Public Financing of Candidates, a Faustian Bargain
Public financing for Presidential candidates is one of the Watergate-era reforms intended to end the corrupting influence of campaign contributions. But it offers candidates a seductive, Faustian bargain: The government will provide public money to Presidential candidates if the candidates surrender their Constitutional rights:
1. To spend their own money, and
2. To receive and spend contributions from others.
That’s the bargain in a Presidential general election. You can take the government’s money – some $81 million in 2008 – only if you surrender your right to spend your own (if you happen to have a fortune), and additionally, surrender the right to receive contributions from other people.
So, if the candidate has a vast fortune that he/she is willing to spend, or if the candidate anticipates that he/she can raise substantially more than $81 million after deducting fundraising costs, public financing is not a good option.
The offer of public financing has been attractive enough for every major political party Presidential candidate since the program began.
So why is Barack Obama saying, no?
One word answer: Internet.
The June 20, 2008 New York Times reported that the Obama campaign has raised money from 1.5 million individual contributors, most of whom sent contributions through the Internet. His campaign is reportedly anticipating $200 to $300 million or more in contributions for the general election.
That sum is much higher than $81 million even after deducting fundraising costs, something a publicly financed candidate does not incur. Further, and perhaps even more importantly, private contributor-investors are most likely to be campaign participants who will promote the candidate.
Figures available on the website of the Federal Election Commission (www.fec.gov) support the observation that the Obama campaign has been far more successful in attracting individual contributors (corporations and unions are prohibited from contributing) than McCain.
Through the end of May, most of Obama’s contributors gave $500 or less through the Internet, while most of McCain’s gave over $2,000 (the maximum permitted is $2,300). Since McCain’s contributors have been far fewer in number, he has raised only $111 million to Obama’s $287 million. Thus, Obama’s choice to opt out of public financing and McCain’s to opt in appear to be sensible strategies for both.
Public financing solves a problem that most candidates face early in their campaigns: How to raise enough money to pay for television advertising, a chicken and egg problem. The candidate needs to get his/her message out to raise money, but needs money to get his/her message out.
The dilemma is especially pressing in a state like New Jersey, which has the most expensive media market in the country, and in addition to its own voters, covers an audience in New York, Connecticut, Pennsylvania and Delaware. It’s no accident that New Jersey was the first state in the country to establish public financing for its gubernatorial elections.
Clearly, the fundraising potential of the relatively inexpensive Internet has gone a long way toward solving that fundraising dilemma in Presidential elections. But, what about the potential corruption factor that public financing is intended to mitigate? The candidate who is getting money solely from Uncle Sam is undoubtedly immune from the potentially corrupting influence, as the Supreme Court describes it, of excessive contributions.
Yes and no. For one thing, contribution limits and disclosure of contributors are the reforms that are more directly aimed at undue influence. Thus, a broad spectrum of limited contributors may be the best antidote to undue influence exercised by a few large ones.
Also, a fundamental weakness of public financing from the candidate’s perspective is that once his/her $81 million is gone, there is nothing left to spend, even if the election is still pending. For the candidate, the very spending limit that is critical in keeping the amount of taxpayer money awarded under a reasonable cap creates a vulnerability to 11th hour spending by independent committees not under his/her control.
Individuals who form independent committees that cannot be proven to be controlled by a candidate have a Constitutional right to raise money from other individuals in unlimited amounts – no $2,300 limit. The committees they form (typically under Section 527 of the IRS Code, thus “527 Committees”) can spend the money in unlimited amounts for advertising that effectively, if not explicitly, supports or opposes a candidate.
Proving “coordination” between a candidate and a 527 committee is a formidable task, a reality that understandably fosters cynicism about the integrity of the entire program.
To his credit, Senator McCain championed efforts to bring accountability to 527 committees, but nevertheless they remain a potent political factor. No one is prepared to predict, least of all the Obama campaign, that Swift Boat ads will not be on the 2008 election horizon.
The McCain campaign will be hoping that $81 million of public funds will be sufficient when combined with the considerable financial advantage the Republican National Committee (RNC) currently holds over the Democrats (DNC). The RNC finished May with nearly $54 million compared to the DNC’s $4 million.
However, a national party committee can spend only $19 million in “coordination” with its Presidential candidate. How much of the remainder the RNC will spend for uncoordinated party building that possibly benefits McCain in critical Presidential states (as opposed to critical Congressional districts) is speculative at this point.
How ironic it would be then, if ultimately the McCain candidacy has to hope for 527 advertising to supplement its publicly financed message.
Gregory Nagy was the Legal Director of the NJ Election Law Enforcement Commission until his retirement from that agency in 2002.