Follow the money

Larry Makinson from the Center for Responsive Politics says the computer industry is flexing its muscle in the form of increasingly large campaign contributions. But to what purpose?

8 min read
"Follow the money" was the advice Watergate super-source Deep Throat gave sleuthers Bob Woodward and Carl Bernstein in "All the President's Men." It's a suggestion Larry Makinson has taken to heart.

Makinson, a senior fellow for the Center for Responsive Politics (CRP), spends his time tracking the flow of financial donations from the private sector to politicians. Currently, he has his eye on the computer industry.

For the better part of the last couple of decades, this wouldn't have been much of a job. Silicon Valley and the rest of the tech industry initially wanted to keep a continent's length away from Washington and the machinations of the nation's political class. That apathy was manifest in the absence of any real political influence in the nation's capitol.

But in the last several years, the computer industry has gone from wanting nothing to do with official Washington to being one of the top 10 campaign contributors, as ranked by industry. Numbering 55th on the list of campaign contributors in the 1989-1990 election cycle, the computer industry finished seventh in 2000.

The CRP conducts computer-based research on campaign finance issues to find out who's paying for American elections. The information is categorized into about 80 industries and interest groups and is published on the group's Web site Opensecrets.org.

CNET News.com recently spoke with Makinson about Silicon Valley's increasing political influence and how contributions affect public policy.

Q: Who are the top contributors in the computer sector, and how much did they contribute?
A: For the first six months of 2001, Microsoft would be number one with $1.2 million, EDS Corporation is number two with $327,000, and Propel.com contributed $262,000.

Does the computer sector donate more to Democrats or Republicans?
Because they've given to both sides of the aisle, they have had politicians tripping all over themselves to do favors for the high-tech industry. This is one of the most interesting stories we've seen. They split their money almost exactly down the middle. That's been pretty much historically the case with the computer industry. Because they've given money, overall, 50 percent to Republicans and 49 percent to Democrats, they have had politicians tripping all over themselves to do favors for the high-tech industry. And in the last election, you saw planeloads of senators and presidential candidates making the pilgrimage to Silicon Valley.

How much do contributions help an industry to get its way with a legislator?
I think with the computer industry there's been a remarkable coincidence in the rise of campaign contributions and the batting average of the Congress. The computer industry has gotten virtually everything they've asked for because they gave a lot more money than ever before, and they were smart enough to give it to both Democrats and Republicans equally.

Right now, Silicon Valley and all the other pockets of the computer industry are the darlings of Capitol Hill. So I think that was probably the expectation when the money was given. I mean, we're talking lots of money here. We're talking about some hard-nosed executives who would not be frivolously throwing this money away if they didn't think they were getting something in return. And so far, it looks like they're getting quite a lot in return.

Which is the most effective industry when it comes to this?
There are two types of industries that have a lot of clout in Washington. There are interest groups like the National Rifle Association, the abortion groups, and the American Association of Retired Persons that have their clout because voters pay attention to the issues that they care about. Politicians are always careful not to do anything that will upset the voters. If a lot of voters are behind your industry, people on Capitol Hill are going to listen very strongly to those groups.

But there's a second type of industry that has a lot of clout in Washington, and often, it's one like the computer industry, where voters aren't thinking about computers when they go to the polls. And therefore there's no public outcry in any direction with how Congress deals with computers. In those industries, the more money you give, the more clout you have in Washington...The computer industry is knocking on the door of that elite club at the top and is quickly gaining membership.

Where does the computer industry rank in the amount of contributions it makes?
It's the single fastest-growing sector that we've ever recorded in the entire 12 years that we've been tracking money in politics. The overall trend is upward, big time. This is also one of the most interesting stories from the 2000 elections. In 1998, the computer industry was the 25th biggest contributor to elections. In 2000, they jumped all the way to number seven. They actually quadrupled the amount of money they gave in that one election cycle. This year, they've dropped back a little bit, probably because of the dot-com bust, and now they're 11th. They went from nowhere to the top 10. And they're not quite as high as they were, but still a force to be reckoned with.

Since this is an off year for elections, how is it different?
There's less activity this year than there was before because the politicians aren't going to run until next year. But momentum is now building, and between now and November, we're going to see a huge increase. Typically, September and October during an election year is the equivalent of the Christmas shopping season for politicians. That's when the big money comes in.

Recently, the House of Representatives passed a bill that would outlaw soft money...and that's where half the money that came from the computer industry was given. This may be the last year we're going to see the unlimited contributions. That's going to affect all industries, but it's certainly going to affect the computer industry.

What's been the computer industry's strategy?
I think their strategy was, "Please keep your hands off us and help the computer industry to grow." And I think there were a lot of people in Washington that very much bought that line. There are different messages in different parts of the computer industry.

Microsoft clearly wanted to protect itself from troubles with the Justice Department, so they're looking for as many friends in Washington as they can have because they don't want to be seen as a monopoly and (get) broken up. For the rest of the industry, I think the key (phrase) in the 2000 election--and still a key word--is, "Please let the Internet grow." So, for example, "Keep our exemption from having to pay sales tax on Internet purchases."

Has the computer industry's political activity changed in the last few years?
It's changed fundamentally, and that's one reason that the dollars they've given to Washington have grown so fast. I think it was Bill Clinton who first seduced the computer industry and tried to bring it into the wing of giving to Washington. But five years ago, 10 years ago, the message coming out of Silicon Valley was, "We don't want to pay any attention to Washington." Even Microsoft gave almost no money and had no Washington presence. But gradually the politicians realized that there are a lot of deep pockets in Silicon Valley. There are things Washington can do for them.

When the Internet became as big as it has become, suddenly there was something akin to the airwaves or the Interstate highway system. There was a major new medium that came out of nowhere and that might or might not be regulated by the government. Once you have the specter of government regulation, suddenly the industry had a real reason to pay very close attention to what was being done in Washington, D.C. And so they started to open up those wallets and sign those checks.

When did the computer contributions start to appear?
When the industry really exploded with the Internet, everybody in Washington jumped on the bandwagon and wanted to be attached to Silicon Valley. We first started tracking industry contributions in the 1989-90 election cycle, and when we did, the computer industry had given, at that point, $1.3 million. They were 55th on the list of industries. In this election, they are up to $6 million so far, and it will certainly get a lot bigger...Back in those early elections, in 1990, (the computer industry) was really only a blip on the radar screen. These days it's beginning to fill the radar screen.

Was there any single event that started the industry off, or is it more a reflection of the maturation of an industry?
I think the first thing that started the computer industry looking to Washington was Clinton's campaign in 1992. He was the first major American politician to attach his star to the growing star of Silicon Valley--not just to the cash that the industry had to offer, but to the cachet that the industry offered...When the industry really exploded with the Internet, everybody in Washington jumped on the bandwagon and wanted to be attached to Silicon Valley and be associated with the most glamorous new industry in America.

What are the long-term contribution trends in the computer sector?
It's the single fastest-growing sector that we've ever recorded in the entire 12 years that we've been tracking money in politics. The overall trend is upward, big time. And the other trend is they've been very careful to give equal amounts to both Republicans and Democrats, and that's very unusual, because most business groups give more of their money to Republicans since they now control the White House. But the computer industry has been very cagey.

Do you see any big shifts in future contributions?
The big question with the computer industry is whether the campaign-contributions profile will match the stock market profile. In other words, having soared in 2000, will it crash in 2002? So far, the evidence seems to be no, they're holding their own...And I think in the longer term, every expectation, at least in Washington, is that the computer industry is probably going to continue to grow and become an even more important part not just of the economy in general, (but) of the funding of elections in Washington.

Has the computer industry's muscle been felt? That is, have there been particular victories in terms of bills or language sought by the industry?
Most definitely. One of the biggest things the industry got was hands off the Internet in general--a continued moratorium on sales taxes on the Internet. That's probably the biggest thing the industry could've hoped for and, probably, the biggest success that they've had in Washington so far. The other thing is the H-1B visa, which allows them to bring in high-tech talent from overseas quite easily.

Almost like Global Crossing, the computer industry came out of nowhere and has suddenly emerged as a major force in politics, as well as in the economy. And I think a lot of politicians discovered that there's a lot to be gained by keeping Silicon Valley happy and by tapping into that happiness and trying to raise ever more quantities of campaign cash. So this is a love affair that is a two-way dance, and so far, they're happy with each other. We'll see what the future may bring.