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Public-Finance Dilemma
Who would benefit most by forgoing private money in a general election?


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Last year, Barack Obama promised to accept public funds for the general election campaign if he were the Democratic nominee, under the condition that his Republican challenger do likewise. Under this arrangement, both would forgo private money and return any general election funds that they had already gathered. John McCain agreed to the proposal, and is now demanding that Obama honor his end of the bargain.

Ostensibly, McCain has Obama in a bad spot; if Obama breaks his pledge, he short-circuits his halo of integrity and reform. If he keeps it, he forgoes the fundraising edge that he would enjoy in the fall. He must also give back the $6.1 million in general-election funds that he has raised to date — McCain’s total, meanwhile, is only $2.2 million.

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But the gambit carries significant risks for McCain, as well. Just when he needs to build support among party conservatives, he is spotlighting a major issue on which he disagrees with them. Conservatives have denounced the public financing system as “welfare for politicians.” In their eyes, McCain is proudly going on the dole and attacking his opponent for lifting himself up by his bootstraps.

McCain has also muddied his own message by backing out of the matching-fund system for the primary campaign. Rank-and-file voters may have a hard time figuring out why a candidate would eagerly collect contributions in the spring, and yet shun them as evil in the fall.

For Obama, sticking to the private-financing route may not be as unpopular as some think. In 2007, Gallup asked a national sample: What do you think candidates should do: agree to take public financing and accept spending limits, or opt not to take public financing and spend whatever money they can raise on their own?” By a margin of 56 to 39 percent, Americans thought that candidates should opt out of public financing and raise their own money.

Of course, there’s that little matter of breaking a public promise. But what the heck, Obama has a Harvard law degree and stunning verbal gifts. He has already convinced millions that a mishmash of clichés is the most transformative rhetoric since the St. Crispin’s Day speech. Surely he can come up with a rationale that not only sounds plausible but is downright uplifting.

The problem is that reporters will start to ask more questions. Although most have an ideological affinity for Obama, they have a professional interest in conflict. For reporters, sainthood is boring; sin is what sells eyeballs to advertisers. The more that journalists ponder Obama’s fundraising, the more they will notice the gap between his image and his bottom line.

Obama refuses contributions from lobbyists or political action committees. That stand sounds impressive but means little. In the recent past, he accepted a great deal of financial support from these sources. In any case, lobbyists are merely agents, and PACs serve to aggregate money from individuals with interests. Obama takes campaign donations from people who hire lobbyists and give to PACs. In other words, he doesn’t avoid special interests: he just cuts out the middleman.

Hillary Clinton’s opposition researchers, and groups such as Public Citizen, will be sure to keep the public abreast of Obama’s fundraising.

If Obama wants to avoid the risk of a snoopy press corps, he might accept public funding. That way, he wins good-guy points — and what’s more, he might not have to lose a financial advantage after all. Under public funding, both candidates get about $85 million in taxpayer money and cannot supplement that sum with private funds. Nevertheless, there is nothing to stop outside groups from entering the fray. In the past couple of elections, “section 527” groups have spent hundreds of millions on such things as voter registration and issue advertising. One study found that in 2006, Democratic-leaning 527s spent almost two-and-a-half times as much as Republican-leaning ones.

If Obama nobly gives up private funding, we shall see a rush of money to such groups, as well as to 501(c )(4) organizations and independent-expenditure committees.

So McCain’s public-financing ploy might work out okay for Obama. As Justices O’Connor and Stevens acknowledged, “Money, like water, will always find an outlet.”

– John J. Pitney Jr., is the Roy P. Crocker Professor of Government at Claremont McKenna College.



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