Campaign Finance Gets New Scrutiny

Barack Obama's unconventional fundraising success, many experts say, could transform the campaign finance system, though it also raises new questions. (By Nikki Kahn -- The Washington Post)
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Obama's success with these kitchen-table contributors has set up one of the most lopsided financial advantages in modern presidential campaigning. During the first two weeks of October, Obama spent four times more than McCain, including for an unprecedented $82 million saturation-advertising campaign that blanketed the airwaves in key battleground states.

Campaign finance experts have already classified this contest as one of the transformational elections that will dramatically change the way politicians pay for campaigns in coming cycles.

"It's the model of the future," said Rick Hasen, an election law specialist at Loyola Law School. "Gone will be the $2,300-a-plate dinner. That will be replaced by the $30,000-a-plate dinner, the kind of select event Obama had hosted by folks like Warren Buffett. And the rest will be the micro-donors -- entirely Internet-based."

Hasen said the 2008 campaign is a mirror of other races that led to major shifts in fundraising. The Watergate scandal of 1972 led Congress to create a public financing system for presidential bids. Ronald Reagan harnessed the power of direct-mail solicitation in 1980. In 1996, political parties opened the door to runaway donations in the form of unregulated "soft money."

One immediate result of Obama's fundraising showing this fall is that it may render obsolete the current system of public financing for presidential campaigns. Because McCain opted into the system, he was limited to spending the $84.1 million provided to his campaign by the Treasury once he claimed the GOP nomination. Obama, who chose to remain outside the system after initially suggesting that he would participate in it, is expected to raise and spend at least three times that amount in the general election campaign.

Obama's advantage, said FEC Chairman Donald F. McGahn II, makes it likely that Congress will rethink whether the program still makes sense.

To many, Obama's fundraising success is good news -- it shows that a White House bid can be financed largely without donors who have ulterior motives or agendas, and diminishes the role of the special interests and large institutional givers that were once the backbone of presidential fundraising.

"When you have that many contributors," McGahn said, "it does in a weird way cleanse the system."

Bradley A. Smith, a former FEC chairman, in an essay in today's Outlook section of The Post, agreed that Obama's effort would "put to rest all the shibboleths about campaign finance reform -- that it is needed to prevent corruption, that it equalizes the playing field, or that tax subsidies are needed to prevent corruption."

There are already signs that runaway fundraising efforts built on small donors have the potential to create an entirely new set of problems.

Scott Thomas, another former FEC chairman, said the potential for these types of security breaches has been looming for more than a decade, since the commission first allowed donors to use a credit card when making a contribution.

"The problem itself has been lurking," Thomas said. "What's changed is the sheer volume of donations. At some point that causes enough of a clog that campaigns cannot do all of the vetting and research that would be necessary to figure out if they're looking at a real name."

How the FEC might attempt to tackle these problems is unclear. Both parties have filed formal complaints calling on the agency to investigate their rival. Only McCain will automatically be subjected to an audit, because his campaign accepted funds from the Treasury. There is no requirement that Obama's books be audited, and FEC-watchers predicted that it could be tough to find the four votes needed to approve an audit, given that the panel comprises three Republican and three Democratic appointees.

Under current law, there is also very little policing of small-dollar contributions. The false donations uncovered by news outlets or by rival campaigns have all involved more than $200, because those contributions must be disclosed in published reports. The campaigns are not required to share any information about donors who give less than $200. And they are not required to even keep records of donors who give less than $50 -- they can even give cash.

"Maybe the answer is to revisit [those disclosure thresholds], given that the levels were put in in the '70s, long before the Internet," McGahn said. "This may bring it to the fore."