More Money, No Problem

The death of taxpayer-financed campaigns


The first time I covered Sen. John McCain (R-Ariz.) he was enjoying the raucous cheers of liberal college students. It was 2001, and McCain and Sen. Russell Feingold (D-Wis.)-the anti-war Sam Gamgee to McCain's Frodo Baggins-were on a stumping tour of universities to drum up support for their eponymous campaign finance reform law. Almost none of the students they encountered at Northwestern University had voted for George W. Bush. Almost all of them were in love with John McCain.

"Russ and I are committed to one fundamental principle," McCain promised. "Take the government out of the hands of special interests, and give it back to the people." He argued that banning unlimited "soft money" donations -contributions for "party-building" activities, which weren't covered by campaign finance laws-would prompt politicians to ditch their multimillion-dollar diving sessions for barbecues and barn raisings; office seekers would rub elbows with average Americans in Peoria and Biloxi instead of donors in Georgetown and on K Street. "Without soft money," McCain announced, "we'd go back to campaigns as we knew it [sic]."

Less than a year later, McCain and Feingold got rid of soft money as we knew it. The outcome: McCain, the on-and-off front-runner for next year's Republican presidential nomination, has cut back on those small-money barbecues and come crawling to the deep-pocketed donors who helped Bush clobber him in 2000.

In 2004 soft-money donors used Section 527 of the Internal Revenue Code to fund groups that could run TV ads without flouting the restrictions of McCain-Feingold. One such group was Progress for America, which the Federal Election Commission subsequently charged with violating campaign finance restrictions. (Ultimately they were fined $750,000.) At the time, McCain contributed an amicus curiae brief to the FEC's defense of its ruling. Now he has hired Univision mogul A. Jerrold Perenchio, who gave $4 million to Progress for America, to co-chair his finance committee.

McCain did something else that shattered the hearts of his former admirers: Like Rudy Giuliani, Mitt Romney, Hillary Clinton, Barack Obama, and John Edwards, he decided to forgo public campaign subsidies. Under this system, established in 1974, each taxpayer can allocate a few dollars of his taxes to a massive campaign pot; candidates can draw on it for matching funds if they agree to caps on their fund raising and their private campaign spending. This is the first year that every leading candidate for the presidency has opted out of the system.

"It's become obsolete," Michael Toner, an FEC commissioner (and former chairman), says of presidential campaign public financing. "This election is basically the end of the old system."

Public financing was never truly popular. Its support hovered in the mid-60s when it started; in polls taken since then it has tumbled into the 20s. Support wavered as fringe candidates like Lyndon LaRouche collected government money to run campaigns that had almost no grassroots support. It was wobbly enough in 2000 that George W. Bush could break the spending limit and experience no blowback stiffer than the wind from a few angry pundits. In February 2007, after Hillary Clinton ditched the system, Rasmussen Reports found 38 percent of voters would be more likely to vote for a candidate who turned down public financing, compared to 25 percent who would be less likely.

There's another reason candidates are opting out. The final version of McCain-Feingold included a sweetener for politicians who would lose the benefits of soft money. The maximum contribution an individual could give a candidate, which had been $1,000 for the primary and another $1,000 for the general election, was doubled and pegged to rise in each subsequent campaign cycle. In 2008 the limit is $2,300 for the primary and another $2,300 in the general election. In other words, candidates can now ask every donor for $4,600, which makes the potential payoff of $50 million to $70 million in public financing seem almost Lilliputian.

Public financing still has its true believers, including a great number of "good government" groups and, in their weak moments, most politicians. In February Barack Obama, the second Democrat to ditch public financing for the 2008 primary, stroked Beltway activists by proposing a cap on spending for the general election. And he mulled giving public financing one last shake after the primary, as did McCain a few weeks later. Campaign finance reform boosters were quick to offer praise, though it had a certain fatalistic quality.

"What Obama did was promising," says Mary Boyle of Common Cause, one of the most muscular pro-public financing groups. "But that said, the system is broken. When one candidate makes the intention to drop out of it and no longer has to abide by the restrictions, the ball starts rolling downhill."

That's the standard reaction to the death of public financing. Taking the money out of campaigns is supposed to clean up politics; the fact that 2008 might become the first $1 billon presidential campaign is considered a sign of a broken democracy. In late February former Iowa Gov. Tom Vilsack dropped out of the Democrats' race and made a glum tour of the pundit circuit, bemoaning how he had to end his quest for a promotion because he couldn't raise money. The implication: An unassuming Midwestern politician who was polling third or fourth in his own state, long before any TV ads started running, deserved as much money as Hillary Clinton. And if taxpayers had to provide that money, so be it.

This is, to put it bluntly, sour grapes. Another governor from a small state, Vermont's Howard Dean, surged far ahead of his 2004 rivals in fund raising simply because the threshold for donations had gone up and the Internet made it inexpensive-almost free, compared to the costs of direct mail or fundraisers-to reach out to donors.

In November 2003, Dean broke a pledge and exited the public financing system for the right to raise more money from donors who were itching to reopen their wallets. And while Dean ultimately lost, other candidates who followed his path have come out on top. Virginia Democrat Jim Webb, who won his Senate race by less than 9,000 votes, raised almost $900,000 from online donors and defeated the vastly better-funded GOP Sen. George Allen. From the liberal MoveOn.org to the pro-war Victory Caucus, grassroots groups are using the Internet to collate their cash and level the electoral playing field.

The reason groups like Common Cause want all candidates to draw from a trough of taxpayer money is that they consider fund raising an unfair process that corrupts candidates. But if candidates are accountable to the people paying their way in the race, the rise of Dean-style online fund raising means more candidates are appealing to average, small-money donors. Maybe public financing is crumbling because campaigns are becoming more democratic. The shift from Eugene McCarthy's millionaire-funded insurgency of 1968 to Howard Dean's small-donor-driven campaign in 2004 suggests that it might be time to adjust our idea of electoral fairness.

"You could argue that presidential fund raising is more inclusive then ever, thanks to the Internet," says Toner, the FEC commissioner. "I think it's for the best." Toner wants to salvage some version of public financing, but he opposes efforts to extend McCain-Feingold's limits to Internet activism. "I want Congress to reform the whole system, but it would be a mistake for reformers to pull the plug on Internet fund raising."

But if the Net is binding voters closer to their candidates, what's the argument for salvaging public financing? If it doesn't work, and if elections don't suffer when it doesn't work, why try to preserve it?

The most important reason: political advantage. "Several years ago, when John McCain wasn't getting huge donations, it served him well to take these reform positions," says Timothy Lee of the Center for Individual Freedom, which opposes public campaign financing. "I don't question his sincerity at the time. But he needs to admit that the system needs to be killed off, or that the Straight Talk Express has taken a U-turn."

David Weigel is an associate editor of Reason.

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