When Banning Foreign Money, First Decide What Is ‘Foreign’

Whatever measures those distinguished economists used to conclude that the Consumer Price Index was overstating the rate of inflation certainly cannot have included the soaring costs of election campaigns.

By any measure, the costs of sustaining the finest democracy money can buy have skyrocketed in this decade. The presidential election campaign alone went from $311 million in 1992 to $800 million this year, according to figures compiled by the Center for Responsive Politics.

Take the new flavor of the political season, the unregulated “soft money” that was intended to finance politically neutral projects to educate the voters on the issues and to support get-out-the-vote efforts. The Federal Election Commission reports that soft-money donations grew from $83 million in 1991-92 to $223 million in 1995-96.

If any of this was meant to encourage the voters to take part in the quadrennial celebration of their democracy, the money was counterproductive. Voter turnout declined from 55% in 1992 to just under 50% this year. Chart this process as lines on a graph and an interesting pattern develops: The more the politicians spend to lure the voters, the less the voters go to the polls.

This soft money dwarfs the $62 million in public funds given to each of the main-party candidates by the Federal Election Committee this year, and the $30 million given to Ross Perot’s Reform Party. The numbers also say a lot about which companies see political donations as part of the cost of doing business.

Four of the top-10, soft-money donors to the GOP were tobacco companies. Evidently hoping to protect their interests against the the restrictions being urged by President Bill Clinton, Philip Morris ($1.6 million) and RJR-Nabisco ($970,000) were in first and second place. Three of the top-four donors to the Democrats came from Hollywood. Seagram-Universal was in the lead with $620,000; the Disney group in third place with $532,000, and DreamWorks fourth with $525,000.

There is an intriguing symmetry to this process, with a big corporation’s right hand understanding perfectly well what the left hand is doing. In addition to their generosity to Democrats, Seagram-Universal was also the sixth most-generous donor to the GOP--giving $435,000. Hollywood likes Clinton, but Seagram sells booze, and wanted to soften the political opposition to its plan to end the voluntary ban on TV advertising.

Atlantic Richfield gave $615,000 to the Republicans, $373,000 to the Democrats--in the hope that it might finally be allowed to develop the oil reserves in Alaska’s Arctic National Wildlife Reserve. AT&T; gave $417,000 to the Republicans, and $326,000 to the Democrats, because, in the communications business, you need friends everywhere.

For much of this, we may thank the U.S. Supreme Court, which has decided that the many attempts to regulate campaign donations amount to restrictions on the 1st Amendment right to free speech. Last summer’s Supreme Court ruling was seen by both parties as a license to help finance vulnerable candidates. The ink was still drying on the court’s decision when the National Republican Senatorial Campaign Committee began pumping $8 million into individual campaigns, including a possibly decisive, last-minute gift of $281,000 to help Sen. Jesse Helms (R-N.C.) keep his seat.

In one sense, the costs of financing U.S. politics are not excessive. Put together, the presidential and congressional, statehouse and all local races, and the sum falls short of $3 billion. In a U.S. economy whose gross domestic product will top $7.5 trillion this year, that is a flea bite, less than 0.04%. For someone with an income of $100,000, it is the equivalent of $40--like an annual credit-card fee.

Since the overall sums are in the billions, the surprising feature of this dependency culture that the politicians now inhabit is how little yet comes from foreigners. John Huang, the Democrats’ star fund-raiser among Asian Americans, raises a total of $4.6 million. More than half of that has now been returned as improper--not all because it came from non-Americans or legal residents.

Just to keep this bipartisan, bear in mind the Democrats have listed a total of $2.4 million in foreign money that went to the Dole campaign. And while that generous Indonesian gardener, Arief Wiriadinata, has become a household name for the $345,000 he gave to the Democrats, we have heard rather less of the Cuban-born, Spanish citizen Jose Fanjul, a Florida-based sugar magnate who gave $278,000 to the Republicans. The total of foreign funds given to both parties is in the region of $4.6 million, which sounds sizable. But it would not have been enough to finance the campaign of Texas Republican Gene Fontenot to win his seat in the House.

The real impact of foreigners on this year’s politics came much earlier, during the GOP primaries, and it had nothing to do with campaign donations. It was the force that stopped Patrick J. Buchanan, when he went to South Carolina to exploit his stunning victory in the New Hampshire primary.

When Buchanan checked into his hotel room to launch his campaign with speeches about U.S. jobs being sent overseas through unfair trade deals, the view from his window was dominated by the new Michelin building. His campaign caravan drove past new plants of Fuji film and Hoechst chemicals. Buchanan’s arrival in the state was greeted by the announcement from BMW that the German car-maker was plunging another $200 million into its new-car plant, employing more than 2,100 people.

The state’s exports had tripled over the previous eight years. Nearly 120,000 of the work force in this state of 3.5 million people were employed by foreign-owned corporations. An industrial revolution had taken place, undermining Buchanan’s assumption that the hard-pressed textile workers of South Carolina would vote for his protectionist message.

Buchanan’s campaign against free trade backfired in a state so dependent on exports. But in a broader sense, the U.S. political system had better brace itself for the inevitable surge of foreign involvement. Last year, international commerce accounted for 30% of American GDP. The U.S. is the world’s biggest exporter and its biggest market, and in the global economy, foreign corporations are unlikely to shun the chance to copy their U.S. rivals and buy influence in a political system so utterly dependent on cash.

Clinton’s proposed rule to bar foreign nationals from making campaign donations is a loophole waiting to be exploited. Ever since British Petroleum bought Standard Oil of Ohio, it has been difficult to define precisely where British money stopped and the money of its U.S. employees and shareholders started.

One tobacco corporation that was so generous to the GOP was the British-owned Brown & Williamson. In a world where Rupert Murdoch can change his citizenship like other men change their hats, does the $351,000 his News Corp. gave to the GOP count as clean home-grown money or filthy foreign lucre?

There is a serious legal issue here, which the Supreme Court may yet have to decide. If U.S. companies are entitled to buy political influence in Washington, how, in an interdependent global economy, can a fair system exclude foreign-owned companies that create American jobs and pay taxes, and whose investors and central banks finance nearly a third of the U.S. national debt?.

The rules of the free market have a curious way of seeping beyond economics. If American politicians who like to set the rules for global trade are so ready to be bought, they should be less squeamish--and less shocked, shocked, shocked--if they find the foreigners eager to pay.*