Silicon Valley Goes to Washington
A traveling corps of Silicon Valley executives descended on Capitol Hill last week, touting the Central American Free Trade Agreement as vital for the success of U.S. technology products in a global economy.
In the eyes of some CAFTA supporters, the weight of that message was amplified considerably by the people relaying it.
“Members pay special attention to the high-tech community,” said Rep. Kevin Brady (R-Texas), a champion of the hotly contested trade deal that may reach the House floor in June. He added, hopefully: “They’re key to the passage.”
At least, they would like to be. The escalating struggle over trade is just the latest uphill fight for an industry that once steered clear of Washington but has now poured hundreds of millions of dollars into its goal of becoming a player in the capital.
High tech spends more than $80 million a year on lobbying -- sixth among major industries and up from 17th in the late 1990s -- according to the nonprofit Center for Public Integrity.
Tech lobbyists even have their own name for Franklin Park, the downtown block surrounded by the Washington offices of Microsoft Corp., Dell Inc., EBay Inc. and others: Silicon Square.
Yet a sector that was the glamorous new kid in the capital just a few years ago faces growing pains.
So many high-tech associations have emerged that even members of Congress have trouble keeping track. Compared with old-line lobbies of labor and industry, high tech still has a limited track record of delivering votes. And in the aftermath of the dot-com bust, the industry has lost some of its luster.
What’s more, tech lost a fierce battle last year to derail new rules requiring companies to report stock options as an expense on their financial statements -- a stinging defeat for an industry that, more than any other, uses options to attract and retain talent. Nor has it succeeded in winning more spending for math and science education, despite a growing competitive challenge from overseas.
“I don’t think anybody in the tech industry will tell you they’re calling the shots,” said Daniel Lathrop, who monitors industry lobbying expenditures at the Center for Public Integrity. “They’re still reacting to a lot of issues. But on some issues they’ve been able to set the agenda.”
The Central American Free Trade Agreement may not be one of them. House Democrats, backed by labor, are broadly opposed because of fear that it will hurt U.S. workers. Unions at tech companies are also against it. Members with close ties to the sector, including Reps. Anna Eshoo (D-Palo Alto) and Zoe Lofgren (D-San Jose), have not yet committed on the matter.
The technology industry has argued that the Central American deal would yield it quick savings of $75 million a year through lower tariff costs. The sector also expects long-term benefits as U.S. technology companies supply many of the products needed by Central American nations as they modernize and build their infrastructure.
A defeat of the trade deal, its advocates fear, could jeopardize future efforts to ease barriers elsewhere in the world.
But in the Bush administration and on Capitol Hill, some proponents of the accord are waiting for high tech to translate its words into votes.
“I’ve been saying to them, they need to plead with my Democratic colleagues in their community to be supportive of the CAFTA,” said Rep. David Dreier (R-Glendora), chairman of the powerful House Rules Committee.
Dreier, who counts himself as a big fan of high tech, said the industry’s track record in Washington was mixed: “Like any agenda, it’s got wins, it’s got losses, and it’s got challenges that lie ahead.”
The challenges no longer seem limited to matters of emerging technology.
Rather, amid increasingly intense competition, high-tech executives have become newly sensitive to an array of issues that affect their future labor force, including education and science funding.
Last week, for example, 20 corporate officers from California companies including Solectron Corp. and Rambus Inc. went on a marathon of meetings with dozens of members of Congress to make their case on CAFTA and other issues, including transportation funding. It was the first such trip to the capital by the Silicon Valley Leadership Group, which in the past has focused more exclusively on regional concerns.
“We don’t operate in a Silicon Valley bubble that is not affected by the outside world,” said Charles Kenmore, chief executive of ANDA Networks Inc. in Sunnyvale, Calif., who arrived with his colleagues Tuesday. “Issues in Washington really do affect our business.”
That realization is a far cry from the days when Jack Krumholtz had to bide time between meetings in his Jeep Cherokee on quiet Capitol Hill streets. Microsoft hired him as its first full-time Washington lobbyist in 1995, squeezing him into a sales office on the city’s northwest fringe -- too far to make extra trips between Congress and his office on busy afternoons.
“I’d be sitting in my Jeep on a side street on Capitol Hill, on my cellphone,” Krumholtz recently recalled in a more conveniently located office that houses a staff of 20.
“There was a sense that if we continued to develop great technology and create jobs, we’d be left alone,” Krumholtz said.
Soon, that widely shared sense would be shattered. The Internet and other information technologies were hitting critical mass with the public, raising new issues about privacy, taxation and freedom of expression.
Then in May 1998, the Justice Department and a handful of states slapped Microsoft with an antitrust lawsuit. All of high tech, including rivals of the software giant, took note.
By 2000, such companies as Yahoo Inc., Amazon.com Inc., EBay and others had established Washington beachheads. Now, Google is joining the gaggle. The Mountain View, Calif., company, which went public last year, has hired a Democratic lobbyist and is searching for a Republican one. “What happens in Washington matters to the tech community,” said Steve Langdon, a Google Inc. spokesman. “So it’s important to be engaged in the policymaking process there.”
To be sure, not all of the tech industry views that goal from the same perspective.
Old-line hardware producers, such as IBM Corp. and Hewlett-Packard Co., are Washington veterans. IBM, for example, opened up a governmental relations office in 1975. Such companies have traditionally focused on issues such as export controls that limit their ability to sell abroad.
In addition to a growing roster of companies, tech’s Washington corps includes an alphabet soup of associations, creating potential confusion in the lobbying quest. According to one cheat sheet floating around the capital, separate tech networks focus on state issues, federal issues, consumer electronics issues, concerns of chief executives, federal procurement and politics.
Nor does the industry fit neatly into anyone’s partisan framework. Unlike much of the private sector, it tends to donate more to Democrats than Republicans -- 54% to 45%, according to the Center for Responsive Politics -- even though the GOP controls Congress and the White House.
Tech also retains a distinctive style: “If it’s a coal or oil or gas guy, he’ll tell you how many votes he has lined up with the subcommittee -- and will you co-sponsor the bill?” said Rep. Eshoo.
Tech lobbyists, she added, often “don’t speak about who’s co-sponsoring something or the lingo of the Hill. They’ll spend time teaching members and staff about what these things do for our economy.”
On a growing list of issues, the approach has paid off. Tech lobbyists last year secured a four-year hiatus on an Internet access tax, an expansion of the number of skilled foreign workers allowed into the country and a measure requiring that patent fees be used by the Patent Office rather than diverted to unrelated government activities.
High tech pushed hard for a one-year opportunity to bring home overseas earnings at a sharply reduced tax rate. The Bush administration opposed the measure, preferring to get the higher tax revenue, and the Treasury Department testified against it.
Tech lobbyists and their allies prevailed. Congress passed the provision as part of a tax package that President Bush signed in October.
The success reminded technology executives “that a vigorous Washington lobbying presence can improve their financial well-being,” noted Ralph Hellmann, senior vice president of the Information Technology Industry Council.
At the same time, the technology industry has suffered a painful setback on stock options, a matter of almost mystical significance to the industry.
The Federal Accounting Standards Board is insisting that publicly traded companies begin counting as an expense the value of options issued to employees. An option is the right to buy shares of stock at a set price in the future. Regulators say the rule is needed to provide a clearer picture of a company’s finances and have dismissed tech claims that the change will stifle innovation by discouraging firms from giving workers an ownership stake.
The House passed a bill last July to override the accounting board, but the effort died in the Senate and the new rule is scheduled to take effect next year.
Lofgren, the San Jose Democrat, notes that high tech has come a long way from the 1990s, when much of the industry still needed prodding from lawmakers to get involved.
But for all the investment in Washington, the goal of gaining influence remains a work in progress. Said Lofgren: “To say they’re going to have the same kind of relationships that Disney has developed over 40 years, it’s just not possible to do.”
