-playing Ulysses metaphors, my proposal navigates, like Ulysses in the Odyssey, between a rock and a hard place.  On the one hand, Congress has enacted legislative rules that have little staying power due to the lack of external governing forces.  On the other hand, Congress’s status as a lawmaking body and its derivative power over its legislative rules provide few avenues to assist it in reinforcing those rules.  My proposal attempts to strengthen Congress’s precommitment to transparent special interest tax and spending legislation, without intruding upon its lawmaking function.  The proposal thus challenges the commonly held notion that Congress cannot truly precommit itself due to the endogeneity of its legislative rules.  In future work, I intend to further question the constitutional inevitability, as well as the wisdom, of a wholly internal set of legislative rules.  In so doing, this larger project will explore the threat of such instable, non-binding rules upon the rule of law, citing various examples of this encroachment in the tax legislative process.dingbat



Copyright © 2009 Cornell Law Review.

Rebecca Kysar is Assistant Professor of Law, Brooklyn Law School.

For helpful comments, I am grateful to Lily Batchelder, Meredith Conway, Steven Dean, Peter Devine, Kelly Dunbar, Miranda Fleischer, Vic Fleischer, Bob Green, Kristin Hickman, Anthony Infanti, Carlos Gonzalez, Heidi Kitrosser, Anita Krishnakumar, Doug Kysar, Sarah Lawsky, Richard Lazarus, Michael Livingston, Trevor Morrison, Eduardo Peñalver, Jeff Rachlinski, Kirk Stark, Larry Solan, Sarah Varet.

This Editorial is based on the following full-length Article:   Rebecca Kysar, Listening To Congress: Earmark Rules And Statutory Interpretation, 94 CORNELL L. REV. 519 (2009). Click Here for the Full Version.

  1. Pub. L. No. 99-514, § 204(a)(7), 100 Stat. 2085, 2165 (1986).
  2. 153 CONG. REC. S10,693 (daily ed. Aug. 2, 2007) (statement of Sen. McCain) (quoting WALL ST. J.).
  3. Id.
  4. John Fund, Earmark Cover-Up, WALL ST. J., Mar. 26. 2007, at A15.
  5. This fact pattern and the legal arguments are generally taken from a manufacturer’s suit against the government in Kimberly-Clark Tissue Co. v. U.S., 38 F. Supp. 2d 1028 (E.D. Wis. 1999).
  6. Alternatively, if Corp. X is disclosed in accordance with the earmark rules, the presumption should be in favor of its entitlement.

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