The bill proposed by Sen. Richard Shelby, R-Ala., is the more restrictive. Approved 20-0 by the Senate Banking Committee on March 30, it would require CFIUS to rank states based on the threats they may pose to U.S. security and to evaluate proposed investments with those rankings in mind. The bill also reportedly mandates heightened scrutiny of any deal involving either a company owned by a foreign government or any foreign investment in U.S. critical infrastructure that raises national security concerns. The former stipulation worries investors from any country where state ownership of major companies is common. The latter frightens those who search in vain for a precise definition of either "critical infrastructure" or "national security."
The stakes are high, because foreign investment plays an enormous role in America's economic vitality. By Shelby's own accounting, foreign direct investment in the United States has exceeded $530 billion over the past three years. The very threat of increased scrutiny can discourage investment as well—as we saw in the CNOOC and DPW cases. If Congress, which is more directly subject than the White House to electoral pressures and public fears, wins a greater role in the CFIUS process and uses it to impose tough restrictions, it could have a chilling effect on foreign investment. Sponsors of both bills say they hope to have the president's signature well before November.
The irony is that Bush has made "security" the centerpiece of his presidency. Throughout his tenure, public approval of the president's handling of these issues has prevented his favorability ratings from dipping further than they already have. But the pressures unleashed by the 9/11 attacks, the outsourcing of American jobs, a growing trade deficit, and China's economic expansion have encouraged lawmakers to more broadly define "national security" to include both homeland and economic concerns.
The political battering the president has taken over Iraq has prevented him from doing much about it. As November's midterm elections approach, Republicans and Democrats will elbow one another to grab the lead in satisfying public demand for tighter security—whatever the result for long-term U.S. economic interests. The United States needs strong presidential leadership to safeguard its interests at home and abroad. With each passing week, it seems the war in Iraq is doing more damage than we thought.