Obama Opts Out of Public Financing: Promise-Breaker or Reform-Shaker?

| Thu Jun. 19, 2008 1:00 PM EDT

In the decades after Watergate, the basic thrust of campaign finance reform was this: limit the flow of big-money private contributions to candidates. No more bags of money for the pols. Now, only donations of up to $2300 from individuals are acceptable. And in the presidential race, there is public financing: the nominees--if they agree to forgo fundraising--receive full underwriting of their general election campaigns. This year that subsidy is about $85 million.

This system has been an imperfect reform. There have been loopholes. Well-heeled private interests have poured money into independent efforts to support a preferred candidate or, more often, blast that candidate's opponent. And parties could raise money, while corporations could donate unrestricted amounts to presidential conventions. So the opportunity for one side to outspend the other (using unlimited donations from wealthy individuals, corporations or unions) has remained. The influence of big money has not been eradicated. Still, presidential candidates, once nominated, could focus on campaigning, rather than cash-hunting.

Now comes Barack Obama.

He has run for president as an agent of change who slams the money-talks ways of Washington. As an Illinois state senator and as a U.S. senator, he has passed reform measures. Yet on Thursday, in an email to his supporters, he announced that he would not participate in the public financing system in the general election, despite an earlier promise to stay within this system. He will be the first major presidential nominee to reject public financing for the general election since Watergate. Instead of relying on that check from the U.S. Treasury, he will continue his record-setting fundraising operation. John McCain's campaign immediately and predictably proclaimed that this decision "undermines his call for a new type of politics" and will "weaken and undermine the public financing system."

Obama said:

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It's 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. John McCain's campaign and the Republican National Committee are fueled by contributions from Washington lobbyists and special interest PACs. And 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.

Obama is clearly doing what's best for his political prospects. No doubt, Obama, who has raised about $265 million so far (while McCain has raised $97 million), can pocket hundreds of millions of dollars in the general election. So by eschewing the public financing system, he will have far more dollars to deploy--and be able to double, triple or quadruple what the McCain campaign raises and spends (presuming McCain keeps within the system).

But the story here is deeper than the simple narrative, Obama-sells-out-reform. His campaign, relying on Internet fundraising, has broken records in the number of small donors it has attracted. It has been far more populist than other major campaigns when it comes to fundraising. As Obama put it, "Instead of forcing us to rely on millions from Washington lobbyists and special interest PACs, you've fueled this campaign with donations of $5, $10, $20, whatever you can afford. And because you did, we've built a grassroots movement of over 1.5 million Americans." Sure, Obama did receive a significant amount from maxed-out contributors and bundlers, but he has mobilized small contributors like no one else. Given that the goal of the reform system was to prevent big-money backers from getting their hooks into a candidate, are its restrictions less relevant for a candidate who does so well with small donors?

When the system was first designed, few could imagine an Internet-dominated world in which it would be possible for a candidate who motivates millions of voters to haul in so much from non-fat-cats. Are these rules then obsolete? And considering that Democrats have often been at a disadvantage when it comes to big-bucks fundraising (though not lately), should a Democratic nominee walk away from an advantage in people-power fundraising? After all, if literally millions of citizens yearn to make a small contribution to a campaign that aims to undo the work of the Bush administration, why stop them? Isn't that small-d democracy at its best? And Obama's decision will put him in a stronger position to pressure independent groups from raising and spending unlimited amounts to support him or attack McCain. If he does draw in $300 million or so in campaign donations, Obama will not need these outsiders. McCain, however, will. Even though McCain has said he does not fancy independent spending in campaigns, he will be less able to lean on these players (say, this year's Swift Boaters) to cease and desist. Assuming that McCain will rely on the public subsidy of $85 million, the GOP will somehow have to cover the $200 million-plus gap between the McCain campaign and the Obama campaign.

Obama can be pegged a flip-flopper on this front. And the McCain camp is right: he's setting a precedent that will weaken the system. Longtime reform advocate Fred Wertheimer says,

We had hoped and expected that Senator Obama would stick with the public pledge he made to accept public financing and spending limits for the presidential general election, if he was nominated, and if his Republican opponent also agreed to accept public financing and spending limits for the general election. These conditions have been met.

We do not agree with Senator Obama's rationale for opting out of the system. Senator Obama knew the circumstances surrounding the presidential general election when he made his public pledge to use the system....

Senator Obama's decision to opt out...make it all the more important for Senator Obama to personally make clear to the public in no uncertain terms that if he is elected, one of the early priorities for his Administration will be enacting legislation to repair the presidential public financing system.

The argument that the Obama campaign has created a parallel system of public financing through its Internet small donor fundraising does not hold up. ...Larger contributions and bundlers already have played an important role in financing the Obama presidential primary campaign and may well do so in the general election....

It is true that Obama has used bundlers and accepted money from big donors. But he has indeed demonstrated the potential of a new model. And Obama is one of three lead Senate sponsors of legislation that would improve the presidential public financing system, particularly for presidential primaries. This bill would give primary candidates public matching funds of $4 for every $1 raised, covering only individual contributions of $200 or less. Under this reform, the importance of smaller Internet contributions would be maximized and the primaries would become less a money-chase than they have been.

Does Obama's decision mean he's a phony, or is his embrace and mastery of small-donor fundraising an indication he is truly a vehicle for change? Ultimately, his move will be judged expediently. Political foes will brand him a business-as-usual promise-breaker. His supporters will cheer his hard call and celebrate his grassroots and netroots successes as a democratic (and Democratic) triumph. As for nonpartisan reformers, they will have to keep on pondering the implications for reform and clean elections in the brave new world of the web. And whatever happens in November, Obama will not have the excuse of having been outspent. This self-proclaimed candidate of change will be the most well-financed-by-the-voters politician in the history of the United States.