Presidential public funding: worth saving?

Whatever the 2004 election results, the thirty-year-old system for funding presidential nomination contests is clearly in trouble. Both major parties' nominees rejected public matching funds, opting for unlimited spending before their conventions. The legal ceilings for campaign spending are simply too low and inflexible for many candidates.

In addition, the public funding formula has failed to empower average donors, and the Presidential Election Campaign Fund cannot make timely payments because not enough people check off the box on their income tax forms to pay for the program.

The system seemed to work well for twenty years, but is now failing. The problem may not be the original law, but the result of a natural aging process: circumstances have changed and the law no longer works.

The current public/private system of presidential funding was enacted in 1974 as part of the most comprehensive campaign finance reform in American history. It came only two years after the 1972 election (the Watergate election), the first election in which the nomination process shifted away from the party leaders toward domination by primaries. To some extent, the campaign finance law of 1974 was designed with the elections of 1972 and 1976 in mind. The 1976 primary season unfolded at what now looks like a leisurely pace. Jimmy Carter did not sew up his party's nomination until June; Gerald Ford's victory over Ronald Reagan was in doubt until the GOP convention in August. The campaign laws, after a rocky start, did what they were supposed to do.

Frontloading

By the 1990s, the system had changed with campaigns being settled earlier. In 2004, the contest was over on March 2. Strategists, since 1996, have noted the strain put on the public funding system by this forward movement of primaries. Earlier, almost all major presidential candidates agreed to limit spending in return for public money. In 1996, the wealthy Steve Forbes opted out of public funding to run a self-financed campaign. Bob Dole stayed in the system and spent up to the maximum to beat Forbes. With primaries crowded to the front of the calendar, candidates feel they must "spend it all" quickly or lose. After mid-March, Dole was legally unable to spend much for months. President Clinton used that time to run TV ads that the GOP nominee could not answer. Dole never recovered.

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In 1999, George W. Bush referred to Forbes and Dole when he announced he would not take public money in 2000. He said, in effect, "I'm not going to let that happen to me." It turned out, however, that Bush beat Forbes early and John McCain ended up as his main opponent. McCain stayed in the system; by mid-March, his spending pattern looked almost identical to Dole's in 1996. McCain lost on Super Tuesday and soon withdrew from the race. Even if McCain had won more states, he could not have continued because of the spending limit.

The 2004 election continued the process. Like Bush referring to his opponents and predecessors in 1999, Howard Dean referred to the incumbent when he refused public money in 2003; John Kerry in turn referred to Dean. John Edwards stayed in the system and spent at almost the same rate as John McCain had in 2000. If Edwards had done well enough to stay in the race after Super Tuesday, he would have faced the same severe spending limit problems as McCain and Dole.

To be sure, this year is different in one important respect. It is the first election after the 2002 Bipartisan Campaign Reform Act (BCRA). Before BCRA, the candidate who won the nomination could count on the party to spend soft money between March and the convention to do some advertising. BCRA prohibits soft money. This raises the risks associated with spending limits, especially for a challenger to a well-funded incumbent who bypasses the system.

But Kerry's and Dean's decisions to get out from under spending limits were not only about what might happen after March. Their spending in Iowa and New Hampshire was far more than they could have sustained under spending ceilings. For Kerry, getting out from under the law also allowed him to mortgage his house and lend his campaign $6.4 million when his treasury was bare. Staying in the system would have limited him to $50,000.

Clearly, breaking out of the system's restrictions was helpful to those who could afford it. The question for the future is whether those who cannot raise such large amounts early will be able to compete for the voters' support. As the Dean campaign was collapsing in Iowa, the remaining serious competitors--Edwards, Wesley Clark and Joseph Lieberman--all would have been bankrupt if not for the federal matching funds they got in January. In this respect, their dependence on federal money at a crucial early point was like Ronald Reagan's in 1976, Gary Hart's in 1984, John McCain's in 2000 and others'. This is one of the real virtues of matching funds. Without help for the underdog, campaigns in a frontloaded system will be settled during the money primaries before the voters have any real say.

The underdog therefore is helped by public funds, but at a price later in the season. Like Edwards, McCain and Dole, the system forces a devil's bargain: To get matching funds, they have to accept a spending limit that will leave them bankrupt if the contest continues into March. They have no recourse around an inflexible limit even if their opponent is spending without limit. With the underdogs boxed in by the limits, the frontrunners (and others who can afford it) have additional incentive to opt out.

Solution

The spending limits can be solved fairly easily, if there is a political will. Almost every proposal for reform would increase the spending limit and give participating candidates an "escape hatch," or higher limit, should they run against a candidate who outspends the new limit.

But making only this change would lose a huge opportunity. The original purpose of public funding was not only to preserve competition and voter choice: it was also to democratize the money system by empowering more donors to participate. This has not worked.

Despite the attention the Internet deservedly has been getting, big givers still dominate the money primary. Howard Dean did capitalize on antiwar passions to raise more than half of his money in contributions of $200 or less. But the remaining Democrats got more than 65% of theirs in contributions of $1,000 or more--virtually the same as Al Gore and Bill Bradley in 2000 and 12 percentage points less than George W. Bush.

There is a good reason why candidates concentrate on major donors. As the robber Willie Sutton once said about banks: that is where the money is. It's easier to raise one $1000 check than twenty $50 checks.

But this obscures two important but little noted facts about politics. First, the vast majority of people who participate are still small donors. According to a Campaign Finance Institute (CFI) study published last year, more than three-fourths of presidential campaign donors in 2000 gave less than $100 to any candidate. Second, only about one-half of one percent of the people contributes any money to a presidential candidate.

Given these numbers, it would not require much more participation to transform the fundraising base of American politics. What is needed is a strategy to enlist small donors by giving all candidates more incentive to pay attention to them. To achieve this, the bipartisan CFI Task Force recommended a shift from the current funding formula, matching the first $250 from each contributor on a one-for-one basis, to a formula that matches the first $100 on a three-for-one basis. The Task Force's quantitative analysis showed that this change would go a long way toward making the total value of small donors collectively as important to candidates as major donors are now.

Subsequent to this CFI report, two other proposals built on similar ideas for enhancing of small donors. A bill cosponsored by Sen. John McCain (R-AZ), Sen. Russ Feingold (D-WI), Rep. Christopher Shays (R-CT) and Rep. Martin Meehan (D-MA) follows the New York City public funding example by matching the first $250 on a four-for-one basis. Howard Dean proposes matching the first $100 five-for-one.

These ideas differ mostly by nuance and cost. The CFI Task Force--which included conservative Republicans, minor party members, progressive Democrats and others--focused on small donors, and providing startup money for candidates, within a framework that controlled costs. The Shays/Meehan/McCain/Feingold bill has similar goals but puts more emphasis on increasing the percentage coming from public sources.

Is the System Worth Saving?

The real argument, however, is not among those who support slightly different repairs to the system. The issue is whether the system should be maintained at all.

The most commonly heard argument from those who say "no" is: Since only 11 percent of taxpayers check the box on their income tax forms to give $3 of their tax money to the Presidential Election Campaign Fund, 89 percent of the people oppose public funding. This reasoning is spurious. The government does nothing to explain the checkoff to filers. Accountants don't even point out (let alone explain) the checkoff to clients. And, the most popular home computer tax preparation program defaults to a "no" answer without giving any explanation!

The more serious opposition comes from those arguing that the money primary is a valid and adequate test for presidential performance. These opponents make two partially valid points: It does take significant political skill to assemble a coalition of financial supporters, and some of the people who are good at it may well make good presidents. The argument for public funding should not be construed as an argument against all those who can do well without it.

Instead, the claim here is twofold. First, the American people are better served, and presidential candidates will be better tested, if they are put through an election system that gives the less-well-moneyed a fair chance to be heard by the voters. Some of them might be good Presidents, too. Second, the connection between voters and their leaders will be healthier in a system that gives all candidates an incentive to empower small donors.

Make no mistake: This argument is not being made now for theoretical reasons. The system is in peril. To save and improve it for 2008, the best time to act is 2005-06. The opponents of the present system need do nothing for it to disappear. Anyone who believes the system is worth saving should start thinking about the alternatives, soon.

VOTER LINKS

* www.CampaignFinanceInstitute.org

* http://www.cfinst.org/presidential/index.html, Participation, Competition, Engagement: How to Revive and Improve Public Funding for Presidential Nomination Politics, Report of the CFI Task Force on Presidential Nomination Politics, 2003.

Michael J. Malbin is Executive Director of the Campaign Finance Institute, a nonpartisan research institute affiliated with the George Washington University. He is also a professor of political science at the University at Albany, SUNY.