We are in the midst of another contentious election season, with the presidential election heating up and control of Congress on the line. But while the media focuses on the horse race and polling numbers, one of the most overlooked issues is the amount of foreign-influenced cash pouring into U.S. elections.
The threat of foreign influence to our economy and national security was one our country’s founders understood. In his valedictory address, George Washington urged Americans to be “constantly awake,” because “history and experience prove that foreign influence is one of the most baneful foes of republican government.” This sentiment led to foreign nationals and companies being prohibited from making campaign contributions in the United States.
And yet today, this danger is resurgent. In a survey of just six states released earlier this year, nonpartisan watchdog OpenSecrets uncovered that at least $163 million of foreign-influenced cash flooded those states’ races between 2018-2022. OpenSecrets showed that in Montana, a tobacco company with foreign investor cash spent over $17 million to reject expanding health care for Montanans.
Growing Influence of Foreign-Influenced Companies in Elections
How did we get here? The Citizens United v. FEC decision in 2010 accidentally opened a backdoor to foreign participation in U.S. elections. Now, multinational companies are driving a truck through that backdoor, spending hundreds of millions of foreign investor-financed dollars in elections.
This is a problem at the state and federal level. In 2020, foreign-influenced U.S. corporations, including Uber and Lyft, spent $204 million campaigning for Proposition 22 in California. That ballot measure exempted rideshare companies from a state law requiring them to treat drivers as employees eligible for benefits.
In 2018, DaVita, a kidney dialysis company whose shareholders include Norway’s Norges Bank Investment Management, spent $66.6 million to defeat a pro-patient ballot measure. Earlier, foreign-influenced Chevron poured tens of millions of dollars into local races, including spending on TV ads aimed at defeating candidates who criticized the oil company after a California refinery explosion sickened residents.
In recent years, a Canadian multinational financed the opposition to an anti-gerrymandering ballot initiative in Michigan through its U.S. subsidiary. The initiative ultimately succeeded, but only after U.S. citizens were obliged to compete with foreign interests to reform their own elections.
Whether you agree with these measures or not, allowing companies that take money from foreign investors and write checks to elect U.S. politicians or finance ballot initiatives undermines our self-governance. Furthermore, it distorts markets, weakens national security, and crowds out the voices of small- and medium-sized businesses.
Opposition to Election Meddling Mounts
Even in these polarizing times, few issues inspire as much public agreement from Republicans, Democrats and Independents as foreign interference in U.S. elections. Nearly three-quarters of U.S. voters surveyed (and more than half of Trump voters) support banning corporations with any foreign ownership from contributing to candidates. Indeed, voters and elections experts agree: We shouldn’t be giving foreign investors rights that foreign individuals are barred from having.
The stakes keep rising. An analysis from the Urban-Brookings Tax Policy Center shows that foreign-owned U.S. corporate equity has increased tenfold in the past four decades, from 4% in 1986 to 40% in 2020. This means that, more than at any time in modern history, CEOs of the largest U.S. corporations are accountable to foreign investors.
How Foreign Influence on Elections Encourages Rent Seeking
Foreign investors’ interests are prone to exporting profits overseas and rent seeking regardless of the consequences for American citizens.
For example, 35% of the corporate tax breaks passed by Congress in 2017—amounting to some $700 billion over 10 years—were essentially a giveaway to foreign investors. In essence, they received all the upside of the tax break while sticking the American taxpayer with a $700 billion bill. Dramatically increasing our debt with little to show for it isn’t just insulting, it’s dangerous for our long-term national security. Whether you agree with this particular tax reform or not, the bigger issue is that the policymakers who supported those tax breaks did so having already been underwritten with election cash by foreign-influenced companies that stood to benefit from it.
A foreign-influenced company may also be more likely to put a profit motive over the health and well-being of citizens to whom they have no loyalty. Foreign-influenced Big Pharma long blocked Medicare from negotiating lower drug prices, favoring its fiduciary duty to deliver monopoly profits to overseas investors over the welfare of U.S. citizens.
Lastly, companies influenced by foreign investment have little interest in protecting the integrity of American elections. The rally that led to the insurrection at the U.S. Capitol on January 6, 2021 to stop the American tradition of peaceful transfer of power was funded in part by multinational corporations.
CEOs and boards have a duty of loyalty to investors. And when many of their investors are overseas, their aims often conflict with American interests. When that’s combined with the ability to finance U.S. elections and politicians, it can lead to kinds of free-riding and rent seeking that stifle innovation and make markets less efficient.
Legislation in the Works
Efforts are underway to put U.S. interests first when it comes to who is funding our elections. In April, Minnesota became the first state to prohibit foreign-influenced corporate spending in elections. In November, Maine voters passed a similar referendum, with 86% in favor of it. Elsewhere, momentum to act is building. The New York Senate passed the “Democracy Preservation Act” with substantial bipartisan support. States including Hawaii and Washington are advancing bills of their own. And a solution at the federal level has been introduced in Congress.
Most of these bills would prevent companies with 1% or more ownership by a single foreign entity (or a total of 5% or more by multiple foreign entities) from using their corporate treasuries for electioneering in the U.S. While 1% may seem small to some, a 1% owner is often one of a company’s top ten largest owners. In my own experience as an investor, CEOs know who their largest owners are—and, more importantly, what they want and are legally accountable to them.
Restoring self-governance in U.S. elections is good for business. In particular, it levels the playing field for companies owned by Americans. This is especially important for small- and medium-size businesses whose interests are often drowned out by the political spending of giant multinationals.
With this overdue reform, multinationals would still have plenty of avenues to influence policy through corporate lobbying and corporate political action committees (solely funded by Americans). Furthermore, corporate American executives and employees would also be free to shape U.S. elections in their personal capacities. But almost all foreign investor participation would finally be stopped.
A Matter of National Security
National security has quietly become a tool for building consensus as American voters begin to pay more attention to whether politicians work harder for overseas interests or their own. Having strengthened our economy and safeguarded U.S. infrastructure from undue foreign influence with bipartisan laws, such as the Infrastructure Investment and Jobs Act and the CHIPS Act, it would make sense to do the same for our country’s vulnerable election systems.
The time for reform is past due. Bipartisan majorities today understand what the nation’s founders grasped more than two centuries ago: The direction of our country—and especially financing of our elections—should be driven by 100% American interests, without fiduciary duty to foreign investors confusing the issue.
