Obama's Balance Sheet

Barack Obama's decision to forgo public funds will bring joy to opponents of campaign finance reform. But to say that Obama has killed public financing is to miss the point.

The current system began to unravel eight years ago. George W. Bush became the first candidate since the post-Watergate reforms of the mid-1970s to decline public money in the primaries, thus avoiding the limits it imposed.

Bush's decision was the single most important reason he defeated John McCain for the 2000 nomination because Bush was able to spend without limit to win South Carolina after his loss in the New Hampshire primary. John Kerry walked away from the public financing system for the primaries in 2004. Note that Kerry, too, won the nomination.

Obama has heeded those lessons. Bush and Kerry paid no political price for opting out of the public money system in the primaries. And Kerry's political operatives argue that they would have been able to respond more effectively to the outrageous attacks on their candidate's Vietnam service record if they had not been hampered by their acceptance of public funds and spending limits for the general election.

This might be seen as a handy rationalization for the Kerry campaign's failure to take the attacks seriously early enough. Still, the Obama campaign wants to avoid falling into the same trap.

Two things are true about Obama's decision to be the first presidential candidate since Watergate to reject public financing for the general election. It is, whatever Obama may say, an opportunistic move. But in political terms -- this is hard for reformers to take -- Obama almost certainly made the right call.

Obama's decision is based on the assumption that he can raise remarkable sums of money, online and elsewhere; his desire to compete in states outside Democratic comfort zones; and his belief that as potentially the first African American president, he will need more resources than public financing allows to combat especially scurrilous attacks.

Obama's choice has been criticized by reformers such as Sen. Russ Feingold (D-Wis.), and even by normally sympathetic editorialists, because his new position contradicts his old one, which was that he would accept public funds, because it raises questions about his credibility and because it strikes a blow to a public financing system he said he respected.

And, contrary to Obama's claims, the fact that he has revolutionized and democratized fundraising has not eliminated the dangers of big money in politics. As of May 31, Obama had raised 33 percent of his money from contributions of $1,000 or more, according to a report by the Campaign Finance Institute released today. (McCain raised 62 percent of his money that way.) In the coming months, Obama will be raising big money as well as small money.

Obama can afford to shrug off the criticism. This is that rare election in which Democrats are positioned to raise more private money than Republicans raise, and given the collapse of the Republican Party's standing, 2008 represents a once-in-a-generation opportunity for Democrats to compete in places where they haven't set foot in years.

In any event, Obama did not kill the presidential financing system; the failure to reform it did. For what it's worth, I wrote in 2006: "It's only a matter of time before antiquated limits force presidential candidates to forget about public funds altogether."

But Obama's move could indeed be destructive unless we draw the right lessons from what he's done.

We don't know yet whether the online revolution in fundraising will have the same impact in the future that it has had this year. We do know that special-interest money will not go away. We also know that until Congress allowed the system to fall out of date, public financing worked. Conservatives who doubt this should consult veterans of Ronald Reagan's campaigns.

What's needed is a new system, one that responds to new circumstances. Specifically, tax credits and vouchers should be used to support the democratization of fundraising by providing strong incentives for candidates -- for both Congress and president -- to raise funds in lots of, say, $200 or less.

Outdated spending limits should be repealed or revised, and legal loopholes for supposedly independent groups and parties should be closed. We should rid ourselves of an irrational regulatory patchwork that distorts campaigns and encourages candidates to prevaricate about "coordinated" vs. "uncoordinated" political activities.

Is Obama's move self-interested? Of course. The question is whether it will mark the end of campaign finance reform or instead remind us that even good reforms need to be reformed, or else they wither and die.

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