The candidate from Facebook: Silicon Valley’s march on Washington

The tech economy elite are pouring money into Ro Khanna's campaign for Congress. What do they want in return?

Topics: Ro Khanna, Silicon Valley, Global economy, Manufacturing, manufacturing jobs, 2014 elections, tech policy, repatriation, Immigration, Taxes, Mike Honda, Facebook, , ,

The candidate from Facebook: Silicon Valley's march on WashingtonRo Khanna

It is a Thursday night in mid-May in San Francisco’s North Beach and Silicon Valley is feeling its oats. The occasion is a $2,600-a-plate fundraiser at the Park Tavern Restaurant for Ro Khanna, an upstart aspirant to represent California’s 17th District in Congress.

The 17th includes the heart of Silicon Valley and the tech economy elite have come out in force. Executives from Oracle and Pinterest and Dropbox and Y Combinator are in the house. Yahoo CEO Marissa Mayer has made an appearance. So has Ron Conway, the Valley’s legendary angel investor. Napster co-founders Shawn Fanning and Sean Parker are both present.

Sean Parker, in fact, has the mic.

If anybody represents both the ego and the id of Silicon Valley in the year 2013, it is Parker, most recently famous for his faux medieval redwood grove wedding down in Big Sur. As he revs up the crowd to meet Ro Khanna, he makes it clear that this gathering In North Beach isn’t a run-of-the-mill rubber chicken political dinner circuit. This moment is all about Silicon Valley asserting itself as more than just silicon and software.

The San Francisco Chronicle’s Carla Marinucci captured the video.

“We feel for a long time that Silicon Valley hasn’t been represented at the federal level,” says Parker. “We haven’t had the young, dynamic, hard-driving candidate who understands the unique issues facing Silicon Valley right now.

“To a certain extent, I think we’re starting to come to a realization of our own power,” he continues. “And of our own capability, not just as innovators and technology pioneers, but also in a political sense.”

Silicon Valley, he says, needs one of its own in Washington. Introducing: Ro Khanna. Silicon Valley’s chosen one.

A little more than a year away from an election that will decide which of two Democrats will represent the 17th, Ro Khanna lags far behind the incumbent, Mike Honda, in the polls. But thanks to his well-heeled friends and supporters in the tech community, Khanna has far out-raised the veteran lawmaker. His treasure chest is big enough to afford hiring a fleet of top campaign operatives from Barack Obama’s 2012 reelection campaign. Only 36 years old, the intellectual property lawyer has already served a stint in Obama’s Commerce Department and written a book about how to boost manufacturing in the United States. He’s someone to take seriously.

But what exactly does it mean to be Silicon Valley’s favorite son? His supporters talk glowingly about how he understands technology at a gut level — “he speaks it fluently,” says one backer — and how necessary it is for a region as critical to the economic performance of the United States to be represented by someone that “gets” the global economy.

But to his critics, there’s nothing at all new or special about Khanna. It’s just the same old story: The business community wants someone who represents their interests. In a region where registered Republicans stand no chance of winning a general election, they argue, Khanna is the next best thing, a “fiscal-conservative Manchurian candidate” pushing a “Republican-lite” business-friendly policy platform. He’s just another techno-libertarian, they claim, a tool for the Valley’s wealthiest to keep taxes low, labor cheap, and the hand of government as light as possible.

The truth lies somewhere interestingly in between. Khanna is hardly the libertarian his critics aver, nor is he someone who emerged from the womb spitting out code and microprocessor design. On crucial issues he does advocate policy very much in line with what Silicon Valley’s executive class cherishes most, but he also makes a compelling case for a strong government role in the economy, especially on the topic of boosting manufacturing jobs.

But what might be most intriguing about Khanna is how he reflects Silicon Valley’s image of itself. With ample evidence that government is broken, the Valley wants someone in Congress who believes that politics is as amenable to fixing as a start-up’s busted business plan. If you think of Ro Khanna as the representative of an impatient group of investors who demand better performance for their tax dollar, you won’t be far off. The venture capitalists want to bring in a new CEO.

* * *

The street sign next to my parking spot near Mission Coffee, the Fremont, Calif., cafe at which I am meeting Ro Khanna, seems like an omen. “Adopt-A-Street: Indo Americans for Better Community.” The 17th is the only mainland U.S. majority Asian-American congressional district. The cafe’s clientele reflects that diversity, and so does the congressional race. Khanna is a second-generation Indian-American; incumbent Mike Honda is a third-generation Japanese-American who spent time as a child in an internment camp. If you’re looking for signs of what a more diverse America will mean for the future of politics in the U.S., the battle for the 17th District is a great place to start.

But the 17th’s real claim to fame has nothing to do with ethnicity. The 17th also encompasses the core of Silicon Valley — San Jose, Santa Clara, Cupertino, Sunnyvale, Fremont. The headquarters of Apple, Cisco, Intel, Yahoo and scores of other technology companies are part of this district. This is where the semiconductor took flight. For generations this is where the future has been manufactured. Most recently, the 17th has become a literal fountain of wealth-creation. Silicon Valley is richer than ever, and looking for new things to do with its cash.

For several years now, an eye-opening stream of that wealth has been headed Khanna’s way. When he formed an exploratory committee to see whether he should run in 2012, he quickly raised over a million dollars, with contributions coming from Google’s Eric Schmidt, Sun Microsystems founder Vinod Khosla, Netscape creator Marc Andreessen, and V.C. firm Kleiner-Perkins’ John Doerr. In October, Politico reported Khanna had $1.9 million in the bank, having far outraised Honda over the same period.

Listening to Khanna outline his positions, it’s easy to see why the money is flowing. In a culture that purports to worship meritocracy, Khanna has the right résumé: an undergraduate degree from the University of Chicago and a law degree from Yale; stints at the Commerce Department and as an intellectual property lawyer for the Valley’s premier law firm, Wilson Sonsini. He is a casting director’s model of what a Silicon Valley up-and-comer should look and sound like: young, dapper and prone to punctuating his sentences with Silicon Valley buzzwords — “transparency” and “efficiency” and “innovation” — just like the start-up CEOs who cluster in office complexes up and down I-880.

“There is a sense in the Valley,” says Khanna, “amongst technology leaders and thinkers, that Congress is broken.” As just the latest example, he plucks a headline from the week’s news, and scoffs at the rollout of Healthcare.gov.

“Fourteen million people go on the website and few people can actually enroll. That’s crazy. That would never happen in Silicon Valley.”

A little dose of Silicon Valley is exactly what the doctor ordered for a dysfunctional Washington, argues Khanna.

“We need to look at Silicon Valley not just as an ATM machine for politics but for its expertise in technology. We need to encourage more Silicon Valley people to go into public service, listen to more of their ideas and involve them in helping design systems and take their expertise and counsel. We need to leverage those resources.”

Supporters of Khanna try to portray Honda, who is twice Khanna’s age, and has been elected seven straight times to the House, as “new” to this whole technology thing. A look at Honda’s legislative record doesn’t quite justify that attack. It’s difficult to imagine, for example, that there are many other congressional representatives in Washington who have been as aggressively pushing legislation supporting the development of nanotechnology as Mike Honda.

But there are clear differences between the two men on policy issues that are crucial to Silicon Valley.

Rusty Rueff, a longtime S.V. executive who backs Khanna, suggests that Khanna will fight harder on an issue very close to the Valley’s heart — immigration. Specifically, immigration for high-skilled labor. Both Honda and Khanna support higher caps for H1B visas specifically targeted for skilled immigrants, but there are some indications from the past, when Honda represented a district that wasn’t quite as heavily dominated by the Valley, that the veteran lawmaker was worried about the impact on domestic labor of “cheaper” immigrants.

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Rueff also notes that Khanna supports lower capital gains tax rates than his opponent. When one contemplates just how big a difference a higher capital gains tax rate would make to the members of Silicon Valley’s investor class supporting Khanna, this distinction appears to be meaningful.

When I press Khanna directly for an economic policy difference he has with Honda, he goes straight to corporate taxation, specifically as it applies to the problem of corporate cash stashed overseas.

“[Honda] voted to tax companies at 35 percent the minute they make a dollar overseas. That’s the exact opposite of repatriation, and it will lead to more companies incorporating overseas. It’s a basic misunderstanding of the tech and entrepreneurial economy. He is for putting a tax on any company that has any employee overseas, misunderstanding that to create jobs in the United States, companies have to have a global footprint because that is necessary for an export market. He lacks an understanding of the global economy.”

Khanna believes that the current corporate tax rate is too high, although he acknowledges that many companies don’t pay anywhere near the statutory 35 percent. He says he wants to lower rates and remove loopholes. He also notes that he supported the Korea Free Trade Agreement. Honda voted against it.

Keeping capital gains taxes where they are and lowering corporate taxes? Higher H1B visa caps? Pro free-trade? No wonder Silicon Valley likes Ro Khanna.

I raise the criticisms of him made by progressives. I tell him that according to one report, he’s the only Democrat ever to have received a campaign contribution from Paypal founder and early Facebook investor Peter Thiel, one of the Valley’s most notorious libertarians.

Khanna is surprised to hear that. But he rejects the notion that he is some kind of libertarian “Manchurian candidate.”

“The Democratic Party,” he says, “has failed to make a compelling case for the role of government in the economy, and we need more people with economic background, understanding and expertise to be making that case. Here’s what I say. I tell folks, let’s have a debate on the facts. Read my book. I have made one of the strongest cases for the role of government in economic growth that I think any Democrat has made in the last 10 years.”

* * *

Entrepreneurial Nation: Why Manufacturing Is Still Key to America’s Future” is exactly what Khanna says it is, a fact-based defense of government’s role in spurring domestic manufacturing jobs. Based on his experience as an assistant deputy secretary in the Commerce Department during President Obama’s first term, the book is a series of case studies of American companies that have flourished in the age of globalization, along with careful analysis of the government programs and policies that have helped them compete. Khanna routinely recommends increased spending and support of those government programs. (He is also a supporter of significantly expanded government investment in education, vocational training and job retraining.)

In fact, it’s hard to imagine a less libertarian text. Khanna directly calls out the Ayn Rand, Friedrich Hayek-infused Tea Party call to disembowel government. Nearly every government program name-checked by Khanna is under sustained assault from Republican budget-cutters. In an era where most politicians avoid trying to have an explicit record for opponents to campaign against, Khanna’s got nowhere to hide. Government, he argues, can help — indeed, must help — American corporations compete more effectively.

One section of his book deals with the widely recognized problem of the trillions of dollars that American corporations have stashed overseas. In our interview, Khanna noted that his opponent, Mike Honda, supports taxing those overseas holdings at the current maximum corporate tax rate. But that will just push American corporations to move completely overseas, argues Khanna, who supports finding a way to let American corporations “repatriate” their earnings.

The problem is, as Khanna notes in his book, that the last time Congress allowed repatriation, in 2004, the corporations who jumped at the option to bring their money back without taking a big tax hit didn’t do what they were supposed to, which was invest the money in domestic job creation. “Most of it went into share repurchases,” he writes, “helping stockholders instead of generating domestic employment.”

This why a number of thought leaders at the AFL-CIO and, frankly, in the Obama administration remain skeptical of that policy. Not only would the U.S. Treasury be forgoing revenue by lowering the tax rate, but the benefit to American workers is unclear. Making matters worse, some U.S. corporations, such as Merck & Co., have found ways to dodge the U.S. tax altogether, bringing billions of dollars back home through elaborate schemes without measurable job creation.

A better designed repatriation policy, argues Khanna, would explicitly link repatriation to domestic jobs.

Only those multinationals that expand their total U.S. workforce, measured by the number of people on the payroll, should qualify. The amount of dollars these companies repatriate at a discounted tax rate, moreover, should be directly tied to the number of unemployed workers that they hire and keep employed for more than 12 months. These provisions would help overcome the loopholes in the 2004 effort, preventing companies from playing accounting games by using repatriated money to displace money that had already been committed for salaries or domestic investment.

After reading Khanna’s book, it becomes much harder to caricature him as Republican-lite, and much easier to see why his attraction in Silicon Valley goes beyond immigration policy or low capital gains tax rates. The question of how a nation can compete most effectively in the age of globalization is one of the most relevant economic conundrums any policymaker can face, and this is especially true in Silicon Valley. Khanna makes a good case, in his book, that he is as an expert in the relevant policy issues. He’s a wonk, and Silicon Valley loves wonks.

Which means one year from now, voters in the 17th District will have a real choice — the global economy wonk, or the old-school progressive — when they vote in the primary.

And then, intriguingly, they’ll most likely have the same choice in the general election. Because California’s new “jungle” open primary system pits the top two voters in the primary in the general, regardless of official party identification.

Devised as way to break decades of political gridlock in California, the open primary system, in conjunction with the non-partisan redistricting that created the new, heavily Silicon Valley-centric 17th District, has had a remarkable effect on California politics. In 2012, it resulted in Democratic supermajorities in the state Assembly and Senate that gave Gov. Jerry Brown a relatively free hand in steering the state out of a fiscal and legislative mess. But it has also created competitive contests in regions where for years, the Republican candidates were so far out of tune with heavily Democratic districts that they stood no chance at all at winning in a general election.

Things are different now. Ro Khanna is no Republican, at least by today’s Tea Party standards. But he clearly offers a distinct alternative to Honda. In 2012, another longtime local Bay Area incumbent fixture, Pete Stark, was ousted by a young challenger who came out of nowhere.

New rules, and the new economy, give Khanna a fighter’s chance. Instead of an election between ideological opposites in which the Democratic choice would be guaranteed reelection, the fight for the 17th District will be a battle in which meaningful differences are at stake. That’s probably healthy, in that it will force both sides to make a clear case to voters. If, as so often has been the case, California provides a model for the rest of the country to follow, the showdown in Silicon Valley could tell the rest of the nation where the national Democratic Party could be headed.

In a land where the future is made every day, nothing could be more appropriate.

Andrew Leonard
Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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