Might It Soon Be “a Later Date”?

During the first administration of President Ronald Reagan, in a January 1983 issue of the Federal Register, the Office of Management and Budget (OMB) proposed amendments to its Circular A-122—which, among other things, defined the responsibilities of tax-exempt, nonprofit organizations that had contracts with or grants from the federal government. While Circular A-122’s content was later relocated to the Code of Federal Regulations, it remains the same.

The amended rule would have restricted government funding for nonprofits that engage in lobbying of that same government. When nonprofit government contractors or grantees engage in lobbying, of course, it’s often if not almost always to seek increased funding from the government.

After the nonprofit sector and groups speaking on its behalf successfully organized a coalition to express strong opposition to the proposal, OMB withdrew it in May 1983. Given what was then basic trust in the sector and admiration for its underlying charitable mission, its opposition was taken seriously enough by Reagan to halt the effort. Given the decrease of trust in the sector since then, and serious questions about the degree to which all of the sector is pursuing charity properly understood, the incoming administration’s OMB and “Department of Government Efficiency” (DOGE) might think the amendments worth reviving.

Involuntary and Fairly Well Concealed

The proposed ’83 amendments were part of a larger effort on the part of aggressive conservatives to “defund the left,” as they put it. These conservatives saw the left as benefiting inordinately from government contracts paid for and grants drawn from the massive fisc created by taxation of both liberals and conservatives. The contracts and grants, by this thinking, essentially constitute an unfair wealth transfer.

“Is it fair to require taxpayers to finance the political activities of groups whose views they do not share? Most people would say no,” conservative Richard Viguerie wrote in an August 1982 New York Times op-ed. “The real issue is not whether tax-funded projects are good or bad, liberal or conservative. It is that they represent involuntary taxpayer support of special political interests—support that is fairly well concealed from the public.”

The “defund-the-left” project is widely considered to have fallen short of its goal, on both the right and left. “Government funding of advocacy groups had become too deeply engrained in the structure of American government to be stopped with a little more energy and maneuvering in Congress,” according to Michael Greve in a 1987 article in the neoconservative Public Interest. “The advocates of defunding failed to grasp this point: Congress funds advocacy organizations not because it shares their ideology,” he concludes, “but because it can no longer bring itself to say ‘no’ to anyone—even to ideologues.”

“[I]t all came to naught,” Jeffrey Berry writes in a HistPhil article last year. “The essential problem is that laws or agency rules have to apply to all organizations in a class. Thus, a rule applying to the Natural Resources Defense Council also applies to United Cerebral Palsy.” Others on the left have lamented a perceived “chilling effect” on nonprofit funding in the wake of the endeavor.

Stronger and Strategic, and More Fully Fitting the Tenor of Our Time

The proposed A-122 amendments were spearheaded by Michael Horowitz, counsel to OMB director David Stockman. Called “highly competent and determined” by Greve in his Public Interest piece, Horowitz knows philanthropy and the nonprofit sector well. Three years earlier, the onetime liberal Democrat, Yale Law School graduate, and civil-right activist had submitted a report to the conservative Scaife Foundation courageously and sharply criticizing the early conservative public-interest law movement. Later, he discreetly advised Michael Joyce, president of the conservative Lynde and Harry Bradley Foundation (on the program staff of which my fellow Giving Review co-editors and I served).

The Horowitz report to Scaife “sent shockwaves through the conservative public-interest community, especially when several high-profile donors and foundations stopped funding public-interest litigation as a result,” as Jefferson Decker describes it in his 2016 book The Other Rights Revolution: Conservative Lawyers and the Remaking of American Government. “And yet, Horowitz believed that his report was also a defense of the public-interest right, at least as it might exist in principle.”

“For more than fifty years, liberals have viewed the Powell Memo as the Rights road map to power, proof of a vast right-wing conspiracy, evidence that the other side schemed and planned while their own complacently snoozed,” according to progressive David Daley’s book Antidemocratic: Inside the Far Right’s 50-Year Plot to Control American Elections last year.

But it’s the almost unknown Horowitz Report that may have been more quietly influential. Where Powell’s report laid out a master plan to power, Horowitz showed how the conservative movement must first recalibrate its goals from raw power to real ideas, and shift the battleground from courtroom to campuses. Yet its influence and Horowitz himself remain today almost entirely invisible ….

The Powell Memo’s role has been overstated repeatedly, in fact, and its recommendations now seem relatively cautious—too, well, conservative. The stronger, strategic courses of action suggested by Horowitz in his report and evidenced in his proposed amendments at OMB more fully fit the tenor of the time now—because of the temperament of Trump, yes, but also the related popular decline in trust of almost all institutions, including politicized nonprofits, that gave rise to his political ascendance.

Incoming OMB director Russ Vought and legal counsel Mark Paoletta, who filled the same roles in the first Trump administration, certainly understand this. So, too, do those in charge of and advising the second Trump administration’s DOGE—which is looking into the sheer size of federal support for nonprofits, questioning its value and effects. They all know that Big Philanthropy and those big nonprofits it funds are only becoming bigger, more politicized, and more progressive.

Modest, but with Portent

Specifically, Horowitz’s 1983 OMB action aimed to create a new regulatory classification of nonprofit contractor or grantee activity called “political advocacy,” defined as “attempting to influence a government decision.” His proposal would have prohibited nonprofit contractors and grantees in this category from using both received federal funds and any of their non-federal funds for lobbying. Rep. Ernest Istook proposed legislation to the same effect when he was in Congress—which would now likely be more attuned to the tenor of the populist time, too, much different from when Greve lamented Congress’ inability to say no to ideologues in ’87.

Among the range of potential reforms of the legal structure of philanthropy and the nonprofit sector, many of which would attach further or strengthen conditions on the benefits of tax-exemption itself, the ’83 Horowitz proposal would actually be a modest measure. One must wonder about the degree to which it would actually be invoked equally against both the Natural Resources Defense Council (NRDC) and United Cerebral Palsy (UCP); is UCP really as engaged in tax-supported politics and advocacy as NRDC?

More largely, of course, its underlying reasoning may not portend well for a nonprofit establishment back on its (tax-advantaged) heels. Under the rule, nonprofit government contractors and grantees “remain free to engage in political advocacy on any side of any issue. The proposals merely ensure that organizations engage in political advocacy at their own expense—not the public’s,” according to OMB in an informational “Q & A” appendix to the ’83 announcement in the Federal Register.

If an organization chooses to exercise its First Amendment rights, it is only fair that it keep those political activities separate from its work at the expense of the public. It should not expect to have its political advocacy subsidized, or to be able to put facilities purchased in part by tax dollars to political use. Like federal agencies and employees, federal grantees and contractors are “expected to … execute the programs of the Government without bias or favoritism for or against any political party or group of the members thereof.” CSC v. National Association of Letter Carriers, 413 U.S. 548, 565 (1973). Federal grant and contract activity will be more efficiently and fairly performed if it is not mixed with advocacy activities on one side or other of the political debate.

If accepting this latter premise, the proposal would arguably be furthering public administration “as it might exist in principle,” to use Decker’s phrase describing Horowitz’s belief that he was defending the public-interest right with his report to Scaife before the OMB proposal.

Designs Merely Delayed?

The Ronald Reagan Presidential Library’s digitized collections include copies of a May 4, 1983, letter from Horowitz to some of those who formally commented on the proposal, notifying them that it had been withdrawn. “At a later date, OMB will offer a new proposal designed to ensure that contractors and grantees do not use federal funds for lobbying or political activity,” he writes. No such new proposal was offered during the remainder of the Reagan’s terms, nor has one been offered since.

Yet.

Source: https://capitalresearch.org/article/might-it-soon-be-a-later-date/