The original “firewall” of the Smith-Mundt Act of 1948, not the one that exists today that the Smith-Mundt Modernization Act of 2012 seeks to change, was based on three principles:
1) The Congress did not trust the loyalty or competence of the State Department, which was then running the Voice of America and other activities we now call public diplomacy (the USIA was established in 1952 and the BBG became an independent agency in 1999).
2) The Congress firmly believed in the importance of the free flow of information and sought to protect the role of private media in providing both content and dissemination of news and information.
3) The Congress wanted the U.S. media and the Congress, and later academia, to determine what information produced for audiences abroad could be seen and known by the American public.
See Congress, the State Department, and “communistic, fascistic, and other alien influences” for a short backgrounder on these three points.
The modern “firewall” came about in 1972, ironically a few years after the U.S. Advisory Commission on Information recommended relaxing the de facto prohibition in the spirit of the recently passed Freedom of Information Act passed to create transparency in the domestic activities of the federal government. Chaired by the president of CBS, Edward Stanton, the Commission declared the “American taxpayer should no longer be prohibited from seeing and studying the product a government agency produces with public funds for overseas audiences.”
By 1972, the nature of international affairs shifted from international relations between people to closed door diplomacy between superpowers. Senator Fulbright tried to eliminate both the VOA (and other U.S. “Radios”) and the USIA as he declared “the Radios should be given the opportunity to take their rightful place in the graveyard of Cold War relics.” Fulbright wanted to prohibit a fellow Senator (Buckley, I-NY) from showing a USIA film on Buckley’s monthly show to constituents. The U.S. Attorney General disagreed with Fulbright, stating Smith-Mundt “prohibited USIA from actively disseminating its materials in the United States but required the agency to make materials available upon request by the press or by members of Congress.” Fulbright responded by amending Smith-Mundt to allow USIA material to be disseminated within the U.S. only with explicit authorization by the Congress.
In 1985, Senator Zorinsky sought to close the “loopholes” left by Senator Fulbright’s amendment. At the time, Zorinsky was investigating USIA for nepotism, looking into questionable and imperious spending by USIA Director Charles Wick, and voicing concerns over other activities labeled as “public diplomacy,” such as the Office of Public Diplomacy run by Otto Reich that had nothing to do with either the practice or the bureaucracy of USIA or public diplomacy. Zorinsky said the “Second Mandate” of USIA, which was to inform Americans about the world abroad (the first “mandate” was informing foreign publics about America) should never be allowed.
The Zorinsky amendment would result in federal court ruling that USIA material is exempt from Freedom of Information Act (FOIA) requests, a decision that was relaxed years later. When the material was available, through FOIA for example, the “for examination only” clause meant those who successfully petitioned to review USIA material could do so without taking notes or copies of the material (such as a VOA script).
It is worth noting that the Congress decided in 1994 that the “political propaganda” of foreign governments no longer required to be labeled as such.