Money in the 2008 Elections: Bad News or Good?

The decision by presumptive Democratic presidential nominee Barack Obama to decline the public grant of $84 million for his general election campaign has been widely viewed as, and harshly criticized for, administering the final death blow to the presidential public financing system. That system, rightly considered the crown jewel of public financing in American elections, was set up in 1974 as part of extensive amendments to the Federal Election Campaign Act and has been a central feature of presidential elections ever since.

In 2000, George W. Bush became the first successful major party candidate to opt out of the nominating season matching funds section of the law and thereby free himself of the spending limits that are linked to acceptance of the public funds. President Bush repeated that practice in his 2004 re-election bid and was followed by Democratic candidates Howard Dean and John Kerry. Bush and Kerry each raised around $250 million before their party’s convention, compared with the $37 million they would have been limited to had they accepted the public matching funds. By 2008, opting into the public finance system was widely viewed as a sign of weakness. Early in 2007, Obama and Hillary Clinton announced their decision to forego public funding in the nominating season and all of the major Republican candidates followed the same path (although, in the case of John McCain, only after the revival of his candidacy in early 2008). While the nomination component of public financing fell into disrepair over a number of years, the general election grant was accepted by all of the major party candidates between 1976 and 2004. Obama’s decision to reject the public grant for the 2008 general election campaign appears to have set an ominous precedent for the entire program.

To many supporters of campaign finance reform, this was only the latest in a series of discouraging developments in the financing of the 2008 elections. The amounts of money raised by the presidential candidates ($296 million for Obama, $238 million for Clinton, and $122 million for McCain through May) shattered all previous records. The money primary in 2007 once again sharply narrowed the field of candidates before the first delegate selection event was held. The Supreme Court, under new Chief Justice John Roberts, moved in a decidedly deregulatory direction, with one decision potentially undercutting a major provision prohibiting corporate and union treasury funding of electioneering communications of the Bipartisan Campaign Reform Act of 2002, known widely as McCain-Feingold. An extended political deadlock between Senate Democrats and Republicans left the Federal Election Commission with only two members (two short of the majority required for formal action) in the heat of a hotly contested presidential election. And, as in 2004, outside groups threatened to play a prominent independent role in attacking the presidential candidates.

This litany of problems associated with money in the 2008 elections conjures up an image of a broken system that is much more pessimistic than the evidence warrants. The large amounts of campaign funds raised are indicative of the extraordinarily high level of public interest in the stakes of the election and the choices being offered. Fundraising by the candidates appears more an indicator of their electoral appeal than a cause of it. In a political environment hostile to Republicans, it is no surprise that Democratic candidates have enjoyed a distinct advantage. Large soft-money contributions to parties from corporations, unions, and wealthy individuals (often arranged through intense pressure from elected and party officials) are no longer a part of the picture. Presidential candidates have focused on hard-money contributors, which are limited to $2,300 per donor. Several of the candidates, Obama in particular, have attracted a huge number of small donors via the Internet. Money has not been the decisive factor in either party’s nomination contest. Although falling short of Obama’s fundraising, Clinton raised enough money to give her a fair shot at winning the nomination. She won a number of primaries in which she was greatly outspent by Obama. Her problems stemmed more from campaign strategy and choices regarding the allocation of her resources. John McCain won the Republican nomination in spite of his fundraising shortfall. And the efforts of outside groups to shape the election outcome have thus far constituted more talk than action. Give the potential legal liabilities and questions about the efficacy of independent advertising campaigns, many wealthy donors have decided to stay on the sidelines this election season.

Even the seeming collapse of the public financing system has a silver lining. The extended and highly competitive contest between Clinton and Obama, which mobilized millions of new voters and riveted the attention of publics across the globe, would not have been possible if either had opted into the public matching program. Moreover, Obama’s decision to reject the public general election grant is unlikely to substantially alter the balance of resources that would have resulted if both candidates had opted in. That is because the public grant constitutes only a part (and clearly less than a majority) of the funds spent on behalf of the presidential candidates. The Supreme Court has ruled that political parties may spend unlimited sums on behalf of their candidates as long as they do so independently, while the presidential candidates can assist their parties by transferring unspent funds from their nomination season coffers, sharing donor lists, and engaging in joint fundraising activities. The McCain campaign and the Republican National Committee together might raise and spend as much as $300 million in the general election campaign. Obama and the DNC could have well have matched or exceeded that sum even if he had chosen to remain within the public funding system.

What Obama gains by opting out is not a huge new fundraising advantage, but instead strategic control over his resources, allowing his campaign to control his message, define the electoral playing field, and allocate resources in a way consistent with his campaign strategy.

There are virtues to public financing that merit a reconsideration of the design of existing law in light of new developments and recent practice. In the meantime, there is no particular virtue for candidates remaining within that system.