WASHINGTON -- House Democratic leaders banned Wednesday the practice of doling out multimillion-dollar, no-bid contracts to private contractors, a move that will shake up the lobbying industry that has come to rely on securing these so-called earmarks for their corporate clients.

At a meeting of the Democratic caucus, leaders unveiled the new rule that forbids private contractors from receiving earmarks, part of the party's effort to reclaim the reform mantle that it used successfully in its 2006 midterm campaign to reclaim the majority.

House Appropriations Chairman David Obey, D-Wis., whose panel issues thousands of these line-item grants each year, estimated that the fiscal 2010 budget included more than 1,000 earmarks to private companies, through which businesses reaped billions of dollars. Most of those earmarks were culled from the Pentagon's annual budget.

Earmarks, while a tiny sliver of the more than $1 trillion Congress expends every year in discretionary spending, have emerged in the past five years as a key issue of ethics and corruption allegations. While most of these funds are steered toward congressional districts for local projects, critics say earmarks skew the spending process to favor contractors who hire the right lobbying firms and make donations to lawmakers on the appropriations committees. The 2010 spending bills included $16 billion worth of earmarks to public and private entities, many of which were inserted into the appropriations legislation at the discretion of just one lawmaker.

House Republicans praised the Democrats for taking this key step, but are considering swearing off the practice. "We're going to have to make a decision," House Minority Leader John Boehner, R-Ohio, told his colleagues at a closed-door meeting Wednesday, according to one attendee. "Are we really willing to put it all on the line to win this thing?"

They have scheduled a special gathering today to debate whether they are willing, on their own, not to seek any earmarks. Previous efforts by Republicans -- who oversaw the dramatic inflation of the use of earmarks during their 12-year majority -- have failed.

Democrats reached this point after suffering through a string of scandals, including the admonition of Rep. Charles Rangel, D-N.Y., for accepting corporate-financed trips and the resignation of Rep. Eric Massa, D-N.Y., amid allegations of sexual harassment. They said these scandals have drowned out any political goodwill from their reform efforts upon claiming the majority, including their previously having banned gifts from lobbyists and ordered more disclosure of lobbyist activity.

"We have made some real progress. The negative noise out there is at almost a deafening level," House Majority Leader Steny Hoyer, D-Md., said Tuesday. "And it drowns out, too often, the facts."

The leadership team of House Speaker Nancy Pelosi, D-Calif., had considered calling for a one-year moratorium on all earmarks, or even just a one-year ban on earmarks to private companies. But they settled on eliminating earmarks to for-profit companies, the type of no-bid contracts that have been at the center of the most serious corruption cases in the past decade.

Under this plan, lawmakers can still steer six- and seven-figure grants to local nonprofits and municipalities, as President Barack Obama and White House Chief of Staff Rahm Emanuel did when they served in Congress.

The House ethics committee, in an investigation of five Democrats and two Republicans on the defense appropriations subcommittee that funds the Pentagon, found that the seven lawmakers steered more than $245 million worth of earmarks to clients of a single firm and collected more than $840,000 in political contributions from the firm's lobbyists and its clients in little more than two years. Most of those clients were for-profit contractors, several of whom told congressional investigators that they believed that their donations made it possible for them to win support for their projects.

Even as the Justice Department continues a criminal investigation of this practice, the ethics committee found no "direct or indirect link" in the earmarks-for-contributions allegations, saying the lawmakers -- including the late Pennsylvania Rep. John Murtha, D-Johnstown, the subcommittee chairman -- each made their decisions independently of the donations.

But the Democratic leaders effectively rejected that ruling Wednesday by declaring the need to forbid such earmarks, although some are pushing for further steps.

"It's not enough to swear off some of the earmarks that lend themselves to corruption; we need to get rid of all earmarks if we have any hope of regaining taxpayers' trust," said Rep. Jeff Flake, R-Ariz., the foremost foe of the congressional earmark practices.

Key senators in both parties showed little interest in yielding the power of the purse to federal agencies, leaving the possibility that one chamber could ban the practice while the other continues earmarking as usual.

"The Constitution requires us to do our job. Taxation without representation was a big rallying cry. Well, spending without representation would be a problem too," said Mississippi Sen. Thad Cochran, ranking Republican on the Appropriations Committee.

Washington correspondent Daniel Malloy writes the "Pittsburgh On The Potomac" blog exclusively at PG+, a members-only web site of the Pittsburgh Post-Gazette. Our introduction to PG+ gives you all the details.