Government: CAMPAIGN FINANCE
PACs CROSS THE STREET
Representative Sam M. Gibbons (D-Fla.) was one of the lucky survivors of last November's Republican hurricane. The veteran legislator held off a spirited challenge from Republican Mark Sharpe to win a 17th term, thanks in large measure to cash from Corporate America. Companies and trade associations, expecting Gibbons to return as chairman of the tax-writing House Ways & Means Committee, ponied up 56% of the $1.2 million raised by his campaign. But now that they're in the minority, Gibbons and many other Democratic incumbents may be ill-prepared to withstand another GOP storm in 1996. "The last election has struck fear into the hearts of a lot of people," admits one Democratic aide.
Indeed, finding themselves out of power, congressional Democrats are in a cold sweat over financing their next campaign: Corporate money, a critical source of Democratic funding for two decades, is a lot harder to come by. It's a problem that could doom the party's comeback chances in 1996: A BUSINESS WEEK analysis of campaign contributions by the top 20 corporate political action committees (PACs) during the 1993-94 election cycle shows Big Business became more inclined to back GOP open-seat candidates and challengers (chart).
With Republicans firmly in control of both houses of Congress, Democratic coffers will only get emptier. PAC gifts to Democratic incumbents could be down by as much as 40% this year, some party money mavens and congressional sources estimate. "All the business money is going to dry up," frets one major Democratic fund-raiser. Even Representative Martin Frost (D-Tex.), chairman of the Democratic Congressional Campaign Committee, concedes that "the Republicans will benefit."
The GOP already has, according to business lobbyists. With the spring fund-raising season just under way, Republican lawmakers are holding at least half a dozen breakfasts or lunches a day at the swank Capitol Hill Club, and corporate reps are jamming the receptions with $500 and $1,000 checks in hand. Congressional Republicans often marvel at the size of the turnout and ask snide questions about where their newfound donors were in the past. The answer: "We look to where the power is," explains Robert D. Brown, vice-president for government affairs at AT&T. Although 59% of AT&T'S $1.3 million in election funds went to Democrats in 1993-94, the ratio has flipped in 1995, with 66% of $92,500 going to the GOP in January and February.
For many business PACs, the pro-GOP shift began before Election Day. Even though little more than half the $13 million that the 20 leading business PACs contributed in '94 went to Democrats, $1.6 million in corporate money was pumped to GOP open-seat candidates and challengers, a level not seen since the early 1980s. These donations--coming late in the campaign--helped Republicans win 41 closely contested House seats. After the Nov. 8 election, the real Republican revolution began: GOP House members received $170,000 from the top 20 PACs, compared with the Democrats' meager $22,000. "When business realized the revolution was real, people woke up," says Steven F. Stockmeyer, executive vice-president of the National Association of Business Political Action Committees.
The long-term implications are frightening for the Democrats. In the 1970s, the Democrat-controlled Congress created PACs as a life-support system for incumbents, who lured big bucks from unions, corporations, trade groups, and activist groups to stay in power. And House Democrats became addicted: As of Nov. 28, 1994, they depended on PACs for 46% of their campaign funds, compared with the GOP's 26%. House Republicans, in turn, tapped wealthy constituents for 60% of their money, generated by individual contributions--long a weak spot for Democrats.
Now, the Democrats' traditional money machine is being turned against them. Organized-labor PACs--which gave 95% of their $95 million to Democrats in the 1992 election--won't abandon the party. But labor accounts for only one-fourth of all PAC money, and with union membership eroding, that figure isn't expected to surge. Even worse, labor funds won't be able to offset the loss of business dollars--which accounted for half of the $395 million in PAC giving in the 1992 election. "Democrats made a horrible mistake not pushing through campaign finance reform when they had the chance," says Thomas E. Mann, director of governmental studies at the Brookings Institution.
SOUL MATES. Many corporate leaders and PAC managers admit a shift toward the GOP is long overdue, since Republicans and business often share political goals--such as cutting government spending and slashing regulations. Some companies, such as Union Pacific Corp., have always given the bulk of their gifts to the GOP (chart). In a Mar. 10 letter to employees, Union Pacific CEO Drew Lewis, who was Transportation Secretary in the Reagan Administration, said: "We need to rebuild our coffers to keep up the momentum." But politically sensitive companies such as United Parcel Service, AT&T, and Lockheed Martin are shifting money to the new majority. Lockheed Corp., which recently merged with Martin Marietta Corp., gave more than half of its PAC money to Democrats, who controlled spending vital to the defense contractor. "That's going to change," says Stephen E. Chaudet, Lockheed Martin's vice-president for state-local affairs and PACs. "Whoever's in the majority is going to get the most money."
For anybody in Corporate America who hasn't gotten the message, House Speaker Newt Gingrich (R-Ga.) and his lieutenants aren't shy about underscoring the point. Representative L. William Paxon (R-N.Y.), a zealous fund-raiser who's chairman of the National Republican Congressional Committee, has distributed a list of contributions from the top 400 PACs to fellow lawmakers as a cheat-sheet to screen for GOP loyalty before granting any favors. And Republicans aren't reluctant to punish past Democratic givers. "Every day, we have groups trotting up to the Capitol, plying their wares, and they're finding stony silence," says Paxon.
To help realign allegiances, many CEOs have hired GOP-connected lobbyists to smooth relations, in part by attending a stream of GOP fund-raisers. GOP lawmakers "think we're whores," admits one lobbyist, trying to pave the way for his company. "We've got to convince them we're out to change the way we do business."
And companies are using cash to do just that--big time. The National Republican Senatorial Committee has raised $6.5 million since January, mostly from business, and is now $3 million in the black. By contrast, the Democratic Senatorial Campaign Committee has received just $1.7 million this year and remains $1.5 million in the hole.
For the most powerful GOP barons, fund-raising has become almost effortless. After attending a breakfast of coffee and rolls for bankers in February, Senate Banking Committee Chairman Alfonse M. D'Amato (R-N.Y.) collected $15,000 apiece from 11 leading financial institutions, including J.P. Morgan, Chase Manhattan, NationsBank, and National Bank of Detroit. But even Republican freshmen who received little business support before the election are watching checks roll in. Representative Steve Stockman (R-Tex.), for instance, raised about $30,000 on Mar. 23 at a cocktail reception attended almost exclusively by business reps.
Democratic strategists are trying to downplay the loss of corporate support. Some Democrats, mimicking GOP tactics, are putting new emphasis on soliciting individual contributions, particularly from rich liberals in Hollywood. Others profess long-shot hopes that left-leaning PACs, such as those representing environmentalists and women's groups, will cough up more money to combat the GOP revolution.
ADAPTABLE. Moreover, business probably won't abandon the Democrats altogether. Former California Representative Tony Coelho, who forged key links between Democrats and corporate PACs when he served as head of the Democratic Congressional Campaign Committee, predicts that businesses will keep giving to "protect their investment" in the event that Democrats recapture the House or Senate. "It's just not good business" to cut off donations, Coelho says. "PACs need to cultivate the relationships they've developed."
But that may be true only for the most powerful Democrats, who still wield clout even in the minority, such as Representative John D. Dingell (D-Mich.). The former Commerce Committee chairman, who in '94 raised one-third of his $967,000 campaign funds from business PACs, hosted a March fund-raiser that aides claim was very well attended. Even so, other Democratic sources whisper that the event fell well below expectations.
Talk like that has Capitol Hill Democrats wringing their hands over corporate funding. Even veterans such as Gibbons know they must adapt to survive. "My fund-raising changes with the times," says the Florida congressman. "I'll raise the money somehow." Democratic strategists fear, however, that the Republicans will use strong-arm tactics to dry up Gibbons' business PAC support and send him to defeat in '96. But Corporate America doesn't seem to require much coaxing. If business keeps putting its money where its politics are, Gibbons will be one of many endangered Democrats in '96, and the GOP will be well on its way to long-term majority status.By Mary Beth Regan and Stephen H. Wildstrom, with Richard S. Dunham, in Washington