Opting In or Out

Candidates must decide whether they will accept public campaign financing

Kerry. The party spent $120 million in advertising in 2004. More than 90% of that was for attack ads,” he adds. “It was a basic clash of strategies that was not helpful to the candidate. That is an example of how relying on independent spending might be a problem for the candidate. That is one of the factors that Sen. Obama [and his campaign] are weighing as they consider this decision. “On the other side, $85 million dollars is a lot to throw away.”

The 2004 election cycle was the first in which national parties have been prohibited from receiving “soft money”–or funds spent by organizations that aren’t contributed directly to a campaign–as a result of the 2002 Bipartisan Campaign Reform Act (BCRA), which was coauthored by McCain. The law was to restrain the direct relationships between office holders and major donors, increase disclosure, and make things more accountable.

All political committees file under section 527 in the tax code. There are some organizations that claim tax exempt status under section 527, but don’t register with the Federal Elections Committee as a political committee. They are known as 527 or “loophole” organizations, and since they aren’t subject to contribution limits or reporting like political action commitees (PACs), the money donated to 527s is considered “soft money.” By law, these groups are supposed to be independent of the parties and candidates and should only use their money for “issue advocacy.” They are expressly prohibited from advocating the election or defeat of a federal candidate, or in electioneering communications, but the FEC charged many of them fines for interfering in the 2004 election.

PACs can only solicit contributions from individuals associated with connected or sponsoring organizations, which are usually corporations, labor unions or other established membership organizations. Money contributed by PACs is considered “hard money” because donations to them must be reported and limited to specific contribution limits. This year, Clinton has raised $1.3 million from political committees, while McCain raised about $516,000 and Obama has raised about $8,000.

“PACS are limited to $5000 per year per contributor. The 527 groups claim to be exempt from the regulations limiting PACs and thus can go out and raise money from millionaire donors,” Doyle says.

Some political insiders say that McCain had to accept the public funding or risk looking like a hypocrite. McCain has already received a substantial amount of media criticism regarding lobbyists that work on his staff.

Despite the legislation, people who want to donate above the individual limit of $2,300 usually find a loophole, BNA’s Doyle says. In 2007, many 527 political action committees, several of which supported the 2004 Democratic nominee Kerry, were penalized and fined millions of dollars for participating in campaign activities, accepting contributions and making expenditures in excess of $1,000, and not registering as a federal political committee.

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