Campaign Watch

Election Lessons

2008-11-06T15:56:00.003-05:00

Now that the election is over, what are some of the “lessons learned” on the campaign finance front?

1)The system of public financing may be in for an overhaul.

President-elect Barack Obama became the first presidential candidate ever to forgo public matching funds for his general election campaign. In breaking with that tradition, he may now start a debate over how campaigns will be financed in the future.

Most voters may not be aware, but both presidential candidates are entitled to federal funds to pay for their general election campaign, which begins once they officially accept their party’s nomination. Sen. John McCain took the $84 million in federal funds. Mr. Obama felt he could raise more on his own, and he did. He took in $185 million between September 1 and October 15, out of over $640 million he raised overall.

Now the question that campaign finance reformers are facing is whether to scrap the system entirely or reform it in some fashion. Reforms might include increasing the amount of money given to the candidates and eliminating some of the more onerous rules on how and where the public money can be spent.

2)Big dollars can be raised from small donors by harnessing the power of the Internet.

Republican presidential candidate Ron Paul and Mr. Obama were the pioneers here. Numbers are not available for the general election yet, but in the primary race, Mr. Obama raised $165 million from donations of $200 or less. That wellspring of small donors became the basis of his decision to withdraw from public financing – that little donors did not represent the corrupting influence of rich donors writing big checks.

Mr. Paul’s campaign held one day “money bombs” in which small donors banded together on-line to give him millions of dollars all on the same day.

And ActBlue, an internet clearinghouse for Democratic candidates, has raised $81 million since it began in 2004. This Web site allows donors to make contributions to any number of Democratic candidates with the ease of a single click.

3)The world of independent expenditures has been turned on its head.

In the 2004 election, the explosive growth of 527 groups – so named for the part of the Internal Revenue Service code that regulates them – made big news. These included groups like the Swift Boat veterans. In 2004, these groups spent $338 million. This year, 527 groups spent only $185 million.

Part of this downturn reflected the fact that both Mr. Obama and Mr. McCain discouraged their donors from giving to these groups. Another reason was the increased political use of nonprofit groups – so called 501(c) groups. The advantage of using a nonprofit is that, unlike 527 groups, donors to nonprofits do not have to be identified. These nonprofits spent $200 million, according to the Campaign Finance Institute.

The bulk of the money went to support Republican candidates and to pay for anti-Obama ads. But nonprofits also included such familiar names as the National Rifle Association, Planned Parenthood and the U.S. Chamber of Commerce.

If rules are made to be broken, then the 2008 Presidential race was true to form.

How Cash Secures Seats

2008-10-28T14:15:00.004-04:00

If money can breed success in politics, a new study from the Campaign Finance Institute predicts that the Democratic Party is in a strong position to pick up a “significant number” of House seats in the November 4 election.

Much of the Election Year 2008 campaign finance story has focused on the enormous amounts raised by the presidential candidates themselves, especially the record-shattering $621 million raised by Senator Barack Obama. But under the radar screen, there has been equally impressive fundraising taking place by two Democratic committees raising money for House and Senate candidates.

For years, Republican Party fundraising committees for Congressional races have vastly outraised and outspent their Democratic counterparts. These are national committees that raise money from donors across the nation, and then give that money to individual candidates needing help in contested races. These dollars come on top of the money individual candidates raise for themselves – an extra boost from the party.

This year, the Democratic fundraising committees are rolling in cash, creating new story lines for reporters looking for ideas outside of the Presidential race. The Democratic Congressional Campaign Committee has raised $120 million, compared to $100 million for its Republican counterpart. Meanwhile, the Democratic Senatorial Campaign Committee has raised $103 million, compared to $68 million for the rival Republican committee.

What does this mean for individual candidates? The Campaign Finance Institute study said that Republican and Democratic House candidates are pretty evenly matched financially in seats where there is an incumbent candidate and a challenger. But, when it comes to open seats – those where an incumbent is not seeking re-election – Democrats might have an edge.

Between August 1 and mid-October, the D.C.C.C., has put $42 million into scores of House races. This compares to $8 million from the National Republican Congressional Committee, the N.R.C.C. The Democratic committee was able to put more than $1 million into 19 different races, while Republicans could do this in only one House district.

As of October 19, three weeks before the election, Republicans have $17 million left for House races, while the Democrats have a $54 million war chest. In political terms, mere weeks can be an eternity. But unless Republican House candidates get more cash, the gains that the Democratic party made in picking up House seats in 2006 might be repeated this year.

A Candidate’s Worth

2008-10-13T16:34:00.002-04:00

So how much money are the Presidential candidates worth?

That question has increasingly come to the fore with the release last week of two years of income tax returns for Sarah Palin, the Republican vice-presidential candidate, and her financial disclosure statement as well.

In spite of Ms. Palin’s statements that would indicate her family is one of modest means, the disclosure statements show that she and her husband, Todd, are millionaires, with assets that could be valued as much as $2 million. Most of this is in several properties they own, Mr. Palin’s business and a large investment stock portfolio amassed by the couple.

Journalists covering campaign finance might want to get a peek at the candidates’ personal finances. As members of the Senate, John McCain, Barack Obama and Joe Biden are required by federal law to file personal financial disclosure statements. One good source of information is the personal finances page at Open Secrets, which collects this data.

These statements show that Mr. McCain is one of the wealthiest members of the Senate, with assets ranging in value from between $33.6 million to $49.4 million. Mr. McCain’s wife, Cindy, is the heiress to an Arizona beer-distributorship and has a net worth of around $100 million.

There is no requirement that candidates make public their tax returns, but it has become standard practice for all. Tax returns at www.johnmccain.com/mccainfinancial show that Mr. and Mrs. McCain file taxes separately. She reported income of $6 million in 2007, he reported income of $405,000.

By contrast, Mr. Biden is ranked as the poorest member of the Senate. His financial disclosure statement shows he has assets of between $62,000 and $418,000. The Obama campaign released 10 years of Mr. Biden’s tax returns, which show that Mr. Biden and his wife had an adjusted gross income in 2007 of $319,853 from his Senate salary, outside teaching and royalties on his book. The Senate disclosure statement, however, does not include his $3 million Delaware house.

Barack Obama has assets ranging from $456,012 and $1.1 million. His 2006 income taxes show a total income of $991,296, from the Senate, his wife’s income and royalties from his best-selling books.

Of course, with the financial markets so volatile, many of those numbers could be shrinking pretty quickly.

Monitoring “Outside” Groups

2008-10-01T17:26:00.002-04:00

As the presidential race enters its final month, outside groups on the right and the left are beginning to pour money into the campaigns. These groups are prohibited from coordinating with the official campaigns of Barack Obama and John McCain, but as outside advocates, they can be powerful forces in the race’s closing weeks.

Everyone remembers the role that the “Swift Boat Veterans” played in hurting the John Kerry presidential campaign in 2004. And in an election year as intense as this one, outside groups are getting into full swing.

One source of information for reporters who want to track the spending and other activities of these groups is the Federal Election Commission Web site, which keeps comprehensive and up-to-the-minute data. One type of information that must be disclosed is “electioneering communications” made by these groups, which includes broadcast ads on television, radio and cable. The F.E.C. reports provide a wealth of information for reporters: The contact person for the groups, the identity of donors, the vendors who produced the ads and the amount of money spent.

The other type of data collected is on “independent expenditures” made by outside groups that expressly advocate the election or defeat of a federal candidate. These reports must be filed within 24 hours of when the money is spent and they, too, contain valuable nuggets. These include not only the amount of money spent, but also what it is spent on – television ads, direct mail, phone banks – as well as the names of the vendors that produce these materials.

So what is happening this year? On the right, a large number of small groups – Freedom’s Watch and Americans for Job Security are active ones – have produced a series of ads and Web casts attacking Mr. Obama. One common tactic is to produce a provocative, often controversial ad, which is run on just a small number of television stations. But, the ads generate enough attention in the mainstream media – what campaigns call “earned media” – so that the publicity gives these ads even broader reach.

On the left, trade unions have traditionally turned out ground troops and conducted multi-million dollar ad campaigns on behalf of Democratic candidates. One of the most useful spots on the F.E.C. Web site to track this spending – and to find out which federal candidates the unions are attacking or supporting – is a list of several Web pages that summarize this data in easy-to-read charts.

Since the 2004 election, the rules have been relaxed so that these groups can continue their activities closer to election day and have greater freedom of expression. Given the passion that this presidential race has generated, expect a flood of these ads in the weeks ahead.

Don’t Dismiss Party Funds

2008-09-16T13:05:00.003-04:00

John McCain came out of the St. Paul convention with a bounce in the polls, a telegenic new running mate and more luck on the fundraising front, thanks to the Republican National Committee.

Back in June when Barack Obama announced that he would become the first - and only -candidate to opt-out of the public fundraising system, it looked like Mr. Obama was making the smart move and Mr. McCain was not. That system provides cash from the U.S. Treasury to the presidential candidates for the general election.

In making that decision, Mr. Obama, who had broken all fundraising records, calculated he would raise three to four times the $84 million that the government would provide – some $200 million to $300 million, by his estimate.

Yet in comparing how these two candidates fare, campaign finance reporters need to cast a wider net and not simply compare Mr. McCain’s $84 million against whatever Mr. Obama raises on his own.

That is because Mr. McCain has the power of the R.N.C. behind him, while Mr. Obama must rely on a struggling Democratic National Committee. In August, for instance, Mr. McCain raised $47 million, his highest month ever, and the R.N.C., which can spend money on behalf of the McCain-Palin ticket, raised another $22 million.

Once Mr. McCain became his party’s official nominee and accepted the federal funds, his campaign was prohibited from raising any additional money for the general election.

But the story doesn’t stop there.

The Republican party can spend unlimited amounts of money independent of the McCain campaign and split costs of commercials that promote Mr. McCain and other Republican candidates. McCain fundraisers say they expect the R.N.C. will collect another $100 million over the next two months. Already, the R.N.C. has $75 million in cash on hand.

The D.N.C. can do the same for Mr. Obama. But, the D.N.C.’s financial cupboard is pretty bare. As of last count, the D.N.C. reported having only $7 million in cash to spend on Mr. Obama’s behalf.

Obama's Fundraising Challenge

2008-09-02T17:04:00.003-04:00

With the Democratic convention behind him, Senator Barack Obama’s task is now to hit the campaign trail. But, in doing so, he will be working as hard to land dollars as he will to be to land votes.

Mr. Obama has shattered all fundraising records and rewritten many of the rules of raising campaign cash. But now that he is officially his party’s nominee, he faces his hardest fundraising challenge ever. And that provides a fruitful line of reporting for those interested in covering campaign finance.

The challenge stems from Mr. Obama’s decision to bypass the public financing for the general election, becoming the first major party candidates to do so since the system began in the 1970s. Even George W. Bush, who also had a Midas fundraising touch, still took the money.

The public system gives each major party presidential candidate $84 million for the general election, which basically covers the two months from the conventions until Election Day. But Mr. Obama made the calculation he could raise two, perhaps even three times, that amount.

But can he pull it off?

It is a calculated risk. For reporters, there are several aspects to keep in mind. There is no candidate in modern political history that comes close to Mr. Obama in fundraising. Since the beginning of the presidential race, Mr. Obama has raised a record $401 million. This compares to $171 million raised by Mr. McCain. At the end of July, Mr. Obama had $65 million of that left, compared to $21 million for Mr. McCain.

But reporters need to take a closer look at the numbers, which show that Mr. Obama is vastly outspending Mr. McCain. The most recent Federal Election Commission filings show that Mr. Obama took in $50 million in July, but spent $55 million. He spent more than $32 million on advertising and has monthly payroll expenses of $2.2 million.

By contrast, Mr. McCain, who took in $27 million that month, spent $18 million on advertising and has payroll expenses half that of Mr. Obama.

The Obama campaign estimates it may have to raise as much as $100 million a month for itself and the Democratic National Committee. Mr. McCain, with the federal money in his pocket, will not have to waste time on fundraisers, and can rely on the fundraising prowess of the Republican National Committee to provide the cash to run ads on his behalf as well.

In finance, there is the saying that “time is money.” The question for Mr. Obama is whether that will work to his advantage, or not.

Convention Events: Follow the Money

2008-08-18T17:11:00.005-04:00

Some pundits claim that the upcoming political conventions are “ethics free” zones. And, it some ways, they may be right.

As the days of the convention draw closer, more information is emerging on the vast array of parties and other festivities planned by corporations to honor delegates and members of Congress.

The Sunlight Foundation, a Congressional watchdog group, has vowed to pull back the curtain on the lobbyist-funded partying that will take place and is posting a calendar of receptions, concerts, entertainment and brunches taking place at the two events. The group has found at least 370 events that will take place. Far more is being planned for the Democratic convention in Denver later this month than the Republican gathering the following week in St. Paul

The list, which was compiled by Quinn Gillespie & Associates, provides a road map for reporters interested in following the trail of dollars at the conventions. The list also shows the cultural differences between the two political parties. For starters, it appears there will be more fun at the Democratic convention than the Republican one. The Quinn Gillespie list of parties runs for some 16 pages for the Democrats, but only five pages for the Republicans.

Entertainment at the Republican Convention focuses mainly on country music. Headliners include LeAnn Rimes, a “Texas Honky Tonk” featuring Gretchen Wilson, John Rich and Cowboy Troy, and the Charlie Daniels Band. The biggest non-country headliner will be the Beach Boys.

The Democrats’ entertainment is hipper and includes a broader array of musical styles: The Black Eyed Peas, Kanye West, Jennifer Lopez, Tony Bennett, Willie Nelson and Jerry Jeff Walker, James Taylor and Melissa Ethridge.

But, ethics rules do apply to all these events. The 2007 ethics reform measure – the Honest Leadership and Open Government Act – has put some brakes on non-stop partying and laid out new rules that lobbyists must follow. Reporters can find information on the new law on line: Both the Senate and the House have issued press releases about how these rules will apply at the convention.

The sound of music, however, may drown out the voices of campaign finance watchdogs concerned about whether these rules are being followed.

The Money Behind Conventions

2008-07-17T16:56:00.004-04:00

There was a time when the Democratic and Republican parties both met in conventions to select a nominee. But, no more. With both parties having already selected their presidential candidates, the Democratic convention in Denver and the Republican gathering in Minneapolis-St. Paul are turning into big money fests with major corporations playing the leading role.

Beyond the balloons and the hoopla, the conventions represent a chance for enterprising reporters to dig into one of the last remaining campaign finance loopholes – the last arena where big-money corporate donations can play. An estimated 15,000 journalists are expected to show up at each convention. To prepare for this coverage, there are a number of sources for reporters seeking to get an inside track on convention campaign finance.

For starters, reporters should know the sky is the limit when it comes to how much corporations can donate to these conventions – corporate donations to convention host committees are not restricted by amount, and they are tax-deductible, unlike all other forms of campaign contributions.

For Democrats, the “sponsor” page on the host committee Web site lays out what sort of access is being provided for different levels of contributions. Dozens of companies have already signed up – from Target to Ford, from Coca-Cola to FedEx. Some of the biggest donors are forking over seven-figure checks.

For Republicans, information about corporate sponsorships can be found at the Minneapolis-St. Paul host committee site, under the “donors” tab. This, too, shows a blue-chip corporate list that includes AT&T, Kraft, Microsoft and Pfizer, but has less information what the sponsorships will actually buy.

So why are all these companies spending so lavishly? Partly to gain access to top federal official holders and party leaders that these donations assure. In addition, with so much of the world’s attention drawn to the conventions, having your corporate logo splashed around doesn’t hurt either.

A report by The Campaign Finance Institute, a Washington research group that studies campaign finance issues, pulls back the curtain on many of these donations and is a great source of information for reporters. The report is a treasure trove, complete with has internal memos that lay out the kind of access – meetings with senators and governors – that can be had for every level of donation.

With more money pouring into the conventions, it means there are more opportunities for great campaign finance stories.

The Basics on Bundlers

2008-07-08T15:07:00.004-04:00

They are not called “bundlers” for nothing. Bundlers are some of the most important players in campaign finance -- they are wealthy, highly-connected individuals who are adept at raising money for Barack Obama or John McCain from other similarly wealthy people.

For business reporters interested in covering the Presidential money race, bundlers are where a lot of the action is. Over the years, bundlers have become increasingly important as the “soft money” spigot has tightened and stricter limits were imposed on what individuals can give to a presidential candidate. Federal rules allow for donors to give only $2300 to a presidential candidate’s primary race, and another $2300 to the general election.

Bundlers sway influence in politics by “bundling” money from other people and gaining credit – and influence – for their hard work. At the moment, both Mr. Obama and Mr. McCain are spending precious time meeting with groups of these wealthy fundraisers to fatten their already-ample campaign war chests.

For reporters, the best source of information about bundlers comes from a Web site created by Public Citizen, a watchdog group. Called "White House for Sale," it is a comprehensive list that identifies and tracks these highly influential donors. Bundlers provide campaigns with far more money than any individual can on their own – not surprisingly, lobbyists and other special interests turn up as prominent bundlers.

Relying on bundlers presents a tricky ethical problem for both Mr. Obama and Mr. McCain. Both candidates have positioned themselves in the forefront of the fight to rid politics of special interest money. Mr. McCain even co-sponsored the landmark 2002 McCain-Feingold Act that put tighter restrictions on campaign contributions.

For that reason, a group of eight campaign finance watchdog groups, including Public Citizen, have taken both candidates to task in letters written to each of them. The letters ask both to provide more disclosure of their bundlers – for instance, how much each bundler has raised. The group called Mr. McCain’s disclosure “spotty” and questioned how Mr. Obama could raise $180 million since last November and identify only two new bundlers.

Hillary Rodham Clinton ran into trouble in her primary bid when one of her bundlers, Norman Hsu, who had raised $850,000 for her, turned out to be a fugitive from justice.

Given all the attention that has been given to special interest money in the presidential race – a topic raised by the candidates themselves – bundlers might end up causing a bundle of trouble for Mr. Obama and Mr. McCain.

Clinton's Campaign Debt

2008-06-10T18:12:00.004-04:00

However painful it must be for Hillary Rodham Clinton to suspend her presidential bid, the defeated candidate has even more to be sad about: Mrs. Clinton ended her campaign some $20 million in debt, with $11 million of that coming from her own pocket.

How could someone who raised a total of $214 million since she began her presidential bid, end it in such poor financial shape?

Part of that is answered by the fund-raising strategy that Mrs. Clinton employed. Part is answered by the fact that no matter how much Mrs. Clinton raised, she was continually outraised and outspent by Barack Obama, whose fund-raising prowess has shattered all records.

In terms of overall fund-raising, Mrs. Clinton’s $214 million is impressive on its own, and competitive with the $265 million raised by Mr. Obama. These numbers reflect money raised by April 30, the most recent totals available. When May fund-raising reports come out later this month, both campaigns are expected to announce even higher totals.

But where Mrs. Clinton ended her campaign in debt, Mr. Obama ended nearly debt free. Mrs. Clinton will now have to struggle to pay off her creditors, who include some of her most important campaign insiders, along with hotels, air charters, communications companies, pollsters and other vendors.

The reason for this imbalance in the two candidate’s finances is simple: Mrs. Clinton relied on a network of traditional Democratic donors who quickly wrote $2300 checks for her primary race and another $2300 for the general election. Once these donors gave the maximum $2300 allowed by law for each race, they could not give more. In the last months of her campaign, Mrs. Clinton was forced to find new pools of donors – which she did as she began to tap into the Internet. But much of this was too little, too late.

More frustrating for Mrs. Clinton is the fact that the money raised for her general election race – around $24 million – cannot, by law, be transferred to cover her primary debts. Instead, she is required to give that general election money back to the donors. So while Mrs. Clinton has primary debts of $20 million, she cannot tap any of the $24 million in her general election money to pay them off.

Mr. Obama adopted an entirely different fund-raising strategy. He did not have a network of big dollar donors. Instead, he relied on a large network of small donors to raise impressive sums. The average Obama donation is around $90. But, the Obama campaign claims they have some 1.5 million donors. When Mr. Obama needed more money, he easily went back to these small donors for additional money since few had “maxed out” and reached the $2300 maximum.

The Obama campaign also raised money mainly for his primary race and did little fund-raising for the general election. In fact, the Obama campaign has raised only $8.7 million for the general election – some $14 million less than Mrs. Clinton.

What options does Mrs. Clinton have to pay off her debt?

The most obvious is to try to raise money from people who have not already given the maximum $2300 for her primary race. But, since she has already withdrawn her Presidential bid, getting new donors to pay off her debts will be a tough sell. With Federal Election Commission approval, she might negotiate with some of her creditors to whittle down what they are owed. Then there is the $11 million that Mrs. Clinton lent her own campaign. If she does not raise money from new donors by the time of the August Democratic convention, she will have to absorb that loss herself. Since the Clinton’s have reported earning $109 million since leaving the White House, this loss is affordable.

There has been talk that, in the spirit of party unity, Mr. Obama might step in and appear at a fund-raiser to encourage donations to retire Mrs. Clinton’s debt. Given Mr. Obama’s prodigious fund-raising ability, this most likely would be seen by the Clinton campaign as a generous and gracious gesture.

Mr. Obama's Union Money

2008-05-25T11:40:00.004-04:00

One of the best political friends Barack Obama has is the Service Employees International Union, the politically powerful union that has pledged to spend $75 million to get Mr. Obama and other Democrats elected.

When it comes to Democratic politics, there is no more potent player than the S.E.I.U., which has 1.9 million members across the country and a willingness to knock on doors, pour money into television ads and go flat out for its chosen candidate.

Their chosen candidate is Mr. Obama, who has benefited handsomely from their efforts in his primary battle with Hillary Rodham Clinton. Wherever Mr. Obama has campaigned, the S.E.I.U has been there – forming almost a shadow campaign on his behalf. Mr. Obama may have vastly out-raised and out-spent all other candidates in this election. But even having the biggest campaign war chest of his own has not stopped the S.E.I.U. from adding its own considerable resources to support Mr. Obama’s election effort.

The S.E.I.U. is just one of many independent groups that are active in this election year. Many are unions. Others are nonprofit groups, like the conservative Club for Growth. Still others are so-called 527 groups, like the liberal MoveOn.org. But, by any measure, the S.E.I.U. is the biggest, the richest and the boldest.

To date, the union has spent $9.7 million supporting Mr. Obama – the largest amount spent by any outside group on any candidate. The next largest amount is the $2.3 million spent by the American Federation of State Local and Municipal Employees to support Mrs. Clinton. In addition, the S.E.I.U. has also spent $1.5 million in efforts attacking Mr. McCain. And, the union’s leadership has been loud in its calls for Mrs. Clinton to exit the race and cede the party’s nomination to Mr. Obama.

Federal election rules prevent the union from coordinating its efforts with the Obama campaign. But, when voters see television ads sponsored by the S.E.I.U., it’s hard to tell the difference between an official Obama ad and one paid for by the union.

The union also has more to offer than money. It has foot soldiers. In the recent Oregon primary, for instance, the union said it made 150,000 phone calls, knocked on 22,000 doors, sent out 200,000 pieces of mail and lead a massive get-out-the-vote drive headed by 500 union volunteers. In Indiana, where Mr. Obama lost to Mrs. Clinton, it led a similar effort. A television ad there called “New Building” focused on money being spent to rebuild the infrastructure of Iraq, rather than that of the United States, and pointed out that Mr. Obama opposed the war.

One central campaign theme for Mr. Obama has been his denunciations of special interest money and his refusal to take money from lobbyists. In fact, during the Iowa caucuses, Mr. Obama went out of his way to criticize independent groups that had been supporting John Edwards.

But, when it comes to the S.E.I.U., which has its own political agenda in Washington, Mr. Obama has been silent. And many voters, especially those not schooled in the nuances of campaign finance rules, may not notice the difference when watching a television ad paid for by the Obama campaign versus one paid for by the union.

Public Financing: To Use or Not to Use

2008-05-08T11:50:00.002-04:00

One would think that if the government were offering free money – no strings attached – to mount a race for the White House, Presidential candidates would eagerly take the cash.

But that may not be the case this year.

Ever since 1976, when public funding for the Presidential election was started, every Presidential nominee has accepted these funds for the general election. This year, John McCain and the Democratic nominee are each eligible for $84 million in cash from the Presidential Election Campaign Fund. The money comes courtesy of taxpayers who voluntarily checked off the $3 donation on their federal income tax returns and is given to the candidates from the U.S. Treasury.

For his part, Mr. McCain is giving indications that he will take the money. But Barack Obama, who had earlier pledged to accept public financing if the Republican nominee did the same, appears to be backing away from that pledge. (Hillary Rodham Clinton has not yet said whether she would take part in the system.)

Sparks are flying between the McCain and Obama camps on this point. Both men have staked themselves out as campaign finance reformers, and have loudly denounced special interest money in politics. But, since Mr. Obama has shown to be such a formidable fund-raiser to date – he’s raised $234 million compared to Mr. McCain’s $77 million – he is now rethinking his pledge. This, of course, has caused the McCain camp to accuse Mr. Obama of backpedaling on a fundamental belief and not living up to his own words.

What it all comes down to is a matter of pragmatism against principles. By any count, $84 million is ample money for what will amount to a two-month general election campaign – roughly the time between each party’s convention and the November 2nd election. But Mr. Obama has shown he can easily top that sum. Last March alone, his campaign raised $40 million, after having raised $55 million the previous month.

The Obama campaign argues that they have developed what amounts to a “parallel public financing” system because of Mr. Obama’s ability to raise large sums of money from small donors via the Internet. These small donors, the campaign has said, offset the influence of special interest money.

Mr. McCain, by actions more than words, looks like he will take the free cash. His campaign is not actively fund-raising for the general election. In fact, Mr. McCain has returned contributions for his general election and asked donors to instead give it to a special legal and accounting fund that candidates can set up outside the public financing system.

For Mr. McCain, besides making a stand on principle, there are practical reasons for wanting the federal money. Last March was his best single fund-raising month. Still, he took in only $12 million, around one-third of Mr. Obama’s receipts that month. Against the Democratic financial juggernaut, Mr. McCain has always trailed.

Should Mr. McCain accept the public money and should Mr. Obama, if he becomes the Democratic nominee, not take it, Mr. McCain could be at a severe disadvantage.

But, fear not for Mr. McCain. The Republican National Committee, with some restrictions, can spend lavishly on his behalf, just as the Democratic National Committee can to promote its Presidential nominee. And, on this score, the Republicans come out ahead: The R.N.C. had $31 million in cash on hand at the end of March compared to only $5.3 million for the D.N.C.

This means there is still plenty of room for special interests – whether supporting the Democrats or the Republicans – to open their wallets and have their voices heard, whether the candidates accept public financing or not.

Small Donors Play a Big Role

2008-04-29T12:29:00.004-04:00

Aided by the ease of the Internet, small donors are playing a big role in the 2008 Presidential primary, especially among Democrats. While campaign fund-raising usually conjures up images of rubber-chicken banquets and deep-pocketed donors writing big checks to wield influence, there’s been a revolution in fund-raising this year.

The Presidential candidates have been able to raise sums in staggering numbers – some $900 million through the end of March by all candidates combined. But the big news comes at the smaller end, where the amount raised by small donors is almost equal, and for some candidates, exceeds the amount raised by major givers. Federal Election Commission data shows that $269 million has been raised so far from donors giving $200 or less to candidates. This compares to $288 million from those giving $2000 or more.(The maximum donation is $2,300 in a primary race and the same amount to the general election.)

The Barack Obama campaign is following in the footsteps of Howard Dean in exploiting the power of small donors and Web-based donations. Mr. Obama, who has generated excitement among many new voters, has raised 45 percent of his money so far in donations under $200. This compares to 20 percent raised from those giving the $2,300 maximum, according to data from the Campaign Finance Institute. In dollar terms, small donors gave Mr. Obama $101 million, compared to $46 million raised from those giving the maximum.

Small donors are important to campaigns simply because they are small. A $25 donation can turn into a $50 donation as small donors are encouraged to give again and again. Once a big donor gives the maximum $2,300, they can give no more – and become, in effect, no longer useful to a campaign.

A greater reliance on big donors is one reason why Hillary Rodham Clinton has so much less cash for her primary race than Mr. Obama. Mrs. Clinton depended, initially, on a large network of major donors for her campaign cash. Soon, she had exhausted this network of big givers. As a result, as cash kept rolling into the Obama war chest – at the end of March, Mr. Obama had $43 million in cash available for the upcoming primaries, compared to $9.5 million for Mrs. Clinton – the Clinton campaign took steps to become more Internet savvy.

On the day after Mrs. Clinton won the Pennsylvania primary, her campaign raised $10 million online, which was the campaign’s best one-day haul. Campaign officials said this included 70,000 new donors.

The most creative use of the Internet came from Ron Paul, the 10-term Republican Congressman from Texas with a Libertarian message. Mr. Paul kept a large ticker on his Web site, recording each donation in real time, no matter how small. This catchy Web gimmick spurred his supporters to join together in one-day “money bombs,” raising millions in quick bursts.

Last November 5, to celebrate Guy Fawkes Day – the British rebel who tried to blow up Parliament and became a model for the main character in the movie “V for Vendetta” -- supporters of Mr. Paul donated more than $4 million online, then a campaign record. This was followed up by another online event, in which Mr. Paul took in over $5 million on the 234th anniversary of the Boston Tea Party.

While Mr. Paul’s chances of winning his party’s nomination ranged from slim to none, his fund-raising prowess could not be dismissed. As the Republican race tightened in the last quarter of 2007, Mr. Paul raised $20 million from his Internet followers. This was more than frontrunners Mitt Romney and John McCain combined.

Harnessing the Internet seems to be more of a Democratic skill than a Republican one. John McCain, the party’s presumptive nominee has raised only $16 million online for his primary bid. Even more, groups like ActBlue, an online political action committee, have sprung up to match small donors with a broad range of Democratic donors, from state house races to the Presidential race. The goal of ActBlue is to make fund-raising cheap and as simple as the click of a mouse. Since it was started, ActBlue has raised $43.7 million, with a goal of raising $100 million for Democratic candidates in the current election.

One of the big concerns of campaign finance reformers has been that too much money has flowed into politics – making politicians vulnerable to the interests of their major donors. But Internet fund-raising turns that concern on its head. By showing how much money can be raised online in small amounts, politicians in need of campaign cash now have another way of getting it, with far fewer strings attached or rubber-chicken dinners to attend.

Outside Expenditures in the Democratic Primary

2008-04-11T18:44:00.002-04:00

While both Hillary Rodham Clinton and Barack Obama break fund-raising records, independent groups outside of the official parties, but with strong points of view and deep pockets, are also pouring money into the races, trying to sway the outcome, especially among Democrats.

Labor unions, so-called “527” groups and politically-oriented nonprofit groups have been playing an increasingly important role as the Democratic primaries grind on. The Campaign Finance Institute, a nonpartisan organization that studies campaign finance, estimates that these 527s’s – so named for the part of the Internal Revenue Service code that governs them – spent $424 million in the 2004 election cycle.

These federally-focused 527 groups raised around $77 million in 2007, and are well on their way to breaking the 2004 record in this election year.

While the rules vary, these outside groups do not face the same restrictions that limit supporters of Mr. Obama or Mrs. Clinton to a $2300 donation in their primary campaigns. Rather, so long as these groups do not coordinate their activities with the official campaigns, they can spend almost unlimited amounts on behalf of the candidates of their choice.

Outside groups act as almost “shadow campaigns.” They mobilize get-out-the-vote efforts, pay for expensive television ads, and buy t-shirts, posters, yard signs and other political paraphernalia. So long as a group simply states its support for a given candidate or talks about why he or she is a worthy candidate — without actually using the words “vote for” or “vote against” — they can operate independent of strict federal campaign finance limitations.

In Pennsylvania, the Service Employees International Union is spending lavishly to support Mr. Obama, just as the union did in Ohio and Texas. The union has spent more than $1 million in the last few days on phone banks, direct mail and door-to-door canvassers to help Mr. Obama’s bid in the April 22 primary.

In fact, Mr. Obama has benefited more from outside groups than any other candidate this year. So far, the politically-active SEIU has spent $6 million to support Mr. Obama, more than what other unions have spent on other candidates.

For Mr. Obama this outside help presents a sticky political problem. He has spent months denouncing the influence of special-money in politics, yet he has benefited from the millions that these outside special interest groups have spent on him. Even more, during the Iowa Caucuses, when many unions came out to support John Edwards, Mr. Obama criticized these outside efforts, calling them “underhanded.”

Mrs. Clinton has benefited from heavy spending by two unions — the American Federation of Teachers and the American Federation of State County and Municipal Employees. Together, the unions have spent a combined total of $4 million supporting the Clinton campaign in primary states.

Mrs. Clinton has also benefited from the work of Emily’s List, a group that supports pro-choice women Democratic candidates. That group has spent $1.4 million so far on behalf of Mrs. Clinton. But, even more, Emily’s List has used a targeted strategy — making its pitch on behalf of Mrs. Clinton to older women. This effort has paid off handsomely at the polls as older women have been one of Mrs. Clinton’s core sources of votes.

Of course, just as the Democratic candidates are benefiting from outside spending, they are also the target of attacks from outside groups on the right. In the Pennsylvania primary, for instance, Republican groups that oppose the two Democrats have jumped into the fray. Federal filings show that the Republican Majority Campaign just spent $62,000 on phone banks and a direct mail campaign in Pennsylvania to oppose the two Democrats, while RightMarch.com has spent $16,000 to denounce them.

McCain's Public Funding Debacle

2008-03-28T18:36:00.003-04:00

Senator John McCain has long been a champion of campaign finance reform – in fact, he spearheaded the effort that drove soft dollars – unrestricted donations to party committees – from politics. But, in this presidential year, his commitment to campaign finance integrity is running up against some of the realities of practical politics.

Mr. McCain has gotten caught in a sticky situation involving his effort, now dropped, to seek public matching funds for his primary bid. Last year, when his campaign was cash-short, it wanted public funds. Now, as cash is rolling in, it says it does not. And somewhere between those two views is a complicated political – and potentially legal – problem for Mr. McCain.

Last summer, overspending by the McCain campaign nearly bankrupted it and Mr. McCain applied, and was certified, to accept public matching funds for his primary bid. This is money raised by the $3 check off on federal income tax returns, and it is made available to presidential candidates in return for their accepting strict limits on their primary campaign spending. Mr. McCain was the first candidate to apply for this money, which would limit his campaign spending during the primary to around $50 million. He was then followed by cash-strapped John Edwards. Other major candidates did not apply for the money, largely because they wanted to raise and spend in much bigger amounts.

But, before Mr. McCain began to draw down on this federal money, his political fortunes brightened, winning in New Hampshire and South Carolina. Donations rolled in – lots of them. Flush with this new cash, Mr. McCain now decided he did not want the federal money nor did he want the $50 million restriction in place until the September convention, when he officially would become the Republican nominee.

So, on February 6^th, he wrote to the Federal Election Commission, saying, in effect, “no thanks” to the federal dollars.

But leaving the federal system may not be so easy. Complicating his desire to withdraw from the federal program are the terms of a loan McCain took out late last year from a Maryland bank.

The bank documents show that Mr. McCain used his eligibility in the public financing program to help obtain the loan. And that section of the loan is now a bone of contention.

The Democratic National Committee has said this shows that Mr. McCain used the promise of federal matching funds as collateral for the loan. If that is the case, then the McCain campaign would be obligated to accept the matching funds and cannot withdraw from the program. The McCain campaign has denied that the promise of federal matching funds was collateral – even more, it says that since Mr. McCain never got a dime from the federal program, he can withdraw from it, regardless of what the bank documents say.

In the middle is the Federal Election Commission. On February 19, FEC chairman David Mason basically told the McCain campaign that it could not withdraw from the public financing system until it had answered questions about the terms of the loan.

Time may be on McCain’s side.

Because of a political stalemate in Congress, the FEC lacks enough commissioners to conduct business. That’s a stroke of good fortune for Mr. McCain, who has already spent $58 million on his primary bid – in excess of what he would be allowed under the public financing system. And he plans to spend a lot more between now and September.

In the worst case – for Mr. McCain – a re-constituted FEC could rule that Mr. McCain violated the terms of the public financing agreement that he entered into. In that case, he would face civil penalties and would have to repay to the government anything spent on his primary race in excess of the spending cap. If so, with his spending on the primary expected to increase, perhaps into the hundreds of millions, this summer, Mr. McCain could be forced to write one very big check.

http://www.fec.gov/press/press2008/20080226notice.shtml

Recent Reports Reveal Startling Finance Trends

2008-03-25T12:28:00.005-04:00

The most recent campaign finance reports just issued by the Federal Election Commission show a number of startling trends in the world of money and politics. They show that big money can be raised from small donors. They show how the richest candidates aren’t necessarily the most successful. And, they show that the general campaign assumption – that Republicans out-raise and out-spend Democrats – is being turned on its head.

What is particularly striking about the financial reports, which were filed by the candidates late Thursday night, is the sheer volume of money pouring in the 2008 race. All candidates combined, Democrat and Republican, have raised $790 million so far in the primary races – a record-setting amount. Barack Obama raised $55.5 million in February alone, which is almost equal to what John McCain has raised for his entire primary effort since beginning to campaign 14 months ago.

If there is any breakout star when it comes to campaign money-raising, it has been Mr. Obama, who has amassed more political cash than any other candidate, Democrat or Republican. Mr. Obama’s own money-raising records are continually being broken – by himself. So far, Mr. Obama has raised a record $197.3 million and spent $151.6 million. The $42.8 million he spent in February alone was equal to what he spent in the last three months of 2007 combined.

Even more, he has harnessed the power of the Internet and small donors. To date, 41 percent of Mr. Obama’s money – or $76.3 million – has come from donors giving $200 or less. This is almost twice as much as what he has raised from donors giving the $2300 maximum to the campaign. That group of big-ticket donors has provided him with $43 million.

Hillary Clinton has been equally impressive in her money-raising, trailing just slightly. But she has been aggressive in her spending, and is now on less solid financial footing. She has raised $173 million – with $34 million coming in February, her biggest month. But, she has only $11.7 million left in cash on hand for her primary race – and she is facing $8.7 million in unpaid bills to vendors. In January, Mrs. Clinton lent her campaign $5 million, which lead to an uptick in small donors for her as well. A total of 52 percent of her February donations – or $17.2 million – came from donors who gave $200 or less.

As the two Democratic candidates head off to the Pennsylvania primary, Mr. Obama has the advantage of a war chest three times the size of Mrs. Clinton’s. He has $31.5 million in cash for the upcoming primary races and virtually no debt. Of course, money doesn’t always translate into victory. In the weeks leading up to the March 4^th primaries, Mr. Obama outraised and outspent Mrs. Clinton – yet Mrs. Clinton prevailed in the two biggest prizes of that contest, winning decisive victories in Texas and Ohio, which gave new energy to her campaign.

On the Republican side, John McCain, who ran a shoestring campaign and whose finances in 2007 took a serious nosedive, ended up as his party’s standard-bearer. By the enormous fund-raising standards of the Democrats, Mr. McCain’s campaign finances look pretty pale. He became the presumptive nominee on March 4^th, and in the month leading up to that victory, he raised a mere $11 million. His campaign expenditures of $58 million nearly equal the amount that donors gave him.

By contrast, the big loser financially was Mitt Romney, who spent $109 million, including $44 million of his own money. A graduate of Harvard Business School and a founder of Bain Capital, Mr. Romney has a personal fortune estimated at over $200 million. Yet, if Harvard were ever to do a case study on campaign finance, Mr. Romney would hardly be an example of how to win using other people’s money.