The $200 Campaign Finance Fix

By Fred Wertheimer
Thursday, November 13, 2008

The presidential public financing system, created in 1974 in the wake of the Watergate scandal, has served the country well for most of its existence. The system became outdated and outmoded, however, as Congress failed for more than three decades to modernize it. Today it is no longer viable.

Luckily, the pathway to the future, and to a revitalized public financing system, has been provided by President-elect Barack Obama. First, there is Obama's astonishing breakthrough in raising small contributions on the Internet. He has also recognized the need for a new presidential public financing system, stating in June that he was "firmly committed to reforming the system as president." His campaign reiterated this commitment on Oct. 31.

A recent USA Today-Gallup Poll found "wide support for public financing of presidential campaigns," noting that more than 70 percent of respondents supported public financing for presidential elections and that only one in five said the system should be eliminated.

While the number of people using the tax-form check-off to fund the public financing system has shrunk over the years, the check-off results are not a poll. They do not indicate whether citizens believe the country needs the presidential public financing system. The answer to that question lies in real polls such as the one cited above.

During his campaign, Obama raised more than $300 million in contributions of $200 or less through mid-October, according to the Campaign Finance Institute, with most of those donations coming in online. (This total includes multiple small contributions made by a donor that aggregated to more than $200.)

His remarkable success, however, was the exception in the presidential race; for other major candidates, bundlers and the larger contributions they raised were the rule.

Obama himself raised more than $200 million in contributions of $1,000 and more, with bundlers playing the principal role in soliciting these funds. Nevertheless, Obama's breakthrough in small-donor Internet fundraising provides the path to a future in which small donors become the main source of private contributions for presidential candidates.

Internet fundraising promotes democracy. It allows candidates to raise large amounts of small, broad-based contributions -- not those that are tied to influence-seeking -- at almost no expense and with little or no time required from the candidates. It increases citizen involvement in the political process.

We should build on this opening by implementing four measures to create a new public financing system that presidential candidates would again see as advantageous.

· Move the small donor to center stage for all candidates. Presidential primary candidates should receive a match of $4 in public funds for each dollar raised, up to a maximum of $200 per donor, with no matching funds provided for contributions from a single donor that aggregate to more than $200. This would create powerful incentives for donors to give and candidates to raise small donations online. A $200 contribution, matched 4 to 1, would become just as valuable as a $1,000 contribution, and the importance of bundlers would significantly diminish.

· Provide realistic spending limits. Presidential candidates stopped using the public financing system when the spending limits failed to reflect the costs of a modern campaign. Realistic spending limits remain important, however, to prevent arms-race fundraising and to constrain the role of bundlers and influence-money in presidential elections.

The spending limits in the current system should be increased for the primary and general elections from current levels -- $50 million and $84 million, respectively -- to $250 million per election. This should be accompanied by an exemption from the spending limits for aggregate contributions of $200 or less per donor to further increase the importance of small donors and to provide candidates with greater flexibility to meet the costs of their campaigns.

· Reduce the individual contribution limit. A presidential candidate who participates in the primary system should have to abide by a lower contribution limit than the existing maximum, $2,300 per individual, to take effect once the candidate has raised a threshold amount of seed money to get started. Under this approach, the relative importance of $200 contributions would be further increased, and the importance of bundlers further reduced.

· Close the loophole for joint fundraising committees. This year, both major-party presidential nominees used candidate and party joint fundraising committees to skirt the limits on contributions to candidates. John McCain solicited contributions of as much as $70,000 per individual and Obama of as much as $30,800 per individual for these committees; they raised $177 million and $172 million, respectively, according to Public Citizen.

To donors, limited by law to giving $2,300 per candidate per election, contributions to joint committees are equivalent to making the much larger contribution directly to candidates. To end this circumvention, candidates should be prohibited from setting up joint candidate-party fundraising committees.

Public financing is an optional system, and one we need to improve. Presidential candidates ought to have the choice of running competitive campaigns based on small contributions and public funds rather than having to rely on bundlers, special interests and larger contributions.

The writer is president of Democracy 21, a nonpartisan public policy organization. This column is the second in an occasional series on policy issues facing the Obama administration.

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