The Price of Power

By Christine Gorman

When George Bush and Michael Dukakis breezed into Houston during the same week this fall for $1,000-a-plate fund raisers, Enron, a Texas oil-and-gas firm, had both sides covered. The company's Republican chairman, Kenneth Lay, was co-host for the Bush event, while Democratic president John Seidl attended the Dukakis affair. The hedged positioning made sense: with a victory in November, either presidential candidate, along with the new Congress, could have a profound impact on the energy industry.

The logic applies to almost any other industry, as corporate executives well know. Business people are funneling contributions to Republicans and Democrats alike, in fact to anyone with a reasonable chance of winning or holding a national office. By using loopholes in the election reform laws of 1974, which limit political contributions to candidates, corporate donors have helped make the 1988 national campaign the most free-spending in history.

By Election Day the two presidential candidates will have spent nearly $70 million each. Most of that money comes from public funds, according to the rules set up by the reform laws. Congressional candidates, by contrast, receive no public money and tend to be heavily dependent on business donations. This year's victorious Senate candidates will shell out, on average, more than $3 million, up from $1.2 million in 1978. A House seat will cost about $360,000, compared with $130,000 ten years ago.

Corporate managers who help fill campaign kitties say they merely want to make sure that their views are given a fair hearing in the corridors of power. Public-interest groups see something more sinister at work. Fred Wertheimer, president of Washington-based Common Cause, contends that "Congress is being corrupted" by contributions that "buy influence and undermine meaningful elections."

Influence peddling was to have been curbed by the series of campaign laws that Congress passed in 1974 in the wake of the Watergate scandal. Designed to keep fat cats at bay, the legislation permits individual donors to give a maximum of $1,000 to any one candidate and gifts to multiple candidates in federal races that can total no more than $25,000 a year. Companies are not allowed to contribute directly to campaigns, but they, along with labor unions and other organizations, can set up political-action committees that solicit donations from employees or members and give the money to selected politicians. A PAC can donate no more than $10,000 to one campaign, but contributions of that size could conceivably be made to every presidential contender and all of the candidates for the 535 seats in Congress. With so many opportunities to give, PACs have boosted their handouts enormously, from ; $25 million for the 1980 election to more than $80 million so far this year.

Perhaps not surprisingly, AT&T, which is heavily regulated by the Government, has the plumpest business PAC. In 1987 the company's committee controlled a fund of $1.45 million, up from $1.28 million in 1986, which it used to support 398 congressional candidates, most of them incumbent Democrats. Roughly 45% of AT&T's 45,000-member management-level staff donated an average of $75. Says AT&T spokesman Burke Stinson: "It's a part of people's everyday lives now, along with the United Way." United Parcel Service, which is hemmed in by Government restrictions on the mail business, ranks high among corporate PACs as well. In 1986 UPS gave $616,000 to more than 300 members of Congress.

The largest donors take advantage of an easy way to circumvent the limits on contributions. In addition to giving directly to campaigns, they funnel money to political parties at the national, state and local levels, or to other private organizations that are technically independent of the candidates. Such gifts are not covered by federal election laws and can thus be unlimited. This type of contribution, known as "soft money," is the fastest-growing area of campaign finance. In 1980 the two major parties took in only $15 million in soft money; this year the total will be more like $100 million, evenly divided between Democrats and Republicans.

Soft money cannot legally be spent to promote a candidate directly -- to put an "Elect Bush" ad on TV, for example. But the funds can be used for more general purposes such as conducting polls, organizing voter-registration drives or buying "Vote Republican" ads. The Democrats plan to use some of the $7 million of soft money they have raised in California, for instance, to deploy nearly 75,000 precinct workers to greet voters at the polls on Election Day. In the past, candidates had to dip into their own campaign funds to pay for polls or to get out the vote, but with the growth in soft money, politicians can devote their election resources to more vital expenses, including staff salaries and TV spots.

Sometimes candidates find creative ways to use soft money. During the primary season, for example, wealthy individuals gave some of their soft funds to independent foundations set up by Jack Kemp, Bruce Babbitt, Pat Robertson and Gary Hart, who were campaigning for the presidential nominations. The foundations used the money to produce position papers on the issues for the % contenders.

Petroleum companies and their executives are among the largest contributors of soft money. Their greatest fear is that the next Administration and Congress may try to help balance the budget by raising taxes on gasoline. Oil and real estate baron Nicolas Salgo gave more than $500,000 to the New York State Republican Party. Great Western Resources of Houston donated $100,000 to the Democrats. Los Angeles-based Arco played both sides of the contest, with a $135,000 contribution to the Republicans and $85,000 to the Democrats.

The tobacco industry has similar worries: that either party might resort to raising the national cigarette tax, which has already gone up from 8 cents a pack to 16 cents in the past five years. R.J. Reynolds Tobacco channeled $100,000 to the Republican Party, but that was offset when a Reynolds tobacco heir, Smith Bagley, donated $100,000 to the Democrats. "Many big corporations give both parties $100,000," says a Republican fund raiser.

Critics charge that the soft money and large PAC contributions to candidates amount to little more than sophisticated vote buying. When tax reform came before the Senate Finance Committee in 1986, its 20 members received $969,000 from insurance PACs and $956,000 from energy PACs, according to a report by Common Cause. Says Nancy Kuhn, a fund raiser for Dukakis in New York: "It's no mystery why the chairman of the finance committee can raise more money than the chairman of the judiciary committee." Even some members of Congress conceded, in a 1987 survey, that campaign contributions have had a negative impact on the legislative process.

In congressional races, Democrats rake in the largest share of PAC monies, despite the common perception that corporations lean toward Republicans. The reason is that Democrats hold majorities in both the House and Senate, and incumbents always have a better chance of winning than newcomers. Says one PAC manager: "The core of our business is access to legislators. We can get shut out if we give to challengers who lose." This year PACs have contributed $66 million to congressional incumbents, an increase of 29.4% over 1986, while handing challengers only $7 million, about the same as in previous elections. Democrats have garnered $52 million, up 44% from 1986, but Republicans received only $28 million, a drop of 6.7%. Result: PAC money tends to freeze the balance of power between the two parties and give many incumbents what can amount to a lifetime appointment to Congress.

& Many politicians have come to expect business contributions as their due. Thomas Mann, director of governmental studies at Washington's Brookings Institution, describes PAC contributions and soft-money donations as a "mild form of extortion." Businesses, he argues, are only responding to pressure from politicians. "Congressmen let them know that if they don't play the game -- and it takes money to play -- then someone else will," Mann says. More and more, executives who refuse to become involved in politics via the money route could find it harder to do business.

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CREDIT: TIME Chart

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DESCRIPTION: Cost of Senate and of House of Representatives campaign, 1978, 1982, 1986.

With reporting by Jerome Cramer/Washington, with other bureaus