Bits Blog: Lessons for Silicon Valley on Capitol Hill

Drew Angerer for The New York Times Senators Orrin G. Hatch and Charles E. Schumer, who were central to the deal.

There were two stark object lessons for the technology industry in Congress on Tuesday. One showed the power of influence. The other showed the power of the iPhone.

In the Senate Judiciary Committee, the industry scored an enormous victory. It got its way on the immigration bill after Senator Orrin G. Hatch, Republican of Utah, told his fellow committee members that he would not vote for the bill unless they agreed to changes that Silicon Valley pushed for. It reflected an aggressive effort by the industry: companies have vastly expanded their lobbying budgets in Washington and dispatched executives to meet with lawmakers to push for an immigration overhaul. The latest, brashest entrant is an advocacy group led by Mark Zuckerberg, chief executive of Facebook, which raised huge sums of money to sponsor advertisements supporting several critical Republicans who back the immigration bill.

In the Senate Permanent Committee on Investigations, meanwhile, Apple‘s chief executive, Timothy D. Cook, testified. He was questioned by panel members about how Apple’s subsidiaries had helped the company pay as little as one-twentieth of 1 percent in taxes on billions of dollars in income. Congressional investigators earlier this week unveiled a report detailing those tax diversions by Apple subsidiaries, based in Ireland but spanning other regions around the world.

Mr. Cook chose to take a low-key approach to the grilling, explaining that there was a difference in the tax rates that applied to the company’s sales in the United States versus those abroad, where a majority of its sales took place. He insisted that Apple had paid what it owed in the United States.

Lawmakers may have been disarmed by Mr. Cook’s tone. But they also gushed about the shiny toys that his company made, taking pains to praise the iPad, iPhone and MacBook laptop computer by name. “You managed to change the world, which is an incredible legacy for Apple,” said Senator John McCain, Republican of Arizona.

Apple may soon have to think about a legacy in Washington, which it has largely avoided unlike most of its peers in the industry. The company, based in Cupertino, Calif., spends very little in lobbying on Capitol Hill. And it has been largely invisible in even the immigration debate.

So too was another Silicon Valley company that was likewise known for having changed the world: Microsoft. Twenty years ago, it came under Justice Department scrutiny for antitrust violations. And only after that did it hire lobbyists to press its cause in Washington. Today, Microsoft is one of the highest industry spenders in Washington, investing $8 million last year.

Immigration has been one of its top issues lately. On Tuesday, Microsoft’s general counsel, Brad Smith, sent out a congratulatory missive as soon as the immigration bill passed the Judiciary Committee. The bill, Mr. Smith said in his e-mailed statement, “will promote innovation, job creation and economic growth in the U.S. We look forward to supporting this critical bipartisan legislation as it proceeds to the Senate floor for a vote.”

Mr. Smith is among the contributors to Mr. Zuckerberg’s lobby, called Fwd.us. It includes no one from Apple.

On Capitol Hill, Fiscal Talks Now Turn to U.S. Borrowing Limit

According to the Treasury Department, the government is about $66 billion below its $16.4 trillion debt ceiling, a legal borrowing limit that is set and periodically raised by Congress. When the country hits the ceiling — sometime toward the end of December, analysts estimate — it would start a countdown clock that would end with Washington running out of money to pay its bills.

That event might hobble the government, ruin the country’s credit and send markets into an outright panic, analysts predict. But despite — or because of — the debt ceiling’s potential to disrupt the economy, members of Congress are refusing to raise it as a matter of course, instead using it as a potent political football to extract concessions from the other side.

“I will not raise the debt ceiling ever again until we get significant entitlement reforms, because if we don’t reform entitlements, we’re going to become Greece,” Senator Lindsey Graham, Republican of South Carolina, said on CNN this week. If President Obama “doesn’t lead, there’s going to be one hell of a fight over raising the debt ceiling.”

The White House has pushed back by warning Republicans away from the ceiling in strong terms. “We cannot play this game, because while it might be satisfying to those with highly partisan and ideological agendas, it’s not satisfying to the American people and is punishing to the American economy,” said Jay Carney, the White House spokesman, this week. “We cannot do it.”

Some Democrats have in recent weeks urged the White House to mount a legal challenge to the ceiling itself. The White House has ruled out such measures. But in its initial proposal to avert the worst of the year-end tax increases and spending cuts, the so-called fiscal cliff, the Obama administration asked Congress to grant it more authority over the ceiling.

The White House’s plan — based on a proposal initially made by Senator Mitch McConnell of Kentucky, the Republican leader — would allow it to request an increase to the debt limit. Congress could pass a resolution blocking the increase, though such a resolution could be killed with a presidential veto.

Republicans immediately rejected the proposal. But it stems from the Obama administration’s deep frustration with Capitol Hill’s use of the ceiling as a source of political leverage, both last year and this year.

Mr. Boehner and Mr. Obama tried and failed to strike a long-term debt package before raising the debt ceiling, but not before scaring the markets and leading to the first-ever downgrade of the country’s credit rating.

This time, the ceiling is complicating the renewed negotiations on a long-term debt deal. Republicans are considering a plan to preserve the tax cuts on income up to $250,000 that Mr. Obama has requested, and then in the new year refuse to raise the debt ceiling unless the Obama administration concedes to cost reductions for Social Security, Medicaid and Medicare and possibly other programs.

When the country hits the ceiling, the Treasury would stop issuing new debt and start a series of “extraordinary measures,” technical maneuvers to leave it with enough money to pay all its obligations. But such extraordinary measures would buy the government only about six to 10 weeks, analysts estimate.

Eventually, its spending obligations would overwhelm incoming receipts, and the government would not be able to pay its bills. That would leave the Treasury in the position of choosing whether to pay bondholders or soldiers, the elderly or states.

Last summer, “Treasury considered asset sales; imposing across-the-board payment reductions; various ways of attempting to prioritize payments; and various ways of delaying payments,” a department report said. “Treasury reached the same conclusion that other administrations had reached about these options — none of them could reasonably protect the full faith and credit of the U.S., the American economy, or individual citizens from very serious harm.”

Knowing exactly when the Treasury would reach that point is an exercise in guesswork. The Bipartisan Policy Center estimates the date would fall sometime in February.

If Congress failed to address any of the year-end spending cuts or tax increases, the government’s revenue would rise and spending obligations would fall. But analysts say they do not think that would delay the need to raise the debt ceiling for more than a few days.

“I’ve been here in 40 years this coming January, and I have never seen this many consequential spending and tax problems descend at the same time,” said Steve Bell, senior director of economic policy at the Bipartisan Policy Center, and a former Republican Hill staff member.

“There might be a variation of a day or two or four,” he guessed. But by sometime in March, Congress would have needed to raise the ceiling or the country might have entered another financial crisis — or even another recession.

On Capitol Hill, Fiscal Talks Now Turn to U.S. Borrowing Limit

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Your Money: Even Capitol Hill Gets the Financial Blues

With their salaries of $174,000 (or more for those in leadership roles), senators and members of Congress are paid more than most of us. These days, many of them need enough money in the first place to jump-start their campaigns.

But there have to be some lawmakers who have suffered as much as many of their constituents in the last four years, have changed the way they legislate because of it and learned some lessons worth sharing, right?

Representative Robert Turner, a Republican from New York City, lost his house in a fire after the storm this week. So for him the wound is still raw.

Senator Mike Lee, a Republican from Utah who may have the lowest net worth of the 100 senators, sold his home in a short sale. I hoped to speak to him about it, but his media representative, Brian Phillips, said in an e-mail that my column idea “has to be the silliest thing I’ve ever heard.”

Then there is Representative Joe Walsh, a freshman Republican who represents the suburbs northwest of Chicago. He proudly claims the mantle of America’s poorest congressman, telling Chicago magazine that he’s “No. 1 in poverty.” In the last few years, he’s had to answer for his tax liens, a foreclosure and an accusation that he owed more than $117,000 in past-due child support.

What do we see of ourselves in him? And what does his opponent’s efforts to brand him a deadbeat tell us about what we ought to be willing to tolerate in our elected officials?

There isn’t much in the historical record on these questions, but one example from 20 years ago is instructive. That was when the public learned that many members of Congress were helping themselves to free overdrafts from banklike government accounts.

Voters who had no such privileges at their own local banks weren’t pleased. Within one election cycle, according to Gary C. Jacobson, a political science professor at the University of California, San Diego, and Michael A. Dimock, then a graduate student at the university, who later published an academic paper about the scandal, the worst abusers were about three times as likely not to be in Congress anymore as incumbents who steered clear of the issue. This was equally true of Republicans and Democrats, though Democrats were the more egregious of the two parties in this instance.

It wasn’t until after Mr. Walsh won his Republican primary in 2010 that some of his biggest financial troubles emerged. He triumphed with the help of strong Tea Party backing. And given his call for fiscal restraint, it was only natural that local reporters would look at his personal finances.

Sure enough, right after the primary, The Daily Herald discovered that Mr. Walsh had recently lost a condominium to foreclosure. “This experience helped me gain a better appreciation for the very real economic anxieties felt by Eighth District families, many of whom are just a paycheck or two away from facing similar difficulties,” Mr. Walsh told the paper via e-mail.

Voters fed up with the goings-on in Washington seemed to empathize with this and revelations of tax liens he dealt with more than a decade ago, or at least they were willing to hold their noses and look past it. He beat the Democratic opponent in his race by just a couple of hundred votes.

But the revelations didn’t end there. Last year, The Chicago Sun-Times reported that Representative Walsh’s former wife had filed court papers seeking more than $117,000 in what she claimed was past-due child support. She also said that he failed to make his payments at the same time that he was personally lending money to his campaign, putting politics over paternity, in effect. Representative Walsh countered that there was a verbal agreement between him and his former wife that allowed him to skip the monthly payments because he wasn’t earning much money at the time.

Earlier this year, the two resolved the dispute and issued a joint statement saying that “we now agree that Joe is not and was not a ‘deadbeat dad’ and does not owe child support.”

At the time of the initial revelation, Representative Walsh’s lawyer, R. Steven Polachek, told The Sun-Times that he’d “had no more problems with child support than any other average guy.”

About 40 percent of the 500,000 or so child support cases that the Illinois Department of Health Care and Family Services handles involve late payments at any given moment. The half-million cases tend to involve households with lower income, according to a spokesman, where there may be more frequent income disruptions.

Whether the questions about Representative Walsh’s child support make him Everyman or not, however, it’s the original suggestion that he prioritized his campaign over his children that may give voters the most pause.