He Slashes Staff, Narrows Strategy
By Alec MacGillis and Dan Balz
Washington Post Staff Writers
Tuesday, July 3, 2007
Sen. John McCain's presidential campaign announced yesterday a wave of layoffs and a return to the kind of tactics the candidate employed in his first run for the White House, after reporting that the onetime GOP front-runner had failed to turn around his disappointing fundraising efforts.
Campaign manager Terry Nelson said in a conference call that the campaign has only $2 million in the bank after raising $11.2 million in the three-month period ending Saturday and that it will slash staffers' salaries, in addition to the layoffs. Nelson said that to help trim costs, he will no longer accept a salary for his work on the campaign. Sources inside the campaign said at least half the staff is being eliminated, on top of cuts made after the first quarter -- a level of reductions unheard of this early in a race.
McCain, of Arizona, has been battered on his support for the war in Iraq and the controversial immigration legislation that he helped author. His second-quarter fundraising trailed even the disappointing $13 million he took in over the first three months of the year, a total that led to an overhaul of his fundraising operation.
Although former Massachusetts governor Mitt Romney and former New York mayor Rudolph W. Giuliani have yet to release their fundraising totals, both are expected to far outpace McCain. Fundraisers and strategists for former senator Fred Thompson of Tennessee, who is expected to announce a bid for the GOP nomination in the coming weeks, have sought to target McCain's donor base.
Aides to McCain, who departed for a Fourth of July visit to Iraq before the figures were announced, said the campaign will adopt a sharply narrowed strategy to cope with its financial straits, betting heavily that he can weather the storm and break through in early-voting Iowa, New Hampshire or South Carolina -- the underdog approach that McCain adopted in 2000.
Campaign officials said McCain's rivals are sufficiently flawed that it is plausible for him to stage a come-from-behind win not unlike Sen. John Kerry's resurgence in the 2004 Democratic primary. All but written off well into 2003, Kerry mortgaged his Boston home to loan his campaign $6 million and charged back to capture the nomination with victories in Iowa and New Hampshire.
As part of its new tack, the McCain team is considering accepting public funds for the primary campaign, a move that Nelson said would allow it to borrow $6 million to keep going in the near term. Most of the major candidates this year have sworn off public funding for the primary because the money comes with strict spending limits.
"We confronted reality, and we dealt with it in the best way we could," Nelson said.
While the campaign had warned that it had again failed to meet its fundraising targets, the depth of its financial troubles, particularly the enormous percentage of money raised that has already been spent, surprised McCain's friends and rivals alike.
McCain's supporters placed most of the blame for his dismal fundraising on the immigration debate in Congress, which greatly complicated the candidate's efforts to raise money among rank-and-file Republicans who disapproved of his outspoken support for the bill.
Charlie Black, a veteran political consultant and lobbyist who is backing McCain, said the bill's collapse last week was a disappointment for McCain but a morale boost to his campaign staff and a reason to believe that a rebound is possible.
"If I thought immigration was going to be on the Senate floor every day and in the headlines, I'd be pretty pessimistic," he said. "The mood perked up a lot when everybody realized that immigration was going away."
Black called this spring the "worst two months" in McCain's career but said polls showing that he is competitive in New Hampshire, Iowa and South Carolina suggest he can still win the nomination. "Whatever damage has been done hasn't been fatal," he said. "As long as we can afford gas for the bus, then McCain can campaign effectively. He doesn't need a lot of staff out there."
McCain's troubles go beyond immigration. His attempts to build his credibility with conservatives and his staunch support for the war in Iraq have threatened his popularity among moderate Republicans and independents. Meanwhile, many conservatives remain wary, noting McCain's role in passing campaign finance reform and his initial opposition to Bush's tax cuts.
Worsening the financial picture, the campaign acknowledged yesterday, was its assumption that it would bring in far more money -- at least $100 million this year -- and could therefore afford a bigger staff than its rivals. At its peak, the campaign employed about 150 people. In the first quarter, it spent $1.6 million on payroll, more than Romney and Giuliani.
After the sluggish first quarter, campaign leaders hoped to reach $20 million in the second. A new official, former Texas congressman Tom Loeffler, was put in charge of the finance operation, top fundraisers were given clear goals, and a system of accountability was installed to make sure the campaign stayed on pace.
But two factors prevented that. The immigration debate flared up, and the finance team went through another restructuring partway through the second quarter. "We realized a few weeks into the quarter that we needed to make a change," said a senior campaign official. "While necessary, the changes did slow the fundraising down for a period of a few weeks."
Nelson said the campaign qualifies for $6 million in public funds, which match up to $250 of each donor's contribution. Matching funds are not given out until January, but a campaign can borrow against its payout before that. The downside is that a candidate must agree to spend no more than $55 million before the party conventions in summer 2008.
By accepting public money, McCain would also face strict limits on how much he could spend in early primary states such as Iowa and New Hampshire -- further complicating a strategy that is focused on winning those states, where the other major candidates are expected to spend as much as $15 million each.
Staff writers Dana Milbank and Michael D. Shear contributed to this report.
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