Dialing for Dollars
Forget New Hampshire. The contest for cash is the first real primary
The Iowa caucuses may be nearly 10 months off, but the candidacies of some 2008 White House contenders are all but certain to grind to a halt any day now. Some candidates may actually leave the race; others will be considered too far behind to catch up. By mid-April, the current field of nearly 20 hopefuls could effectively be winnowed down to less than a third of that, with three front-runners in each party hanging on to their leads straight through next January.
It sounds crazy, and many think it is. But it's also likely, because March 31 marks the end of the first fundraising quarter for what is widely anticipated to be the most expensive presidential race ever. "Having a good first quarter is the difference between life and death," says Indiana Sen. Evan Bayh, a Democrat who announced late last year that he would forgo an expected presidential run, largely because he felt the fundraising demands were too great. "There's a lot of spin in fundraising, but on March 31st there's a bottom line. You either meet expectations or you don't." And with celebrity candidates like New York Sen. Hillary Rodham Clinton expected to raise as much as $100 million before the first Iowan heads out to caucus, that bottom line will be much higher than in previous contests. Some candidates are expected to unveil war chests of up to $30 million when they report those first-quarter results, in early to mid-April. Thus the first-quarter numbers are, in effect, the first primary of the '08 season, and front-runners with less than $20 million could raise doubts. Second-tier candidates with less than $10 million may be laughed out of the race. Journalists and pundits can hardly wait to call those shots, amplifying the actual financial implications of the first-quarter reports into full-blown conventional wisdom about who's on top-and who's toast.
All of which raises the question of whether the 2008 presidential contest, described as the most wide open of the past 75 years, is so wide open after all. "Below the three front-runner Democrats, you have a sitting governor who was ambassador to the U.N., a 36-year senator who's on the Foreign Relations Committee, and another 26-year senator on Foreign Relations," notes the Campaign Finance Institute's Michael Malbin, referring to New Mexico Gov. Bill Richardson and U.S. Sens. Joseph Biden and Christopher Dodd. "Yet they are being written off as if they are nobodies. In previous cycles, they would have been given a hearing." The money primary has become so costly and high stakes as to raise doubts that an experienced and qualified candidate who lacks celebrity status or vast personal wealth can win his party's nomination.
Sticker shock. The price hikes of recent presidential campaigns have wildly outpaced inflation, with candidates in 2004 spending $718 million, up 300 percent from 1996 (chart, Page 20). Election experts predict the 2008 race will cross the $1 billion mark, partly because of the unique nature of the contest: It's the first without a presidential incumbent or vice presidential "heir apparent" in half a century, ensuring at least several candidates competing for each party's nomination.
And strategic decisions made in the 2004 election may have set a precedent that sends spending higher still this time around. Back then, candidates George W. Bush and Sen. John Kerry both passed up government matching funds during the primary season-the first time that had happened since such funds became available in the post-Watergate era-because they wanted to avoid the spending caps attached to public money. "Bush was just setting the stage for an even larger leap this cycle," says Sheila Krumholz of the Center for Responsive Politics. "We're basically saying, 'You ain't seen nothing yet.'" For the '08 race, candidates who sign up for public funds in the primaries-a commitment that imposes a roughly $48 million cap on "base" spending to be eligible for a roughly $20 million matching grant-may be committing political suicide. The three Republican and three Democratic front-runners have all either announced or are expected to announce that they will opt out of public financing.
Clinton's campaign has gone even further, announcing that she would become the first major party candidate to forgo public financing in the general election since the system was instituted in the 1970s. Other candidates are considering following suit, and if Clinton wins the nomination it will very likely force the Republican nominee to do the same. Even the bitterly fought 2004 election saw Bush and Kerry participate in the public financing system for the general election. The system provided $75 million to each candidate and would increase next year to around $80 million. Unlike primary matching funds, general election public funds are grants that wholly replace private fundraising. "If you're going to opt out of the general election fund and you're going to raise $250 million just for the general, you can't wait till the spring or summer of 2008," says Michael Toner, a former chairman of the Federal Election Commission. "You have to start raising that money now."
This presidential cycle's front-loaded primary schedule is another added expense. Eight states, including California, have moved their primaries or caucuses up to Feb. 5, 2008, and roughly a dozen more are considering similar proposals. Those states include New York and Florida, which, along with California, are home to some of the most expensive TV advertising markets. "The primary will be over by the middle of February 2008," says Tom Loeffler, general chairman for Arizona Sen. John McCain's campaign. "That puts further pressure on candidates ... to raise as much money as possible early on." James Torrey, a New York fundraiser for Democratic Illinois Sen. Barack Obama's presidential campaign, has raised $100,000 just since mid-February, the equivalent of what President Bush's "Pioneers" were expected to bring in over the course of the entire 2004 primary. Torrey is convinced Obama has to be up and running in about 20 states by February 5: "What you need by way of staff in each state is formidable."
Torrey says the Democratic money chase in New York has already boiled down to a face-off between Obama and Clinton. Which means second-tier candidates face long odds accumulating serious war chests with the money that's left.
New Mexico's Richardson and former Arkansas Gov. Mike Huckabee, a Republican presidential candidate, both face an additional hurdle in that they can't roll leftover funds from their previous campaigns into the presidential race, as senators can. "Senators go into the desert with at least some water," says Craig Varoga, former campaign manager for Democratic ex-Iowa Gov. Tom Vilsack, who dropped out of the presidential race in February, less than three months after declaring his candidacy. "We had to look for the streams." But even with $6 million from his earlier Senate re-election campaign, Indiana's Bayh says his goal of raising $25 million more by the end of 2007 left no time to focus on anything else. "Between meeting prospective and current donors and phone time, fundraising took up 80 to 90 percent of the day," says Bayh. "And the fundraising people kept saying it wasn't enough."
The McCain-Feingold campaign finance reform law of 2002 was meant to stanch the flow of money into campaigns. But the lower donation limits-$4,600 per candidate per person for the primary and general election cycle combined-simply gave rise to a new class of small-donation "bundlers" like Torrey.
Markets. Even for the top-tier candidates, the '08 cycle's costs will require tapping into new markets. Former Massachusetts Gov. Mitt Romney, for instance, is confident he can keep pace with Republican rivals McCain and former New York Mayor Rudy Giuliani by hitting up networks derived from his stints in the venture capital industry and at the Olympic organizing committee, along with harnessing ties to the Mormon community.
But the campaign of former North Carolina Sen. John Edwards, running third in national Democratic polls, says it expects to need only around $35 million before Iowa. Edwards is banking on grass-roots support in Iowa and Nevada, which will host the second of the nation's caucuses next year, to translate into strong early finishes that create momentum for the February 5 states. The campaign is resigned to having much smaller presences in those states. But Edwards's gamble relies on grass-roots networks built during the '04 cycle, when he was a presidential candidate and the vice presidential nominee. First-time candidates lack such assets.
Second-tier candidates are loath to discuss their disadvantages. Asked about the first filing deadline, Huckabee-whose support in polls is around 2 percent-says, "We don't see it as a viability test. We're just trying to ... make sure we're not burning more [money] than we're bringing in." Huckabee notes that many well-financed presidential candidates have gone nowhere, including then Texas Sen. Phil Gramm in 1996.
But skyrocketing campaign spending has also made shoestring bids like Jimmy Carter's in 1976 almost inconceivable today. "Carter ... spent 18 months camped out in Iowa without a lot of money but with all the time in the world," says Southern Methodist University Prof. Cal Jillson. "Now, you [need] ... an organization in 50 states at once and need $100 million, and that doesn't sound like Jimmy Carter, and it doesn't sound like Richardson or Huckabee."
Campaign finance reform advocates say there are other implications to stratospherically priced races, including the news media's fixation with candidate finances, rather than issues. And at a time when Congress has passed ethics legislation to check the influence of lobbyists, campaigns are not required to disclose the names or affiliations of the "bundlers" who collect millions on their behalf-and presumably expect the favor to be returned if their candidate wins.
Many advocates have taken aim at the public financing system. They say it imposes primary spending limits that have not kept pace with the demands of modern campaigns. A recent proposal from the Campaign Finance Institute, a nonpartisan think tank, proposes lifting the primary caps to $75 million. Such a change could discourage even well-financed candidates from opting out and create more of a level playing field. Another proposal: increase government matching funds. Some are also calling for more government funding for the general election.
Such proposals have picked up only modest support in Congress, with many Republicans expressing opposition to steering more tax dollars toward candidates. And as it stands, only around 10 percent of Americans check the box on their tax returns that earmarks $3 for the public campaign fund. "Last time I checked, running for president was about getting the most support behind you," says Ben Ginsberg, chief counsel for the Romney campaign, "and fundraising is one indicator of support." This year more than ever, it may be the most important one.
This story appears in the March 26, 2007 print edition of U.S. News & World Report.