Obama’s Public Funding

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Today’s announcement by presumed Democratic nominee Barack Obama that he won’t be taking part in the public financing system for the general election has important implications for the presidential race.

CQ Politics addresses the questions concerning the state of public funding within the context of Obama’s decision.

How does the presidential public financing system work?

There are separate public financing systems for the primary and general presidential elections. Both are optional, and a candidate is free to participate in one or the other, or both, depending on qualifications.

The general election financing program covers the period of time between the candidate’s official nomination at the party convention and election day in November. The presidential nominee for each major party is automatically eligible for public funding. Minor party candidates may also qualify for partial funding, determined by their party’s vote totals in the preceding presidential election. If he or she chooses to participate, the candidate receives a grant adjusted for inflation. For 2008, that amount is approximately $84.1 million. The candidate may not raise or spend any additional funds, except to cover legal and accounting expenses.

Why did Obama decide to opt out of the public financing system?

Obama said he made the decision because “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.” But the bottom line is the campaign does not want to stop raising and spending its own money. The soon-to-be Democratic nominee has already shown the capacity to raise much more than $84 million over the same roughly two-month period that would be covered in the general election campaign. He raised $56.8 million in February, alone. Given his fundraising abilities, and considering Sen. John McCain ‘s own funding struggles, Obama is likely to have a huge advantage over his Republican rival by the time the conventions roll around. Taking public funding would neutralize that.

In making the decision, the Obama campaign no doubt weighed the fact that the Republican National Committee presently has a significant cash advantage over the Democratic National Committee — $40.6 million to $4.4 million at the end of April — putting the Republican party in a position to outspend the Democrats on the presidential race.

The parties and other outside interest groups can spend unlimited amounts to influence the election. In 2004, the spending totaled more than $200 million.

Why is the decision controversial?

Obama has portrayed himself as a new kind of politician who would like to curb the influence of money and special interests over the political system. In March of last year, the Obama campaign stated that he would “aggressively pursue an agreement with the Republican nominee to preserve a publicly financed general election” if he won the Democratic primary election. But the campaign backed away from those statements as Obama’s popularity increased and the campaign contributions started flowing in. The more his fundraising efforts paid off, the more the campaign talked about pursuing that goal only as an “option” he would explore.

The decision also has historic implications; Obama is about to become the first presidential candidate since the public finance system was established in 1971 not to participate in general election public funding.

Republicans claim Obama went back on his word. “In his decision to break his promise and forgo our nation’s public financing system, Barack Obama failed to demonstrate the kind of principled leadership that Americans are looking for in our next President,” RNC chairman Mike Duncan said in a statement.

Campaign finance reform groups are also disappointed. “We had hoped and expected that Sen. Obama would stick with the public pledge he made to accept public financing and spending limits for the presidential general election,” said Fred Wertheimer, president of Democracy 21.

Obama’s campaign, however, maintains that he never promised to participate and point to his reliance on contributions from small donors — rather than lobbyists and political action committees — as evidence that he has “already changed the way campaigns are funded.”

What is John McCain’s position on public financing?

The McCain campaign has said it expects to take public funding in the general election. But that could change in the wake of Obama’s decision. To ensure he is eligible, the soon-to-be GOP nominee has begun returning contributions tagged for the general election and is asking donors to instead give to a separate legal compliance fund.

What does Obama’s decision mean for the presidential campaign?

If his fundraising lead holds as expected, Obama will easily outspend the Arizona Republican and could end up shifting more states into play, depending on where he targets his spending.

The decision, however, could create headaches for the Obama campaign if voters end up agreeing with critics of the move, who say it is hypocritical.

Obama’s move also underscores what even supporters of the public funding system recognize: that it doesn’t work. For example, few competitive candidates took public funding in the primary elections this year. Supporters and critics agree that unless something is done to adjust the spending limits and amount of money available under the program, it’s unlikely that serious presidential candidates will participate in the future.

Obama is a cosponsor of a Senate bill aimed at fixing the public funding system. It remains to be seen what kind of priority he would place on such legislation should he become president.

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