FOREIGN investment in the United States plunged decidedly this year. That is not good.Edward Graham, a senior fellow at the Institute for International Economics in Washington, says he has "a gut feeling" that the foreign investment boom of the 1980s may not revive in the 1990s. Foreign investors may be somewhat disenchanted with the US because of its basic economic problems. Japanese investors have been telling him that they have met their investment goals in the US and are now looking to Western Europe. If that is actually a general sentiment abroad, it is "one more cause for concern about US competitiveness," he says. "It doesn't help recovery from the recession," adds Robert Salomon, an economist at Brookings Institution. Foreign direct investment in the US came to $13.3 billion in the first three quarters of 1991, reports the Commerce Department. That's down from $32.7 billion in the same nine months of 1990. For all of 1990, foreign direct investment reached $37.2 billion, compared to $71 billion in 1989. The major factor in this decline was the recession here in the US and the economic slowdown abroad. "We have a world investment bust," notes David Rolley, an economist with DRI/McGraw-Hill, a consulting firm in Lexington, Mass. Foreign companies with subsidiaries in the US had just as little reason as domestic companies to expand in 1991. "There is no capacity shortage," says Mr. Rolley. Further, the pressures on corporate earnings in Japan and Western Europe meant that foreign companies had less free cash to go shopping for acquisitions in the US. Indeed, the numbers show an outflow of money from subsidiaries to their parents overseas. Some Americans worried that Japan was taking over the country lock, stock, and barrel during the 1980s foreign investment boom. That wasn't really so, says Graham. And Rolley notes that the Japanese made many investments at top-dollar prices. "It is not such a tragedy that the Japanese came in and bought a lot of buildings," he says. "They should have bought more. The banks [now stuck with many bad real estate loans] would have been thrilled." The statistics for foreign direct investment include net inter-firm borrowing, reinvestment of earnings by foreign subsidiaries, and net equity inflow. The latter, investment in plants, equipment, offices, etc., tends to be what US state governors and mayors chase on their trips abroad, hoping to bring new jobs home. That element dropped precipitously from $47 billion in the first three quarters of 1990 to $16 billion in the same period of 1991. Oddly enough, this decline occurs at a time when measures to limit foreign investment have been multiplying in Congress. The Democrats in particular are hoping to make the "threat" from imports and foreign investment a campaign issue. House Majority Leader Richard Gephardt (D) of Missouri and Rep. Cardiss Collins (D) of Illinois have sponsored a Technology Preservation Act that was approved 25-to-17 on a party-line vote by the House Energy and Commerce Committee in November. The bill would broaden the grounds for rejecting foreign investments that could affect "national security." "A thoroughly bad bill," says Graham. Comments Rolley: "Cold-war-type arguments about national security industries probably make less sense than they did three years ago." Another bill, sponsored by Michigan Democrats, would require that the sale of Japanese cars in the US, both imported and made in the US by transplants, be cut by 250,000 per year under the "voluntary" restraint agreement with Japan, if the huge Japanese trade surplus with the US is not cut by 20 percent per year. Graham describes this bill as "misguided." Its passage, he says, would be a form of protectionism that would subsidize the domestic auto companies and their workers at the expense of other Americans. It would remove the pressure on General Motors, Ford, and Chrysler to improve their efficiency and product quality sufficiently to become "world class" companies. "We don't need protectionist legislation," says Rolley. Nonetheless, there are 24 such bills before Congress. They will be in the background when President Bush visits Japan early in the new year, seeking various trade concessions.