Campaign Financing Reshaped
Bush Edge Making Public Funds Moot
By Thomas B. Edsall
Washington Post Staff Writer
Tuesday, August 5, 2003; Page A01
President Bush's fundraising prowess is reshaping the way presidential campaigns are financed, pressuring Democrats -- if not in this election, then the next -- to devise ways to follow his example of relying solely on private donations. The trend already is choking a major feature of post-Watergate campaign regulation: the promise of federal matching funds in return for a candidate's vow to limit spending.
Bush rejected the deal in the 2000 presidential primary, and went on to collect far more money than did his Democratic rival, Al Gore. Bush again is spurning public funding in the 2004 primary, and he is shattering his money-raising pace of four years ago.
Democrats say they cannot compete in such a climate. And it's not just 2004 they worry about. The nation's new campaign finance law, which greatly rewards a candidate who can gather piles of $2,000 checks, strongly favors Republicans. That advantage seems unlikely to vanish in 2008 and beyond, several analysts say.
"Bush has transformed the system," said political scientist Thomas E. Mann of the Brookings Institution. "He has developed a capacity to gain a financial advantage that hasn't been apparent since the adoption of the 1974" campaign law at the height of the Watergate scandal.
The nine Democrats seeking the 2004 nomination are in a bind, party activists say. Even if they choose to abandon public financing and the spending limits that go with them, they can raise nowhere near the sums that Bush is hauling in, these sources say. Some of them contend that only a Democrat with considerable star power and nearly universal name recognition -- Sen. Hillary Rodham Clinton (N.Y.), perhaps -- will be able to compete under the rules Bush is writing.
The recently enacted McCain-Feingold law bans unlimited "soft money" contributions to national parties, depriving Democrats of a key source of cash from unions and Hollywood figures. The law limits donations to presidential candidates to $2,000, and Republicans have far more supporters able and willing to give that amount of money than do Democrats.
The 1974 law was intended to control campaign giving and spending. It allows presidential candidates, during the primary, to receive federal matching funds for the first $250 of each contribution from an individual. In return, the candidates agree to cap their spending. Generally, matching money accounts for 25 to 33 percent of the total a qualifying candidate can spend. This election, the spending cap is expected to be about $46 million before the late-summer nominating conventions, when each party's nominee qualifies for a new infusion of federal funds.
For several presidential elections, the spending cap was not a major issue. Bush changed that in 2000, when he rejected the matching funds and spending limits, and raised $101 million to spend during the primary. That compared with about $45 million that Gore, who accepted federal funds and spending caps, was able to spend.
Candidates who accept public money face other potential problems. They must comply with state-by-state spending limits that are difficult to abide by in such key caucus and primary battlegrounds as Iowa and New Hampshire.
In 2000, Bush had a special reason to reject federal funds and spending limits. He faced a potential primary challenge from Forbes magazine publisher Steve Forbes, who hinted he might spend many millions from his personal fortune.
In the current election cycle, by contrast, Bush appears almost certain to face no serious primary opposition. But he again will reject public matching money and the spending limits that go with them. Aides say he plans to raise at least $170 million during the pre-nomination period, nearly four times what any Democrat is likely to have.
Bush does plan to accept public financing and spending limits of about $75 million in the general election, after the nominating convention, as he did in 2000.
Bush's strategy is prompting some Democrats to suggest that their party's presidential hopefuls should consider abandoning public financing. Rep. Martin T. Meehan (D-Mass.), the lead House sponsor of the McCain-Feingold bill that passed last year, said, "I'm as committed to campaign finance reform as anyone in Congress, and I'm a believer in the public financing system. But in this election, Bush is going to break all the campaign finance rules, and I don't think the Democrats should be tied to a broken system."
In rejecting the voluntary spending limits, and matching funds, accepted by all Democratic nominees and all GOP nominees -- except himself -- since 1976, Bush may be building a fundraising machine with the potential to become a semi-permanent operation for future GOP candidates, political insiders say.
"The president is doing all of us a big, big favor," said one Republican political operative. "He is putting together a group of active, loyal and effective Republican fundraisers like no one has seen before. They may not all be there for our nominee in 2008, but a hell of a lot of them will be."
"The historical pattern is that new ways of raising money get imitated," said campaign finance expert Gary Jacobson of the University of California at San Diego.
The Bush money machine relies primarily on a corps of "bundlers" -- chief executive officers, contractors, investment bankers and others primarily from the business, legal and medical communities. They tend to have extensive networks of employees, suppliers, subcontractors, clients and others who are receptive to their pitch for campaign donations.
For example, one Bush bundler is E. Stanley O'Neal, chairman and CEO of Merrill Lynch & Co. The Center for Responsive Politics recently reported that Merrill Lynch employees and their immediate relatives already have given the Bush-Cheney 2004 campaign $264,750.
Wall Street and financial institutions, which benefited significantly from Bush's cuts in the top income tax rates and his dividend and capital gains cuts, generally support his reelection bid. Lehman Brothers employees have given $110,500, Bank of New York management has donated $70,250, and Goldman Sachs staffers have donated $58,000, according to the Web site PoliticalMoneyLine.
Jacobson said Bush in some ways is imitating Bill Clinton, who, when seeking reelection in 1996, raised huge amounts of soft money to finance early ads backing his bid and attacking GOP challenger Robert J. Dole. "Bush is taking what Clinton did in 1996 and taking it up an order of magnitude, trying to win before the election starts," Jacobson said. Soft money now is banned for the national parties, however.
While some Democrats fear Bush's fundraising operation could turn into a permanent Republican weapon, GOP campaign finance lawyer Jan W. Baran said he thinks the next politician most likely to adopt Bush's strategy will be a Democrat: Hillary Rodham Clinton.
"Republicans may be relishing this moment in 2004," Baran said, "but I think they will be breaking out in a sweat if Hillary becomes a candidate in 2008." It takes a politician with strong appeal to his or her core constituents to do what Bush is doing, he said.
Unless one of the current Democratic candidates opts to forgo public funding, all of them risk having to spend nearly all the $46 million available for the primary by the early date of March 15. The Democratic National Committee, no longer eligible to collect soft money, will be able to provide only modest support after that. The strongest Democrat will have to wait until late July, when the nomination is formally awarded, to qualify for the $75 million in federal general election money.
During this bleak May-to-July window, Bush, in contrast, expects to have as much as $200 million to spend before he wins the GOP nomination in early September. In addition, the soft money ban has proven far less burdensome to the Republican Party than to the Democrats.
While a Hillary Clinton might be able to tap a universe of Democratic donors whose resources could approach Bush's, the problem for the current crop of Democratic candidates is that few, if any, have a realistic option of rejecting public financing. Not only do many Democratic activists support public financing, but it also is questionable whether any Democratic candidates can raise enough private money to justify the gamble. Forgoing public matching money means giving up as much as $8 million on Jan. 1, 2004, just when the approaching Iowa and New Hampshire contests are placing the highest demands for ready cash.
"You'd have to be one high roller to walk away from that money," said a strategist for one of the Democratic candidates.
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