BUSINESSWEEK ONLINE : APRIL 24, 2000 ISSUE
GOVERNMENT

Tech: The Virtual Third Party
A Silicon Coalition has emerged in Congress. It cuts across party lines and trumps ideology

House Minority Leader Richard A. Gephardt had high-tech execs spilling their lattes in shock when he appeared at a breakfast at a Northern Virginia hotel in late March. Gephardt, an icon of ''Old Democrat'' values and champion of Big Labor, praised Silicon Valley's role in fueling America's economic boom. He then endorsed more visas for skilled foreign workers and even backed a handful of tech-oriented tax breaks. Among them: extending the moratorium on new Internet taxes, scrapping the federal telecommunications excise tax, and making the credit for research and development permanent.

''I was taken aback,'' recalls Rhett Dawson, president of the Information Technology Industry Council (ITI), a Washington (D.C.) trade group. Except for Gephardt's refusal to support expanded trade ties with China, ''he is committed to working the same issues we're working,'' adds Dawson.

Gephardt's reinvention as a Digital Defender left no doubt about the prevailing ethos in Washington: Tech rules. While partisan bickering has gridlocked most other legislation, a broad coalition of Republicans and Democrats is converging to push technology initiatives.

In the process, tech mania is altering the political landscape in fundamental ways. This coalition collaborates so often that it constitutes a virtual party on tech issues. And Washington's obsession with technology is causing a subtle realignment within the two major parties. ''Both parties are moving rapidly in pro-tech, libertarian directions,'' says Jeffrey A. Eisenach, president of the Progress & Freedom Foundation, a conservative think tank.

Within the GOP, tech has strengthened the hand of economic conservatives at the expense of social conservatives. The Religious Right gets symbolic votes on flag-burning and late-term abortion but little of substance. And instead of vilifying government, Republican leaders such as Presidential candidate George W. Bush recognize that the feds can play a crucial role in improving America's schools, a top tech priority.

Among Democrats, tech's pull is forcing the dominant labor-liberal majority to move toward the pro-business New Democrats who have been Silicon Valley stalwarts. Case in point: the Democratic House leadership's reversal of its opposition to lifting the cap on visas for skilled foreign workers. In another sign of changing times, Gephardt made tech the focus of House Dems' annual retreat in February and even invited AOL CEO Stephen M. Case and Time Warner CEO Gerald Levin. Gephardt also has asked Microsoft Corp. Chairman William H. Gates III to join House Democrats at a May 8 gathering with business leaders. Moderate Dems are euphoric. ''We almost can declare victory in terms of repositioning the Democratic Party on tech issues,'' says Representative Cal Dooley (D-Calif.), who co-chairs the centrist New Democrat Coalition.

What accounts for the geeks' growing political clout? Megabucks, for starters. Tech CEOs are writing fatter campaign checks than ever (chart). As of Apr. 1, computer, software, and e-commerce companies and employees had funneled $9 million to candidates and parties for 2000 contests--double their giving for 1992 races, according to the nonpartisan Center for Responsive Politics (CRP). That barely registers next to the financial-services industry's $154 million. But both parties see an eventual bonanza in the growing ranks of Internet billionaires.

It helps, too, that most tech causes tend not to be ideological. Support for keeping the Net tax-free, for example, cuts across party lines. And the industry is almost religiously bipartisan. Its leading political action committee, Technology Network, better known as TechNet, has allies in both parties. ''You see people focusing on issues, not on parties,'' says Raul J. Fernandez, chairman and founder of Proxicom Inc., a Net consulting company in Reston, Va.

And with the New Economy sizzling, is it any wonder that politicians of every stripe are singing high tech's tune? ''It's hot,'' says Representative James P. Moran (D-Va.), co-chair of the New Democrat Coalition. ''It's the new 'new thing' in politics to be with the tech sector.'' Adds GOP high-tech lobbyist Ed Gillespie: ''Everyone wants to feed the goose that lays the golden egg, not kill it.''

It's not the first time Washington has put an industry on a pedestal. In the 1950s, General Motors Corp. President Charles E. Wilson said: ''What is good for General Motors is good for the country, and what is good for the country is good for General Motors.'' Now, says economist Robert D. Atkinson of the Progressive Policy Institute, a centrist Democratic think tank, ''high tech is in the same boat as the auto industry was then. People see it as having the same level of importance and think we have to get it right.''

ODD COUPLES. The Digital Defenders are an unlikely bunch. Their overall voting records run the gamut from liberal to conservative, and their odd-couple pairings on tech issues sometimes elicit chuckles in the Capitol. On Internet taxation, for example, liberal Democratic Senator Ron Wyden of Oregon teams up with conservative Republican Representative Christopher Cox of California. And the prime movers behind the House bill to raise the cap on visas for foreign high-tech workers are Representative David Dreier (R-Calif.), a staunch pro-life conservative, and Representative Zoe Lofgren (D-Calif.), a pro-choice liberal.

But for all their diversity, tech's spear carriers share key values that let them operate as a political force. The ideological underpinnings of the emerging coalition: support for freer trade, a limited but distinct role for government, better public schools, lower taxes, minimal regulation, open immigration, and an economics-based foreign policy. ''It's neither a liberal nor conservative agenda,'' says George Vradenburg III, senior vice-president of America Online Inc. ''It's an agenda shared by leaders of both parties.''

And the changing power grid on Capitol Hill is mirrored on K Street, where new trade groups and lobbying firms are springing up. New Economy groups, such as ITI and the Information Technology Association of America, have joined such established Industrial Age players as the National Association of Manufacturers in Washington's pantheon of power. ITI's high-tech voting guide is now a closely watched handle on who's in and who's out of favor in techland.

To do their bidding inside the Beltway, tech companies and trade groups are loading up on some of the best and brightest staffers from Capitol Hill and the White House. AOL, for example, boasts Andrew Weinstein and Lisa Nelson, top aides of ex-House Speaker Newt Gingrich, and longtime Senate Democratic aide Diane Dewhirst.

Techies will need all the friends they can get in the coming months. The industry is taking a leading role in prodding Congress to liberalize trade with China by granting Permanent Normal Trade Relations. It's an uphill battle: Some of tech's newfound friends on Capitol Hill are reluctant to improve trade ties with China because of its labor practices and a track record of religious persecution. Consumer groups, meanwhile, are wary of industry-backed bills that would give electronic signatures the same legal standing as written ones. And they're urging Congress to regulate online privacy--something the industry insists is unneeded.

But with their widening circle of Capitol Hill friends, techies won't face many legislative setbacks. In fact, as more and more lawmakers grasp the power of the tech sector's growing economic and political muscle, the ranks of the Digital Defenders are only likely to expand.

By Amy Borrus and Richard S. Dunham, with Lorraine Woellert and Catherine Yang, in Washington, and Jim Kerstetter in Silicon Valley

To read a letter to the editor about this story, click here.

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