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UPDATE 3-US House bans some earmarks amid ethics concerns
* Democrats try to regain ethical high ground
* New rules won't apply to most earmarks (Adds Senate response, additional detail)
By Andy Sullivan
WASHINGTON, March 10 (Reuters) - Democrats in the House of Representatives moved on Wednesday to limit the ability of lawmakers to tuck pet projects into spending bills amid mounting election-year ethics concerns.
Top Democrats on the House Appropriations Committee said the new rules prohibit lawmakers from steering money to for-profit companies through the earmarking process, as Democrats seek to tamp down concerns over ethical violations and wasteful spending.
The decision will affect billions of dollars in federal spending on everything from daycare providers to battlefield weapons, but will not affect the lion's share of earmarks projects, which go to non-profits or local governments.
"It's a positive step forward," said Steve Ellis, vice president of the watchdog group Taxpayers for Common Sense. "For-profit earmarks are Ground Zero for pay-to-play and the concerns about corruption."
Earmarks have figured in several scandals over the past decade as lawmakers were found to have directed funds to businesses that showered them with gifts.
Public outrage over the scandals helped Democrats win control of Congress in 2006, but they now face several ethics scandals of their own and Republicans are poised for major gains in the November congressional elections.
House Republicans are weighing a voluntary ban on all earmarks, which would go beyond the ban announced by Democrats on the Appropriations Committee.
The ban does not apply in the Senate. Appropriations Committee Chairman Daniel Inouye, a Democrat, said he found the House announcement "quizzical" and launched a vigorous defense of how that chamber handles earmarks.
LESS THAN 1 PERCENT OF FEDERAL BUDGET
Earmarks account for $15.9 billion of federal spending in the fiscal year that ends Sept. 30, less than 1 percent of the federal budget that Congress controls directly. That's down from an earmark total of $29 billion in fiscal 2006.
They help build support for the 12 spending bills that must pass each year to keep the government running, and lawmakers say they are a legitimate way to ensure that Congress has a say in how federal agencies spend that money.
"I don't believe this policy or ceding authority to the Executive Branch on any spending decision is in the best interests of the Congress or the American people," Inouye said in a statement.
Defenders also say that earmarks give smaller businesses a chance to win lucrative military contracts -- the widely used Predator drone was first created as an earmark to a for-profit company, Inouye said. Nearly half of last year's earmark dollars were included in the Pentagon's spending bill.
To address those concerns, the Appropriations Committee said it would set up a special process to allow small businesses to pitch to the Pentagon directly.
Had the House ban been in effect last year, it would have blocked roughly 1,000 of the 9,500 earmarks awarded, the committee said. It would not cover earmarks awarded to non-profit organizations, universities or local governments.
The ban would not have blocked some of the most notorious projects that have made earmarking synonymous with wasteful spending for many voters, such as the $500,000 awarded a North Carolina teapot museum in 2006 or the proposed $400 million "bridge to nowhere" in Alaska.
Earmarks increased dramatically when Republicans controlled Congress from 1994 to 2006, though they are popular with lawmakers from both parties.
Democrats taken steps to clean up the process and reduce the number of earmarks since they took control, but they have been tarred recently by an earmark scandal involving members of the House subcommittee that oversees defense spending.
The House ethics committee cleared the seven lawmakers last month, but found that they had steered hundreds of millions of dollars in mostly no-bid contracts to clients of a single lobbying firm, while collecting more than $840,000 in political contributions from the company and its clients. (Additional reporting by John Whitesides, Editing by Doina Chiacu)
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