Comfy With K Street

The late Milton Friedman used to rail against what he called corporate America's "suicidal impulse." By that he meant that the business community continually financed the very politicians who were intent on robbing their profits and slitting their throats.

It's happening again. The latest quarterly Federal Election Commission Report on political giving, released this week, shows the majority of corporate money flowing to the Democrats. Firms like Comcast, General Electric, Federal Express and UPS have shifted campaign giving away from the GOP. Employees of five major defense contractors including Lockheed Martin, Boeing and Northrup-Grumman spent $104,000 on Democratic presidential candidates, versus $88,800 for the Republican field.

Meanwhile, according to FEC data, about 85% of the donations from Roll Call newspaper's top-20 list of corporate lobbyists are helping Ms. Pelosi and Mr. Reid protect and expand their House and Senate majorities. Roll Call calls it a "Democratic donor surge," noting that many of the highest-priced lobbyists already "maxed out"--they've bumped up against the legal limit in how much they are allowed to give the Democrats.

The shift in corporate allegiance helps explain the Democrats' commanding fund-raising lead. The House Democratic money-raising committee had $22 million of cash on hand at the end of August, the Republican committee $1.6 million. With more than $50 million in the bank, Hillary Clinton has as much cash as all the Republican presidential wannabes combined. The FEC report does note that Republicans closed some of the money gap thanks to a surge in small dollar contributions.

This deluge of corporate dollars comes at a time when congressional Democrats aren't the least bit bashful about their agenda. Should they win the White House they'll raise tax rates, pursue a trade protectionist policy under the guise of "fair trade," and enact as much of Big Labor's wish list as they can, from doing away with secret ballots in union certification elections to piling on more labor, environmental and health regulations. "There's almost nothing in the Pelosi/Reid agenda that we favor," one long-time industry government affairs representative tells me. "But we're still giving the bulk of our money to them."

Last spring, Democratic Finance Committee Chairman Max Baucus said he wanted to more than double the tax on private equity and hedge-fund managers, which could cost this industry up to $6 billion a year. Yet Wall Street firms, investment banks, and private equity firms are still among the Democrats' most reliable ATMs. Goldman Sachs, Citigroup, JP Morgan Chase, and UBS are all giving about two-thirds of their dollars to Democrats this cycle.

Sen. Charles Schumer runs the Democratic Senatorial Campaign Committee and is playing the role of "good cop" when he dials Wall Street donors. As one hedge-fund manager tells me: "Senator Schumer says on the phone, 'I can make your problems go away.' " Of course, the Democrats created the problems. Mr. Schumer has raised at least $2 million this year from managers at leading PE firms like Carlyle and Blackstone Group.

High-tech companies depend for their existence on policies such as free trade, low capital-gains taxes, a tax-free Internet. But employees at firms like Microsoft, Cisco Systems and IBM give most of their money to the party largely opposed to these policies. In 2006, Google's employees gave 91% of their donations to Democrats.

Silicon Valley givers complain, with justification, about Republicans' lousy record of fiscal restraint, and of their harassment of employers with round-'em-up immigration tactics. More typically these donors say they are uncomfortable with the GOP positions on abortion and gay rights. Do they care so much about those issues that they're willing to jeopardize their jobs and multimillion dollar investment portfolios? For now the answer is yes.

When Republicans were in control, Ms. Pelosi and company denounced the "K Street Project," run by former House Majority Leader Tom DeLay. They protested that corporate lobbyists were allowed to become a fourth branch of government--and in some cases their protests had merit, as Republicans curried favor with money interests.

Meanwhile, Democrats under Rep. Rahm Emanuel and Sen. Schumer have quietly erected their own K Street Project, and employ some of the same strong-arm tactics they once deplored. "I've never felt the squeeze that we're under now to give to Democrats and to hire them," says one telecom industry representative. "They've put out the word that if you have an issue on trade, taxes, or regulation, you'd better be a donor and you'd better not be part of any effort to run ads against our freshmen incumbents."

Why does corporate America go along? The standard excuse is that this is the way the game is played. They've made a calculated decision that Democrats are going to sweep in 2008. Republicans rightly object that corporate interests are making this a self-fulfilling prophecy.

When Republicans took over Congress, the labor bosses didn't climb into bed with them. Unions like the Communications Workers of America and Service Employees International Union have a long track record of giving more than 90% of their dollars to Democrats and have spent millions more on independent campaigns to pound Republicans. Labor seems to understand what corporate America doesn't: It's a policy war, stupid.

So why won't business groups go to the mat for their friends and spend whatever it takes to defeat their enemies? Former Republican House majority leader Dick Armey explains that "the business groups are simply not ideological givers. They give to buy access and to minimize risk."

He's undoubtedly right. And so, if Democrats run the table in 2008, they will have corporate America to thank. But business is living in a fantasy world if they believe this will spare them from what is likely to be one of the most anti-growth agendas that Washington has seen in many decades. Nor should they be spared. When you sell the rope to the hangman, you deserve to have a noose around your neck.