Thursday, November 02, 2006

On hopeless causes and presidential campaign finance

Duncan Hunter, Chair of the House Armed Services Committee, has announced he is running for Preident. Umm, yeah. Hunter's campaign promises to deliver as much coverage and support as Joe Biden's.

Listen, Hunter's one of the good guys in Congress, but this just ain't gonna happen. If he makes it to Iowa that in and of itself will be an accomplishment. No doubt John McCain wouldn't mind another authentic conservative in the race to divide the vote up further, but the .0001% Hunter should draw is probably not going to do the trick.

The thing is, having worked for awhile at the Campaign Finance Institute, and primarily covering the 2000 and 2004 presidential races, Hunter will raise money. The checks will be rolling in from all over the country, and he may raise a cool million or more, as did Arlen Specter, Orrin Hatch, John Kasich, Liddy Dole, Dan Quayle and Bob Graham, and as will Biden, Brownback and others who will also have about the same amount of success in their respective presidential bids.

Far be it from me to tell people how to spend their money, but it does make one ponder the different ways those millions could be spent.

Of course, some might say that any money given to an election campaign is a waste of money. And we do spend billions per election cycle, be they presidential, Congressional, or local races.

I don't want to delve to much into campaign finance and the effects of "special interests" on our elected officials (I will merely say that John McCain and I differ in our opinions to a great extent). I merely wanted to bring up some questions about the future of presidential campaign finance since this was an issue I was involved with for a couple of years. (read on after the click)

For anyone interested, CFI's The Election After Reform covers election finance in the aftermath of McCain-Feingold (aka the Bipartisan Campaign Reform Act, aka BCRA). Many of the assumptions made beforehand were proven to be either false or exaggerated. Money still flowed into campaigns, just not in the traditional ways. George Soros and other financiers found new ways to funnel money into the system.

That said, the presidential campaign finance system is in trouble. You're all vaguely aware of it simnply because of that $3 checkoff you all see on your tax forms. No doubt, if you're like 88% of Americans, you either ignore it or check no. And it's because of that propensity to decline participation that the system is in crisis - or at least it's one of the reasons.

Here's a brief recap of how the system works. In the primary, presidential candidates that opt into the system are able to receive matching funds from the federal government based on the money they raise. Each candidate is eligible to receive a dollar-for-dollar match of all money they raise from individual contributions that aggregate to less than $250. In other words, if Joe Smith donates $1,000 to a candidate, only that first $250 is matched. If a person donates $200, all of it is matched. If a person donates $25 per week (and believe me, lots of people do this), those first 10 contributions will be matched. In the general election, each major party nominee receives $75 million flat, and they are not allowed to raise money on their own.

This chart will show you how much each candidate in 2000 and 2004 raised, and how much in matching funds they received. Conspicuous by the absence of any matching funds in either cycle is George Bush. That's because he opted out of the system. For, you see, if you accept matching funds you also must abide by spending limits. Bush realized in 2000 that he could raise far more money on his own than anyone else, and he didn't want to be tied down to spending limits. Bush gambled, and he won big.

In 2004, two Democratic candidates decided to do the same thing. Howard Dean and John Kerry both opted out. Kerry's decision came in December when he was stuck in the middle of the pack with the rest of the field behind Dean. As you can see, Dean had a huge fundraising edge by the end of calendar 2003. (As someone keeping track of the individual contributions back then, the candidate data entry went something like Dean, Dean, Kerry, Dean, Dean, Edwards, Dean, Dean, Lieberman, Dean, Dean, LaRouche, Dean.)

Dean's fundraising capabilities were stunning the political world. As you can see from the first chart above, most candidates receive a bulk of their money from large (i.e. $1,000 and up) contributions. Practically all of John Edwards' money was coming from attorneys giving a couple of hours worth of wages. But not Dean. Dean was tapping into the online community and drawing money in small clumps from around the country. In fact, 60% of his money came from people who donated cumulatively $200 or less. (Kucinich had an even higher proportion of such donations, but by a far smaller overall amount.)

It was this fundraising that had most people assuming that Dean would get the nod. And then came Iowa, and everything changed. Suddenly my data entry went like this: Kerry, Kerry, Kerry, Kerry, Kerry, Dean, Kerry, Kerry, Kerry, Kerry, Dean, Kerry, Edwards, Kerry, Kerry. And John Kerry's own gamble paid off. In fact, he did so well that he almost opted out of the general election system because he potentially could have raised more than the $75 million allotted, but he chose to stay in.

So what does this all tell us about the future of presidential campaign fundraising? Well, I'm sure my former boss Michael Malbin would entertain any guesses. I'd be shocked if Hillary Clinton were to opt into the system. No doubt she could raise several hundred million, even with the $2,000 individual contribution limit. And even with the spread out field for the GOP, it's unlikely that McCain or even Romney couldn't do better on their own than with the matching funds.

On the one hand, this seems fair. Money acts like a vote. Candidates with popular appeal are going to be able to raise a lot of money. Longshots won't. In effect, we're narrowing the field and removing the "unworthies" before a single vote is cast. So be it. We'll be able to focus our attention on those that actually can win.

What does the Dean collapse and the Kerry comeback tell us about that? In a way, it acts an affirmation. People funnelled their money to the new leader almost instantaneously. Again, people voted with their pocketbook. The money flowing into the coffers reflected the polls - in fact, it can be treated as a poll of some kind.

But what of self-financed candidates? Their financial advantage would not be a true reflection of popular appeal. And what of candidates who lack the initial resources and need time to develop a following, but who might be able to draw money once their message was heard by a wider audience? Again, they'd be eliminated from contention before things got started. And who knows how candidate Ronald Reagan would have done were it not for this very system.

Of course, it could then be countered that the matching fund amounts are so paltry that it doesn't matter. The only candidates who would have received a significant amount of money were the ones who opted out anyway. Wesley Cark received the most public money, and his total was just over $7.5 million. That's hardly a great deal of money in today's political climate.

We could raise either the matching limit or simply go to a 3-for-1 or even 5-to-1 matching system. But at that point, shouldn't we go to a completely publicly financed system?

I'm not sure what the answer is. I'm inclined to say that anyone who truly has broad enough appeal will be able to raise enough money to remain competetive. And you can have millionaires like Steve Forbes in the race, and they still won't do well if people just aren't interested in actually voting for them. Money isn't everything - just ask Howard Dean. But it sure does help.


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