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Magazine / Politics

Follow the Money

The 2012 presidential campaign will be awash in dollars—much of it unregulated.

At issue: Like other potential GOP candidates, Haley Barbour will have to decide whether to accept public financing.(AP Photo/Jim Cole)

photo of Alex  Roarty
April 21, 2011

The 2012 election could see the collapse of the campaign finance system that has been in place since the Watergate scandal nearly four decades ago.

One pillar of post-Watergate reforms—public financing for presidential elections—has been teetering for years, and this election cycle could mark its fall. Two other pillars—limiting the amount of outside money in politics and disclosing its sources—have been significantly weakened by last year’s landmark Supreme Court ruling in Citizens United v. Federal Election Commission, which rejected a ban on corporate and union spending. The decision has allowed independent groups with virtually no disclosure requirements to become magnets for big money from anonymous donors. Such organizations are poised to wield unprecedented influence in 2012.

“It’s fair to say the campaign finance regulation is now at its weakest point since the middle of the 1970s,” said Anthony Corrado, a campaign finance expert at Colby College in Waterville, Maine. “And I think that what we now have is a system that puts a premium on fundraising in a way that we have never seen before.”

 

Consider the raw numbers: Independent groups, which operate separately from candidates and political parties, spent nearly $300 million last year, according to the Center for Responsive Politics. That’s a jaw-dropping amount for a midterm election. It was three times the amount of money spent in 2006 and 10 times more than the outlay in 2002. In fact, it was nearly as much as independent groups shelled out in the 2008 presidential election, a race that normally attracts far more money.

Perhaps more significant than the amount of money is the source. Forty-seven percent of independent expenditures were funded anonymously in 2010, compared with less than 10 percent in 2006, according to the Center for Responsive Politics. The effect on campaigns was clear. Aided by a 2-to-1 edge in spending, conservative groups helped Republicans win historic victories in November. The GOP, of course, would have had a good year regardless, but the new spending unquestionably allowed the party to seize on a favorable political climate and expand its number of victories.

Still, for everything that happened in 2010, it might have been little more than a warm-up act for next year’s races. Aware that they were outgunned last year, Democrats have fervently worked not just to match conservative outside groups but to surpass them. “The campaign finance story of 2010 was big money,” said William McGinley, a Republican campaign finance lawyer. “The 2012 story will be even bigger money; 2010 was only the precursor.”

The Primary

Perhaps no race will feel the effect of the changes more than the Republican presidential nominating contest, where the rise of influence among outside groups and the desertion of the public-financing system will be felt acutely, shaping the tactics of each candidate.

Public financing for presidential primaries goes back to 1976. It provides candidates with matching federal funds for the first $250 they raise from each donor. Through the decades, that system has allowed lesser-known candidates or those with a national network of small donors—from Jimmy Carter in 1976 and Gary Hart in 1984 to Pat Buchanan in 1996 and John McCain in 2000—to mount viable campaigns. But the money comes with strings: Candidates who accept public financing must agree to limits on how much they can spend in each primary or caucus, as well as an overall cap on expenditures for the entire primary season (which legally extends up to the moment the person accepts his or her party’s nomination at the national convention). If the election had been held in 2011, for instance, candidates would have been eligible to spend a little more than $44 million in the primary campaign, according to the Federal Election Commission.

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Cracks first appeared in the public system in 1996 when wealthy businessman Steve Forbes opted out of public financing in the Republican primaries. Four years later, George W. Bush did the same. In 2004, both Bush and John Kerry rejected public financing in the primaries but accepted it in the general election. In 2008, Barack Obama and Hillary Rodham Clinton each refused to enter the system during the primaries, as did Republicans John McCain, Rudy Giuliani, and Mitt Romney. Second-tier Democrats John Edwards, Christopher Dodd, and Joe Biden did accept public financing in the primaries. In the general election, Obama opted out, while McCain used it.

Facing concerns both practical and ideological, all of the 2012 Republican candidates will face formidable pressure to reject public financing in the primary race. “We had this discussion on the Pawlenty campaign,” said Vin Weber, a former House member from Minnesota who is advising former Minnesota Gov. Tim Pawlenty. “You’re just not going to be seen as a serious candidate if you accept public financing.”

Once any major candidate renounces public financing, the other leading contenders will face pressure to follow suit. The reason is that candidates outside the system enjoy an enormous tactical advantage. With the freedom to spend unlimited sums in any state, they can overwhelm candidates inside the system. The FEC, for instance, projects that the spending limit for Iowa in 2012 could be as little as $2.3 million; a candidate who rejects public financing might easily dole out three times that amount. By way of example, Obama spent more than $9.5 million in the Hawkeye State on the 2008 caucus, according to the Wisconsin Advertising Project.

But candidates can’t spend money they don’t have. For all the bravado about rejecting public matching funds, it’s not clear how many Republican candidates can raise enough money to compete without it.

Ed Rollins, a longtime GOP strategist and Mike Huckabee’s campaign manager in 2008, says that the 2012 campaign calendar will compel candidates to build an infrastructure in the first four or five states holding primaries or caucuses, including Iowa, New Hampshire, South Carolina, and Nevada. That could cost tens of millions of dollars, he estimates.

Trying to meet that steep ante could put many candidates in an awkward position: Take the public funds and be derided by opinion-makers as second-tier and possibly face a backlash from conservative primary voters who see the system as a waste of taxpayers’ money; or pass it up and cripple your fundraising. Even a seemingly top candidate such as Pawlenty, who as a former governor of a midsized Midwestern state does not have a big Rolodex, could find it difficult to raise the huge sums that Republicans are discussing. “Some of these people are going to struggle to raise $10 million in a crowded field,” GOP strategist Tony Fabrizio said. “What do you do? Not take the money when you need it?”

The other big change in the 2012 primary campaign could be greater participation by outside independent groups. Those institutions have grown into a major force in presidential elections.

Think of 2004 and the anti-John Kerry ads from the Swift Boat Veterans for Truth. But such groups have been much less common in presidential primaries; none, for instance, influenced the epic 2008 Clinton-Obama struggle for the Democratic nomination. That could change next year. Guided by the success of such groups as American Crossroads, the Karl Rove-backed operation that is the best-funded and most well-known of all the outside organizations, donors who have already maxed out on contributions to their candidates could find an unlimited outlet for their wealth with “super” PACs. Romney’s donors, hypothetically, could independently break off from the campaign and begin investing millions of dollars in ads. “You have to think every candidate will have some type of ‘527’ that they’ll have engaged in this process,” said Brian Jones, a GOP consultant, referring to unregulated political organizations named after a section of the U.S. tax code.

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By law, independent groups cannot coordinate their efforts with campaigns or party committees. But, clearly, candidates with a well-funded, politically savvy network of backers—such as potential GOP contenders Haley Barbour and Newt Gingrich—would stand to benefit. “What candidate will be able to marshal the biggest entities to go after the other candidates?” Jones asked. “You’ll probably see some of these third-party groups wind up having as big an influence as the campaigns themselves.”

Relying on outside money does present pitfalls. The perception that third-party ads represent a candidate’s attempt to circumvent the rules or hide his or her involvement could rankle voters in clean-government states such as Iowa and New Hampshire. Most dangerous, the ads themselves, produced outside the campaign’s supervision, could backfire. “I guarantee an ad will go up from a third-party group, and there’ll be some [campaign officials] slapping their heads at headquarters saying, ‘I can’t believe that’s going up,’ ” Jones said. “That’ll definitely happen.”

How the 2012 GOP primary campaign will play out remains uncertain—Republican operatives caution that nobody knows exactly how the rules will affect strategies, because the landscape is so different. But with a nomination fight that promises to be as close and competitive for the GOP as any in recent history, how well candidates adapt to the new paradigm could be the difference between winning and losing.

The General Election

The collapse of the campaign finance system would also rock the general election, regardless of which GOP nominee emerges. The first change would be a spillover from the primary season. Candidates who accept public financing must adhere to the primary-campaign spending limits through their party’s convention to the point when they accept the nomination. Typically, the candidate who survives the primaries to win the nomination has spent virtually every penny allowed under those spending limits (if not more). That can leave him or her legally prohibited from spending or raising much money until the convention, when the nomination becomes official. A candidate inside the public-financing system can be at a great disadvantage if an opponent has not accepted public money and is not subject to those limits. That’s what happened to Al Gore, for instance, in 2000.

This scenario is especially ominous for Republicans in 2012. After raising $750 million in the last presidential contest, Obama could rake in close to $1 billion for his reelection campaign, insiders say. Because he won’t face a primary challenge—and won’t be accepting matching funds for the primary season and possibly for the general election as well—Obama would be in a position to blast the just-emerging Republican presidential nominee with a huge ad campaign before his opponent can catch his or her breath. “No one, no nominee, has ever withstood that type of firepower out of the box,” said Republican strategist Fabrizio, who was part of Bob Dole’s 1996 presidential campaign, which was battered by an early ad blitz from Bill Clinton. “The nominee comes hobbling out of the primary, [Obama] could decapitate you.”

One way that Republicans may try to respond to that threat is by rejecting public financing for both the primary and general elections.

 

“Campaign finance regulation is now at its weakest point since the middle of the 1970s.” —Anthony Corrado, Colby College

 

“No Republican in his or her right mind is going to agree to public financing. I mean, that’s dead. That is over,” McCain told The Washington Times after his losing bid in 2008. “The last candidate for president of the United States from a major party that will take public financing was me.”

Another way that GOP contenders will try to counter Obama will be to rely on outside groups such as Rove’s American Crossroads. It is poised to step into the breach and do battle with the president. “Particularly, that time frame between conclusion of primaries and convention is a period in which the Republican nominee is going to be exhausted and bleeding,” Steven Law, the group’s president, told National Journal. “That is going to be a very likely place where we’ll want to take the fight to the president while the nominee gets their feet under them for the general-election campaign.”

American Crossroads includes a PAC and a 501(c)(4) group, called Crossroads GPS, which allows it to keep its donors a secret. The two groups, which the Center for Responsive Politics said spent nearly $40 million combined last year, have a 2012 fundraising goal of $120 million.

Although outside groups could play an important role early in the general election, their influence could wane as time goes on. Even Crossroads and other well-funded groups don’t have enough financial firepower to influence presidential elections, which historically are largely immune to the influence of money coming from any one group or candidate.

“I don’t expect those groups to have a major effect on the presidential general election,” said Michael Malbin, a campaign finance expert at the Campaign Finance Institute. “Of all the contests in American politics, that’s the one about which the American voters know the most. The $100 million or so in incremental expenditures on top of the billion or so spent by the incumbent—it’s just not going to be very much.”

Crossroads and other conservative groups dominated the 2010 election, spending $190 million compared with just $93 million from liberal organizations, the Center for Responsive Politics says. Already in the 2012 cycle, Democrats are vowing that it won’t happen again. In the six months since 2010’s shellacking, a group featuring former aides to Senate Majority Leader Harry Reid has built the infrastructure for an independent effort to rival, or even surpass, its conservative counterparts.

The undertaking includes teams assigned to House races, Senate contests, and opposition research on Republicans. Although as-yet unformed, there will also be a group headed by former White House deputy press secretary Bill Burton detailed to the presidential election. The groups will be affiliated with 501(c)(4) organizations, so they, like Crossroads GPS, don’t have to disclose their donors.

Democrats involved in the effort say they were slow to react to the new campaign finance landscape last year, more concerned with litigating the merits of Citizens United in the court of public opinion than taking advantage of it. As one party operative put it, they were like a prize fighter more interested in arguing with the referee than in returning an opponent’s punches. “It was clear after the 2010 election that we needed to do everything possible to make sure that every possible independent effort was made to keep control of the Senate, which is why the best Senate strategists in the country got together to form Majority PAC,” said Monica Dixon, a former Gore aide and the executive director of the group tasked with preserving the Democrats’ upper-chamber majority. “This is an early and unprecedented start to counter the efforts of Karl Rove and American Crossroads.”

Democrats appear eager not just to match the conservative outside-group infrastructure but to exceed it. Part of that effort is American Bridge 21st Century, which is modeled after the watchdog group Media Matters. It will serve as a sort of “war room” of opposition research, feeding its three sister organizations material that they can use in independent expenditures, while pressing traditional media outlets for coverage. It represents a new entry in the independent-group fold: Conservative organizations that sprang up last year focused almost entirely on financing ads, not opposition research. “We’re going to build American Bridge into an enduring political research and communications powerhouse,” said Rodell Mollineau, the group’s president.

American Bridge signifies just how far-reaching outside groups have become, involved in nearly every effort that once was the sole province of parties and campaigns. How far the political arms race escalates remains to be seen. Law said that Crossroads, which was also involved in voter-turnout efforts last year, will up the ante by financing an opposition-research team for the 2012 cycle.

The rise of these groups, in both the Republican primary and general election, suggests that the center of gravity in American politics has shifted at least somewhat away from candidates and parties toward these independent organizations, aided in no small part by their significant fundraising advantage. “When you look at the landscape, the most dominant thing you’re going to see is the outside group,” said McGinley, the election lawyer. “And it’s here to stay.”

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