February 28, 2007 9:51 pm

Campaign fundraising in the spotlight

The US Federal Election Commission’s ruling on Thursday on whether White House hopefuls can raise private money without prejudicing their access to federal cash might prove to be the last twitch of the public financing system for the presidency.

Set up in the aftermath of the Watergate scandal that felled Richard Nixon, the system arguably received its last rites in January when New York Senator Hillary Rodham Clinton announced she would rely solely on private funds for the full duration of her campaign to be elected president in 2008.

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In making that choice Mrs Clinton made it almost inevitable that her Republican opponent would follow suit – assuming she won the Democratic nomination. That would make the 2008 presidential election the first since 1972 in which both candidates relied solely on private money to fuel their campaigns.

“Once one [leading candidate] opts out then the house of cards falls,” says Kenneth Gross, an attorney at Skadden Arps, who advises candidates on campaign finance.

The mathematics is clear. Mrs Clinton can probably raise as much as $500m (€380m, £255m) from her network of loyal backers in New York, Los Angeles and elsewhere, whereas she would be unlikely to receive much more than $100m from public funds.

Under the Watergate-era rules, candidates who accept public money for the party primary elections, which will take place early next year, are subject to restrictions on their private fundraising abilities. If they accept public cash for the general election, which begins after the respective candidates have been nominated in August 2008, they must forgo private money altogether.

In 2004 John Kerry and George W. Bush accepted roughly $75m apiece for the general election in spite of having raised and spent about $500m between them in the preceding months. This time round, the FEC estimates the overall cost of next year’s election will double to $1bn – presumably all of it from private financing.

“Presidential elections are increasingly like the cold war-era arms race,” says one long-standing Democratic fundraiser. “It doesn’t matter whether you are going to spend it or not. If your opponent is out-raising you then you have to keep up otherwise it starts to become self-fulfilling.”

Wednesday’s FEC opinion was requested by Barack Obama, Mrs Clinton’s closest Democratic rival, who wants to continue to raise money for both his primary and general election campaign without foreclosing his ability to return the general election money to donors and switch to public funds if he were nominated.

“Obama is trying to squeeze the last bit of toothpaste out of the public financing tube,” says Nick Nyhart, president of Public Campaign, which lobbies for reform of an election finance system it sees as corrupting of American democracy. “In practice it is very hard to imagine why Obama would want to accept public funds in 2008 and allow his Republican opponent to outspend him several times over.”

Whether or not Mr Obama is trying to distinguish his image from that of Mrs Clinton by signalling a lingering attachment to America’s broken system of public financing, both candidates are following a frenetic schedule of private funding events.

Dubbed by some the “invisible primary”, because a decisive early lead in fundraising could create unstoppable momentum, the Hillary-Obama contest has already knocked other candidates out of the Democratic race.

Last week Tom Vilsack, the former governor of Iowa, dropped out of contention citing funding as the reason.

Mr Vilack had raised just $1.1m in more than two months – less than Mr Obama raised in one evening last week in Hollywood. In December Evan Bayh, senator for Indiana, dropped out for similar reasons.

On the Republican side, doubts are already growing about Mitt Romney’s ability to match John McCain and Rudy Giuliani, both of whom can draw on a formidable network of donors.

But the real maestro of the system is Mrs Clinton. Campaign watchdogs say the breakdown of public financing opens the door for candidates like her to rely on an army of so-called “bundlers” – in her case, people who have pledged to raise a minimum $1m per event from individuals making the maximum permitted contributions of $4,600 a head. Although Mrs Clinton supports an overhaul of election financing, reformers worry about the overweening influence that America’s moneyed classes will have on the 2008 campaign – even more than in previous cycles.

“When you are talking about raising $1m each time, it invites abuse – the ability to buy influence and access,” says Meredith McGehee, policy director at the Campaign Legal Center, a watchdog. Prominent fundraisers in Mr Bush’s previous campaigns were awarded administration positions and ambassadorships. Many fear that trade-off will only get worse in the 2008 presidential cycle.

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