Tuesday, February 5, 2008

No More Wheels on that Straight Talk Express

This is not really a surprise:

No public funds for McCain

By: Jeanne Cummings
Feb 4, 2008 08:47 PM EST

With the Republican presidential nomination within reach, John McCain is reshaping his campaign to press on without public financing that could limit his spring spending, senior advisers say.

The Arizona senator’s rejection of the presidential public financing program he once defended is just the latest evidence of how ineffective the post-Watergate reform has become in an era of multimillion-dollar candidacies.

Under the public financing program, McCain could spend only about $54 million on all the primaries and caucuses — a sum Democrats Barack Obama and Hillary Rodham Clinton had spent before the first voters caucused in Iowa on Jan. 3.

John McCain on 3/2/2007:

John McCain raised the stakes Thursday in an emerging campaign finance showdown among the major presidential candidates.

In move similar to Democrat Barack Obama’s last month, McCain, a Republican, pledged to accept public funding in a general election, provided the Democratic nominee does the same. McCain’s announcement came hours after the Federal Election Commission granted presidential candidates increased fundraising flexibility.

The moves by McCain, the senior senator from Arizona, and Obama, the junior senator from Illinois, seemed designed to solidify their positions as the field’s leading advocates for reducing the influence of money in politics. But their pledges will also put some pressure on the other leading candidates from both parties to follow.

John McCain on 8/28/2007:

CEDAR RAPIDS, Iowa, Aug. 28 (AP) — Senator John McCain, the Arizona Republican whose presidential campaign is in dire financial straits, is eligible to receive public financing for his struggling bid, the Federal Election Commission said Tuesday.

Mr. McCain requested authority to receive matching money on Aug. 10, but his campaign said he had not decided whether he would ultimately accept it. Doing so would put him at a major disadvantage against his well-financed rivals, Rudolph W. Giuliani and Mitt Romney, who are likely to forgo public financing and thus free themselves from spending limits.

“We have not made a final decision,” said Jill Hazelbaker, a McCain spokeswoman, “but we are doing what’s necessary should we decide to opt into the matching fund system.”

Mr. McCain is the first 2008 presidential candidate to be declared eligible to receive matching money. Should he take the cash, it would be a major strategic shift for a candidate who for months believed that he would not need public money.

Mr. McCain, the former presumptive front-runner for the Republican nomination, set out to raise $100 million or more this year and drew up a budget based on that assumption. But the money did not come in as expected, and campaign spending was exorbitant. The campaign was all but broke by July.

John McCain, making his statement on "527s," which will now have to be tapped to finance his campaign now that he has decided not to take public funds, on 4/27/2004:

This is a very serious issue. We are not going to give up on it. We didn't work for 7 years to get campaign finance reform done and upheld by the U.S. Supreme Court to have a group of six people down there who are so politicized that they refuse to enforce a law which was passed by this Congress in overwhelming numbers, finally, and upheld by the U.S. Supreme Court. I want to tell them and all of those other people I watched on C-SPAN who are trying to undermine this law that we will not let you get away with it. American politics and the political process is too sacred for me to allow these stooges of special interests around this town to prevail and prevent us from restoring faith and confidence in the American people and their electoral system.

I guess McCain is now a "stooge" of his own making...


Mark Schmitt explains this better than I ever could:


Not from Iraq, sad to say. But from the public financing system for his presidential campaign.

Last week I noted a Politico story contending that for McCain "it could be tougher getting out than it was getting in" to the voluntary system of public financing for his primary campaign. While most of the major candidates other than John Edwards opted out of the system this year, because accepting public financing would have meant agreeing to a $50 million spending limit in the primaries, a desperate McCain last fall decided to take the public money, and $5.5 million has been certified in his name, but he hasn't seen the cash yet. Now that he's the front-runner, he would be infinitely better off refusing the public money, in order to ignore the spending limits, which he is approaching or has already hit.

The question was whether he could back out now. A couple of lawyers quoted in the Politico basically said he couldn't, unless the Federal Election Commission ruled otherwise, and the FEC can't make any rulings now, because they don't have enough commissioners to make a quorum. I pointed out that this would not only cause problems for McCain in the remainder of his campaign for the GOP nomination, but cripple him in the general election, as he would have no funds to campaign until the convention in September.

This led to a lengthy discussion among people who actually know what they're talking about -- former FEC commissioners and top election lawyers and law professors -- on a listserv. Eventually former FEC chair Michael Toner pointed to an advisory opinion issued to Rep. Dick Gephardt in 2003, which said that, since the public financing system was voluntary, he could change his mind until receiving the money. One key condition in that case was that Gephardt had not used the promise of public money as collateral for a loan. McCain seems to have followed this to the letter: McCain did take a large loan, and although one press account said he had borrowed against the matching funds, in fact the required disclosure of the loan is online and the section on collateral reads, "All Assets of Any Kind or Amount excluding certifications for federal matching funds." Instead, according to the Washington Post, he pledged future contributions, the future value of his mailing lists, and a large life insurance policy. So it appears McCain has navigated the letter of the law carefully.

The exception regarding loans is important for two reasons. First, you can't renounce an asset if it's entangled in another transaction. But more important, as another top lawyer pointed out, the matching system, while voluntary, is intended to present a binary choice: either accept the matching funds and the spending limit, or spend unlimited amounts, but give up the matching funds. By borrowing against the matching funds, you in effect get to have it both ways: if you do well, as McCain has, you later opt out of matching funds and are free of the limit. if you do poorly, you accept the public funds and pay off the loan. Borrowing allows a candidate to, in effect, spend the matching funds without formally accepting the funds. It's a clever way of avoiding the intended choice.

Thinking about this further, the issue of whether the matching funds are specifically pledged as collateral for the loan should be irrelevant. Consider what would have happened if McCain had lost New Hampshire and sunk under the waves: he would have accepted the public money and he would have used it to pay off the $3 million loan. Just because an asset was excluded from collateral doesn't mean it can't be used to pay off the loan. (Your mortgage is secured by your house, but you use your income to pay it.) And thus McCain is tricking the system exactly as the exception foresees: He effectively spent the public money without accepting it, and now that it has served its purpose, he can escape the limits.

The other question is whether the McCain campaign can rely on that advisory opinion to opt out of the public financing system, or needs an affirmative ruling from the FEC. This question seems to be even more abstruse than the first, but I'm not sure it matters: He obviously will declare himself free of the limits, and someday when the FEC is functioning again, it will rule on a complaint, and either penalize his campaign or not. Odds are this will be long after the election.

But whatever the FEC eventually decides, McCain's ju-jitsu move on the public financing system, effectively evading the choice between public financing and unlimited spending that the law intends, should surely end whatever credibility he has as a reformer of the political process.

-- Mark Schmitt

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