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In a Strategic Shift, Obama Opts to Forgo Public Financing

June 19, 2008 at 6:40 PM EDT
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Sen. Barack Obama said Thursday he will opt out of public financing during the general election. A legal expert and a political reporter examine how the move will impact the race and Sen. John McCain's funding options.
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SEN. BARACK OBAMA (D), Illinois: Hi, this is Barack Obama…

JEFFREY BROWN: In the video message e-mailed to his supporters this morning, Barack Obama said he would opt out of the federally funded presidential campaign finance system for the fall general election, becoming the first major party candidate to do so since Congress passed post-Watergate reforms in the 1970s.

Obama will forgo the $84 million that the system would have given him after the August convention, choosing instead to raise his own funds, with no limits on the amount he can spend on the campaign.

SEN. BARACK OBAMA: This is not an easy decision, and especially because I support a robust system of public financing of elections. But the public financing of presidential elections as it exists today is broken, and we face opponents who’ve become masters at gaming this broken system.

JEFFREY BROWN: Referring specifically to John McCain’s campaign, he said…

SEN. BARACK OBAMA: We’ve already seen that he’s not going to stop the smears and attacks from his allies running so-called 527 groups, who will spend millions and millions of dollars in unlimited donations.

JEFFREY BROWN: Obama has raised $265 million to date, from more than 1.5 million donors, mostly through an unprecedented Internet fundraising apparatus. Of that money, just $10 million is earmarked for the general election.

In the past, Obama has suggested he would stay within the system and its spending limits so long as his opponent agreed to do the same. In a February 20th USA Today op-ed, he vowed to, quote, “aggressively pursue such an agreement,” in which the candidates would “commit to discouraging cheating by their supporters, to refusing fundraising help to outside groups, and to limiting their own parties to legal forms of involvement.”

Days later, John McCain seemed in agreement.

SEN. JOHN MCCAIN (R), Arizona: Well, we committed to taking public financing in the general, if Senator Obama does. That was the deal.

McCain criticizes Obama's action

Sen. John McCain
R-Ariz.
This election is about a lot of things, but it's also about trust. It's also whether you can take people's word, because when you campaign for the highest office in the land, you make certain commitments to the American people.

JEFFREY BROWN: Today, while touring flood-damaged Iowa, McCain blasted Obama's decision.

SEN. JOHN MCCAIN (R), Arizona: ... signed (inaudible) on a piece of paper that said that he would if I, the Republican nominee, took public financing in the general election, then he would, too, and maintained for a long period of time that he would.

And this election is about a lot of things, but it's also about trust. It's also whether you can take people's word, because when you campaign for the highest office in the land, you make certain commitments to the American people.

And if you're not even willing to keep one that is as impactful in a political campaign as his decision to finance his own campaign and completely contradict his solemn pledge, I think should be disturbing to all Americans.

JEFFREY BROWN: Public Citizen, a nonpartisan advocacy group, also decried the decision, saying, "Now that Obama has decided to opt out of public funding, it will be more difficult for him to show that he has not abandoned the concept and will champion clean elections."

For his part, McCain, who has so far raised $115 million, has himself had questions raised about the financing of his campaign. The senator, whose campaign was foundering last fall, accepted federal funds for the primaries, but later tried to opt out of the system.

Weighing public funding benefits

Jeanne Cummings
Politico
Kerry, like Barack Obama, was raising a whole lot of money, but went ahead and went into the system only to be outspent by the Republicans in the general.

And for more, we're joined by Ken Gross, former associate general counsel for the Federal Election Commission. He's now an attorney in private practice in Washington, D.C.

And Jeanne Cummings, who follows the campaign money as a correspondent for Politico, she joins us from Atlanta.

Well, Jeanne Cummings, clearly, Barack Obama is raising lots of money on his own, but is it known how much of a debate there was in his camp about opting out?

JEANNE CUMMINGS, Politico.com: I don't think that there was probably a long debate about this. There are many people who are working for Barack Obama today who were working for John Kerry in 2004.

Kerry, like Barack Obama, was raising a whole lot of money, but went ahead and went into the system only to be outspent by the Republicans in the general. There are a lot of people inside Barack Obama's campaign that did not want to make that mistake again.

JEFFREY BROWN: Ken Gross, take a step back and walk us through the pros and cons here. What does he think he gains? What might he stand to lose by doing this?

KEN GROSS, Former Federal Election Commission Official: Well, the big, obvious gain here is that he is going to raise a ton of money. He's going to have hundreds of millions of dollars at his disposal.

He can roll over anything left from the primary into his general campaign and can now start raising general election money in earnest, so he could raise $200 million, $300 million, maybe more, against McCain's limit of $84 million.

So this is a money play, when you get right down to it. That is a tremendous advantage.

There is some disadvantage that McCain is trying to exploit, this issue as to whether he went back on a pledge to be publicly funded, and just whether this is consistent with the position that he's taken as a campaign finance reform person himself.

JEFFREY BROWN: And just to remind people of how the system works, people will still only be able to contribute a set amount to Obama, right?

KEN GROSS: That's right. While there's no limit on how much money he can spend, he still has to raise it in relatively small increments. The limit is no more than $2,300 per individual.

If you gave $2,300 to his primary campaign, you can give another $2,300 to his general election campaign. And in those increments, as many as he can collect, he can spend.

Obama's financial reasoning

Kenneth Gross
Former Election Commission Official
What has created a breakdown in the system and what Senator Obama is referring to, these so-called 527 groups, which are outside political committees that are not regulated under these normal limits.

JEFFREY BROWN: Now, Jeanne Cummings, tell us a little bit more about his past statements, and where he is now, and how he's explaining the situation now. He's talked in the past about -- he called it a parallel public financing system that he's created through all these millions of donations.

What were his past statements? And how is he explaining the change now?

JEANNE CUMMINGS: Well, in the past, he had suggested that, if the Republican nominee went into public financing, then he would, too, but he left himself wiggle room.

He said he would do it if they could reach certain agreements about limiting the role of outside groups, about limiting the amount of money the parties might spend. And so, at first, that's where he was.

Then he came back with those conditions and promised to aggressively pursue such an agreement with John McCain. And what we're learning today is that there was a very relatively brief conversation, part of a 40-minute conversation between the two lawyers for the campaigns, not between the two candidates, and that's the extent of the aggressive attempt to negotiate this.

So that's why I say I don't think this was a hard call for them to make internally, but now they have to manage the fallout from it.

JEFFREY BROWN: And, Ken Gross, the other thing that he said -- we saw in his statement -- is that the system is broken. He referred explicitly to the 527s used by his opponents, and people will remember the swift boat ads from the last campaign. Remind us how the system works. And what is he talking about there?

KEN GROSS: Well, one of the big reforms of Watergate was to have a publicly funded system for the presidential election, particularly in the general election, which has actually remained intact, one of the few things that has remained intact until now.

But what has created a breakdown in the system and what Senator Obama is referring to, these so-called 527 groups, which are outside political committees that are not regulated under these normal limits.

In other words, they're not restricted on this $2,300 limit. You could literally write a $100,000 or $1 million dollar check if you word the ad correctly and the swift boat guys were the -- of course, got a lot of publicity over that and did a job on John Kerry back in 2004.

And the large donations can also be made to the party committees, not totally unrestricted. So you've got the outside money; you've got the party committee money; and then you've got the candidate money, millions and millions of dollars.

McCain's fundraising options

Jeanne Cummings
Politico
One of the problems for McCain is that he's not a very good fundraiser. He raises in a good month $21 million. A bad month for Barack Obama is $33 million.

JEFFREY BROWN: Jeanne Cummings, let's talk a little bit about McCain now, where this leaves him. Late today, he told reporters that he was going to stay where he's been, actually. He's going to continue to accept public campaign finance money. What options does he have at this point?

JEANNE CUMMINGS: He doesn't have many good ones when it comes to finances. What he gets out of this is a political issue. He can take this into the debates and try to bang Barack Obama up a little bit with it. But now he is going to face an extraordinary financial disadvantage.

Now, one of the problems for McCain is that he's not a very good fundraiser. He raises in a good month $21 million. A bad month for Barack Obama is $33 million. There's a difference between the two of them. McCain's not been able to bring around all of the Bush donors and get them into his campaign.

So one number I looked at is, if you look at Barack Obama, he's had more than 1.5 million people give to his campaign. John McCain has a few hundred thousand who have given to his campaign.

If all of Barack Obama's donors -- and that's on the down side, that's a conservative number -- if they all gave him $250 -- that's it, nowhere near the limit -- he'd have $375 million to spend in two months. That's $185 million in one month. That's $47 million in a week. And John McCain will have $85 million to spend. It is a huge advantage.

JEFFREY BROWN: And there is, Ken Gross, one disparity on the other side, which is that the Republican Party has raised more than the Democratic Party. Now, why is that? And does that help John McCain in some way?

KEN GROSS: No question about it. John McCain is going to be relying in a large part on the Republican Party. Neither of these candidates are enthusiastic about the 527 outside groups, because there's no control. They have to be independent; they can actually do some harm.

JEFFREY BROWN: And is there much sign that there's much activity yet?

KEN GROSS: There is some activity brewing. Both Senator McCain and Senator Obama kind of threw cold water on it and said, "Look, guys, you may be friends out there, but this is not the way I want this done." And they did step back. But, you know, once things get rolling, they will have no control over that.

But going back to the party committee, the Republican National Committee has a good bit of more money than the DNC, than the Democratic National Committee. And McCain is out there raising money for the RNC.

You can raise money in much larger increments: $28,500 per individual, if you're giving to the party committee. That's more than 10 times the limit if you're giving directly to the campaign. And the party committees can spend money on these presidential elections and, with McCain stuck at this $84 million limit, I think he's going to be largely relying on the RNC.

JEFFREY BROWN: Jeanne, let me just ask you briefly before we go, where does this leave this whole campaign finance system? I saw some prophecies out there today that it's, for all practical purposes, dead at this point?

JEANNE CUMMINGS: I think that those prophecies are probably pretty right. Everyone agrees it's broken for the primary with the limits that they put on the states. They'd have to rewrite that law completely to bring it up-to-date.

You know, it's a law that was written in the mid-1970s, and it needs to be a complete overhaul to be adapted to today's world, with Internet giving, and cable, and all how the world has changed in these last 30 years.

And pushing a bill like that through Congress is no easy thing to do. They don't like campaign finance laws as it goes, so I think passing a new law would be very difficult for either of these folks, if they get elected.

And both men have said that they'd like to revamp the system and bring it up-to-date. But I do think that, at least in the short term, until maybe a big scandal creates enough motivation for the folks on Capitol Hill to go to a campaign finance law, we're probably out of the system.

JEFFREY BROWN: OK. Jeanne Cummings and Ken Gross, thank you both very much.

KEN GROSS: Thank you.

JEANNE CUMMINGS: You're welcome.