Federal Campaign Funds: Easier Money

When Obama rejected federal funding for presidential campaigns before his first term, he changed campaigning as we knew it, with candidates on both sides shifting their focus from what’s important (votes! dialogues! press!) to what’s not (money! money! money!).

04.02.14 9:45 AM ET

Wednesday the Supreme Court ruled that individuals could not be limited in the total amount given to political candidates or parties. This does not affect the individual limits which still apply to federal races. No contribution can exceed $2,600 per candidate per race or $32,400 per party. But previously the total aggregate amount an individual was allowed to donate could not exceed $123,000 per cycle. So while this ruling only affects the relatively small universe of donors wishing to give more than $123,000, it is another step toward allowing donors to give more freely to campaigns.

I don’t have a problem with this ruling. It doesn’t change the amount any one campaign or party can receive. The $123,000 limit was completely arbitrary.  In practice, the ruling will have little impact on campaigns as it affects a tiny number of donors. But if someone who supports climate change legislation wants to give $2,600 to every Congressional candidate who shares his or her views, so be it.

Campaign finance is a complicated, vexing issue. There are freedom of speech issues which are legitimate and compelling with a fierce disparity of opinions on the proper solutions. But for over thirty years we had one positive reform that both parties embraced and maintained: federal funding of presidential elections. That ended in 2008 when Barack Obama became the first nominee since Watergate to reject federal financing. Let’s look at the history.

After Watergate, a series of reform campaign finance measures were passed. For the first time in US history, a system was established to fund presidential campaigns with tax dollars. Under the new reform, each Party’s nominee received from the Treasury equal amounts for the general election in exchange for agreeing to abide by strict spending limits. The amount was calculated on a formula based on population and inflation, rising each year,

The same legislation provided for a partial federal funding mechanism for the presidential primaries. It was a more complicated system matching contributions in exchange for limiting spending on a state-by-state basis. This had odd consequences, like candidates campaigning in Iowa and spending the night in a neighboring state, so that the hotel costs wouldn’t be assigned to their limits in a key state.

This system of federal funding and limits held for both primaries and the general election lasted until 1996, when Steve Forbes running in the Republican primary for President rejected federal funding to self-finance his primary campaign. On the Democratic side, the same happened in 2004 when Howard Dean realized he could raise a lot of money on the Internet and therefore rejected federal funding for the primary. It was probably a mistake as it gave permission to John Kerry, married to a billionaire, to spend personal funds. Kerry did, outspending Dean and quickly won.

But Kerry still accepted federal funding and limits for his general election, as had every candidate from 1976 until 2008. In the 2004 campaign, Kerry and Bush each received  $74.6 million for the general election.

In 2008, Barack Obama, of course, pledged to accept federal funding if he were the nominee. At the time, Hillary was the fundraising juggernaut and it was assumed no progressive candidate could be the first to reject federal funding in a general election. As David Plouffe detailed in his book, The Audacity To Win, the campaign had committed in writing to stay in the federal system. “It was declarative, and it was unquestionably stated we’d be in no matter what the GOP nominee did.”

But Obama and his campaign realized they could raise a lot of money. A lot of money. “I thought if we opted out of the system,” Plouffe wrote, “We could enjoy a significant financial advantage over McCain.”

So they did what no campaign had done since Watergate: They rejected Federal funding and campaign spending limits. In a classic Obama touch, he announced the decision not to accept federal funding in a video that claimed, “I support a robust system of public financing of elections.”

The Obama campaign knew they would face criticism in the media. But they were betting that Obama’s special appeal to the media would allow them to get away with it. They were right. The New York Times and Washington Post wrote weak editorials slapping Barack Obama on the wrist; meanwhile the Obama campaign went on to raise historic levels of money. Much is made of their small dollar contribution, but over 20 percent came from a single source: Wall Street, breaking all records.

Meanwhile John McCain, long a champion of campaign finance reform, stayed in the system. He received  $84 million and stuck to the limits. By Election Day, Barack Obama had raised $750 million. The Obama campaign smothered McCain in money.

Today many people, including some in the media, have a tendency to confuse Obama’s decision to reject Federal limits with the Citizens United Supreme Court decision that opened the door to corporate dollars in Superpacs. The two are completely unrelated. The Citizens United came two years after Obama rejected federal funding.

The history of campaign finance reform demonstrates that once a voluntarily imposed limit is broken, it is very difficult to go back. For 2012, Obama announced early that he would continue to reject Federal funding. To avoid the financial mismatch that faced John McCain, every Republican said they’d do the same. The system was dead.

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How much does raising and spending unlimited money help an incumbent president? Well, consider this: Only one incumbent President, Herbert Hoover, not in the Federal funding system has lost in the last 100 years. Barack Obama raised over a billion dollars. The next incumbent president, Democrat or Republican, will likely raise over 2 billion. In all probability, they will face an opponent for their re-election who emerges from the primary broke, like most primary winners. How does a primary winner who just spent all their money to win a nomination start to compete with an incumbent with $2 billion to spend? It’s almost impossible. Short of a major scandal, it’s difficult to see how the current system hasn’t all but abolished the four-year term.

The ongoing ramifications of a system with no limits and no Federal funding were on full display this past weekend at the Republican Jewish Conference hosted by Sheldon Adelson in Las Vegas. Sheldon Adelson contributed tens of millions to Republican candidates in the last cycle, including funding a Superpac that kept Newt Gingrich alive through the primaries.

Before Obama rejected federal funding, the largest donor in presidential campaigns would be taxpayers through the federal system. Now that void is being filled with a world of billionaire mega-donors like Adelson, the Koch brothers on the Republican side and Michael Bloomberg and Tom Steyer on the Democratic.

Much has been written that these donors have a great ability to influence the nominating process through donations and Superpacs. That’s true. But it is less appreciated how the competition for their support becomes another test of a candidate’s ability to compete in a general election.

A strong candidate who has grass roots appeal but lacks an ability to attract major donors can now be attacked for that weakness as a potentially disqualifying factor. “We can't nominate a candidate who doesn’t have what it takes to raise a billion dollars from April to November” is a legitimate concern for both parties focused on winning in November.

Everybody hates money in politics. Candidates hate to raise it, most donors would rather not give it and there is almost universal agreement that our system is crazy. Still, it continues and just gets worse. Federal funding of presidential campaigns with spending limits was one of the last great reforms keeping some sanity in the system.

When Barack Obama announced he was thinking of breaking the system, there should have been a much stronger reaction from those invested in good government. The Commission on Presidential Debates should have announced they would not allow any candidate who rejected spending limits in the debates. The New York Times and Washington Post should have called it disqualifying for a nominee. That would have signaled the pain was too great for anyone, even Barack Obama, to undo the Watergate reform.

But it didn’t happen and now we are in the world of multi-billion dollar campaigns. I’ve worked in presidential campaigns under both systems and there is no comparison. The new, post-Obama system requires candidates to spend upwards of 60 percent of their time raising money deep into September and October. That takes them away from voters, away from the press, away from every dialogue we value in our campaign system.

A federal funding system worked better and was better for the country. Being in the “Get The Genie Back In The Bottle” business is a lousy one but if we want to take one simple, fundamental step to help clean up politics, we don’t have to wonder what it might look like or how to do it. We did it for decades and it worked. Had Barack Obama kept his word in 2008, we’d still have the system.

Bringing back the federal funding of presidential campaigns would be a great positive development in the next cycle.  It’s not impossible. It’s happened before.