Outlook: Obama and the End of Fundraising Limits

Bradley A. Smith
Former Chairman, Federal Election Commission; Chairman, Center for Competitive Politics
Monday, October 27, 2008; 2:00 PM

"The most extraordinary development in this year's election may well be the Obama fundraising juggernaut. First, the Illinois senator raised and spent record amounts in winning the Democratic nomination. Then, unlike Sen. John McCain, he decided not to take a taxpayer subsidy to run his general election campaign. ... That's fine by me. Obama's epic fundraising should 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."

Former FEC chairman and current Center for Competitive Politics chairman Bradley A. Smith was online Monday, Oct. 27 at 2 p.m. ET to discuss his article on what Obama's astounding donation totals mean for the future of money in politics.

The transcript follows.

Archive: Transcripts of discussions with Outlook article authors


Bradley A. Smith: Okay, Brad Smith here.


Redmond, Wash.: Good afternoon. If I gave to the Obama campaign monthly either $50, $75, or $100 at a time since February, am I a small donor, as no donation was greater than $200, or am I a large donor, as the total is somewhere around $1,500? There are many of us who have done this, and I'm just curious as to how we are characterized? I would prefer to be known as just an average American individual without an agenda. Thanks.

Bradley A. Smith: Good question. People tally it different ways, which is why you will see some claims that almost 50 percent of Sen. Obama's contributions are under $200, and other claims that only about 25 percent are under that amount. I think the smaller number, based on number of individuals, not number of donations, makes more sense in measuring his support.


Bel Air, Md.: The huge amount of money raised in this election by Obama spells the death of campaign finance reform. Looks like that several people donated more than the whatever limit it is by using fictitious names and addresses and contributing several under-$200 donations. Names like Mickey Mouse and Will B. Good may be flagged easily, but if they were a step more clever and used innocuous names, they would not be flagged. Contrary to your assessment, this indeed is corrupting the process.

Bradley A. Smith: Well, not really. These contributions are made by credit card. The campaign therefore has a way to track the real donors, and a legal obligation to report the sources accurately or refund the money. I'm comfortable that will happen. You might say the process is working.


Alexandria, Va.: I was surprised to see the over- and under-$200 divide. As a first time political contributor, through the months my four or five small donations probably add up to about $235 for Obama, but I don't feel like a big contributor, but instead a connected, in-it-for-the-long haul participant. And for the first time, I didn't feel like any small contribution I might give to a candidate was not of substantive value, because the big money wasn't driving the election. Am I overly naive here? I would like to think there are a lot of folks like me who got to our total in small amounts over time.

Bradley A. Smith: Well, there is always a question as to what is a "small donor." People use the $200 cut-off because that's the threshold at which the campaign must itemize donor information.


Melbourne, Fla.: How can anyone believe that those millions upon millions of dollars didn't come with strings attached? What price will the people have to pay if BHO is elected and the donors come looking for payback?

Bradley A. Smith: How could more than a million donors get "payback?" I don't think it's much of a secret what Obama wants to do, and lots of people are going to vote for him for those reasons. I think they're wrong and foolish, and I don't think they've thought it through, but I can't dictate their votes or their financial support.


Anniston, Ala.: It is disturbing that Obama has more than $250 million in credit card contributions of $200 or less, where the sources have not been made public. I understand that by law this is not required, but what happens if, after he is elected president, we learn that these contributions came from foreign countries that are our enemies or that support terrorism?

Bradley A. Smith: I presume a tremendous political backlash, massive Republican gains in 2010, and possibly even impeachment before then.


Falls Church, Va.: I've been asking this question for days and have yet to get an answer. Please help. If there are funds left in the Obama campaign coffers on Nov. 5., what happens to them? Thank you.

Bradley A. Smith: Basically, he can give them to the Democratic Party, save them and transfer them to his re-election campaign for president or senate, or give them to charity.


Arlington, Va.: Do we know what percentage of Obama's money has come from small donations, and how much has been from big-money "bundlers" and lobbyists?

Bradley A. Smith: You know, "bundlers" are just people who ask their friends and acquaintances to contribute. The government already knows if you gave to Obama (or McCain), and if I gave to Obama (or McCain). Does it really need to keep a database noting that I gave to Obama because you asked me to? Does it need to track our political conversations? I think far too much is made of bundlers. And if we were to introduce the Patriot II Act, with a goal of keeping foreign money out of politics by having government keep a database of citizen political participation, we'd be chased off the stage. But call it "campaign finance reform," and people are happy to tolerate invasions of privacy.

Anyway, to answer your question, there is no definitive number, but Obama has a bit more than 500 identified "bundlers" -- people raising at least $50,000 -- who have helped him raise somewhere in excess of $63 million, or about 10 percent of his haul, maybe up to 25 percent or so.


Nosh1: Odd, I don't remember any Republicans expressing concern or outrage when George W. Bush decided not to take public financing in 2004, when he was outraising and outspending Kerry by two to one margins. I don't remember any Republicans complaining that Bush was buying that election, so why the outrage now? Oh, that's right ... it's "do as I say, not as I do." Got it.

Bradley A. Smith: Well, Bush did not outspend Kerry by anything close to two to one -- it was about a seven to six ratio -- and Bush did take public financing in the general election, although Kerry nor Bush took tax financing in the primaries. And that's one point of my article -- Republicans weren't complaining then, and Democrats were; now the shoe is on the other foot, and many people in both parties change their tune.


mattrose: The principle difference I see (as an Obama supporter) is the lack of Pioneers and Rangers in the Obama campaign. You try to define a "large" contribution as $200, or $1,000. But when you donate $1,000 you are still wholly unremarkable, and therefore not eligible to buy influence regarding U.S. spending policy.

The Bush and now McCain fundraising model was designed around creating identifiable "Pioneers" and "Rangers" who were responsible for "bundling" $100,000 or $250,000. These individuals were then given direct access to influence policy decisions and reward themselves with government spending and tax breaks. On the other hand, if I donate $2,300 to Obama, I get nothing except the satisfaction of knowing I'm helping to elect someone who doesn't consider my tax dollar "spoils to the victor."

Bradley A. Smith: As noted in an earlier answer, in fact Obama does have his bundlers -- I don't recall if he has created a catchy title for them, such as "Ranger" or "Pioneer" -- but they're responsible for raising at least $63 million for him. That's the thing -- the Obama campaign really isn't different, it's just more successful.


Corolla, N.C.: I'm not sure I agree with your basic premise that Obama's fundraising ability this year points to a new way of political fundraising and that there is no need for limits in political contributions. Are the many contributors of small dollars to Obama always going to come back and participate financially in coming elections? Could it be that the large number of small-dollar contributors only are giving money because of things unique to this election, such as the war(s), President Bush's partisan ways and the unique candidacy of Sen. Obama ?

Bradley A. Smith: Could be. My position would stand -- campaign finance restrictions have not addressed corruption, do not make the system more fair or equal, and in fact they gum up the system, intrude on our rights, and most harm small, grassroots campaigns.


Bozeman, Mont.: I didn't understand what you meant by this answer: "I don't think it's much of a secret what Obama wants to do, and lots of people are going to vote for him for those reasons. I think they're wrong, foolish, I don't think they've thought it through. But I can't dictate their votes or their financial support."

Bradley A. Smith: Obama has been pretty clear on his likely policies, I think they are wrong or won't work, but other people like them and plan to vote for him because of those policies. That's democracy.


SteadyState: What is not examined in this article would be the reasons why someone like Barack Obama would have to raise so much money to combat an incumbent party that relies on personal attacks over substance in the issues. Clearly, given the gap in expenditures in comparison to the polls, it has taken quite a bit of money for the Obama/Biden ticket to advertise their message effectively above the vile McCain/Palin attempts.

Does this high amount of fundraising have potentially negative implications? Absolutely. We do need to avoid "special favors" going to big donors. However, they have to fight the infectious slime the Republican National Committee no doubt has prepared or already has dished out. Given the number of people still questioning Obama's associations, from a sociological perspective, Obama had a mountain to climb to ease people into the idea of a black president with a foreign-sounding name. Had Obama simply accepted the tax-funded campaign budget, could he have won?

Bradley A. Smith: You won't win me over with partisanship. It seems to me that no president has fought such personal vilification as Bush, and that no candidate I can recall, not even Dan Quayle, has ever been so personally vilified. It's all perspective.

The problem comes when you lose your perspective, and think one side is evil and the other is the party of angels. Partisans always think the other side is making unfair arguments. But could Obama have won if he'd taken the tax subsidy in the general election? Sure, I think so. I guess we never will know for sure, though -- and that doesn't bother me.


Arlington, Va.: Just to counter some of the paranoid posts -- I'm one of those small donors that you fear so much. In prior elections the only thing I ever did to support any candidate was to vote for him or her -- I never gave money or volunteered my time. I intended to do the same this year and already had decided to vote for Obama, but back in early September I became so disgusted with the McCain/Palin campaign that I went to Obama's Web site and made a donation.

I since have made two additional donations. All three were responses to something that was said by the McCain/Palin campaign. In all I've given less than $100. I was born in the U.S. and have lived here all my life, and despite various Republican's claims I'm not a communist or anti-American. I'm just a regular person who has every right to vote and to support a candidate with my time and money.

Bradley A. Smith: I wish more people thought like you -- not your support for Obama ;-), but regarding your motives for supporting Obama and your willingness to back up your beliefs.


Reston, Va.: McCain keeps saying that Obama is trying to buy the election. Isn't it more like the citizens are? They're the ones contributing the money.

Bradley A. Smith: Right on!


If there are funds left in the Obama campaign coffers on Nov. 5., what happens to them?: Can he also use them to hire lawyers for the inevitable ballot counting disputes?

Bradley A. Smith: Didn't I answer this? They can go to the party, be used in future campaigns, or be given to charity.


Wilmington, N.C.: "Former FEC chairman." Given your obvious political leanings, I must say I find that very disturbing. Is that a partisan political post? Should it be?

Bradley A. Smith: The FEC has six commissioners, with no more than three from any one political party. Four votes are needed for most action. So one party can't dictate outcomes. I found that the Commission worked pretty well.

But you've really hit the nail on the head -- how can you maintain over time a truly unbiased political police? That's why I generally would deregulate the system, or at least start in that direction. We need separation of campaigns and state, you might say.


Maryland: The other day a friend and I were having a friendly argument. He was saying there should be more rules to limit how much a campaign can spend because $200 million is outrageous. I said "$200 million is rock-bottom cheap for a good presidential administration!" It's just a fifth of a billion dollars -- compare that to the cost of the Iraq war. Just saying.

Bradley A. Smith: You are right. Political spending needs to be kept in perspective. Americans will spend about $12 billion on potato chips this cycle. Coca Cola will spend more on advertising this year than will be spent by all the candidates who have run for president combined. Auto makers will spend more than twice as much this year advertising cars as all political spending for federal office. It cost money to communicate, whether you are talking about cars, cola or politicians.


Alexandria, Va.: The FEC audits all presidential campaigns that accept public money. Does that mean that the Obama campaign never will be audited by the FEC? Although I will vote for Obama, I think it would be good public policy to have all the major presidential campaigns receive such a public audit.

Bradley A. Smith: Because Obama is not taking the tax subsidy, he will not be audited automatically. However, he does have to file reports; the FEC does have analysts who review these reports, and too many errors can trigger a full audit. Also, the FEC can investigate complaints, with full subpoena power -- and complaints have been filed. So there likely will be some scrutiny.


Calvert County, Md.: What happens to the $84 million Obama did not take? Are the rules any different on how the candidates spend money if they take public financing or do not?

Bradley A. Smith: He saved the taxpayers $84 million. It will remain available for 2012.


Washington: Some people seem very concerned by the large number of $200 or less donors. What's the cause for concern? Isn't the goal of campaign finance reform to limit influence through donations? If you get enough small donations, you don't have to go after the "big fish." Doesn't that mean you're beholden to nobody and can speak/act freely?

Bradley A. Smith: I think the concern people have is that the campaign doesn't have to disclose information on all those small donors. In theory, it would possible to, for example, take $50 million from al-Qaeda and then say it was all "small contributions" that are unitemized.

In reality, for many reasons, I see that as pretty far-fetched. Every presidential campaign returns thousands of dollars in donations to people who intentionally, or much, much more often inadvertently, violate the law. Obama has raised more than $600 million -- if he has to return even $2 or $3 million as coming from people not eligible to contribute, or to not allowed to contribute as much as they have, that is not terribly shocking. It's what, about a third of one percent?


Boston: What do you think of contribution limits? I do like that people like Soros and Pickens can't just hand over huge chunks of money, which would mean that a candidate without wealthy donors would have to have hundreds of thousands of donors to just match up; $2,300 is more than I can afford, but me and nine friends can contribute $23 and match the richest person.

Bradley A. Smith: I think contribution limits should be much higher. Contribution limits most harm challengers to incumbents and political newcomers; both groups rely more on large contributions. The limit was first imposed in 1974 at $1,000; today it is $2300, but if it were fully adjusted for inflation, it would be about $4300. I would at least start with that -- let's raise it for inflation. After all, the campaigns of 1976 and 1980 weren't so bad.


Richmond, Va.: I'm an Obama supporter, and I received an e-mail from an acquaintance stating a concern that Obama was being funded heavily by foreign donors. Is this true? Is this even legal?

Bradley A. Smith: Foreign contributions are illegal. The FEC has flagged the Obama campaign for a few million dollars that appear to have come from foreign addresses, but note that much of this may be from U.S. citizens living overseas, which would be legal. Some of it may be data entry errors when the reports were filled out -- for example a person's state abbreviated "ON" (Ontario) rather than "OH" (Ohio). And some may be overly zealous aliens making contributions, which will have to be returned. The campaign could be fined for accepting illegal contributions.


Detroit: When you talk about removing campaign financing restrictions because Obama has raised so much money, doesn't that ignore the fact that he has had so many donors? When you have a limit $2,300, if you want to raise a lot of money you have to seek out a lot of people. As far as I know, Obama has many "big" donors giving the max, but his fundraising base is so much larger than anything ever encountered in American politics.

That funding base may be more about Bush and the state of the country then Obama -- it's hard to know -- but if you remove contribution limits, what's to stop some a few billionaires from donating millions of dollars themselves? Isn't the entire point of contribution limits to try to limit the individual influence of the donors? Sure, you might have bundlers, but the point is to avoid unions, corporations or other huge funding sources buy candidates in chunks.

Bradley A. Smith: Well, a few billionaires is not all bad. Eugene McCarthy's 1968 anti-war campaign was funded by a few multimillionaires. Teddy Roosevelt's campaigns were funded that way; so were Franklin Roosevelt's for that matter -- some multimillionaires plus unions.

Voters can look at the data and make judgments.

The reality is that large contributions are most needed by challengers, especially real challengers to the status quo, such as McCarthy. Precisely because they challenge the status quo, there aren't lots of people with them. They need the true believers to open their wallets.

Think of it this way -- imagine if you wanted to open a business with a neat, brand new idea, but no one bank could contribute more than $2,300. You'd never get enough banks to loan you the money. But it wouldn't matter how many banks turned you down if one bank could make a loan for the full amount. Then your business is up and running, and the market decides.

Why not do that with campaign finance: Make it easier to raise money, to get all voices heard, and let the voters decide?


London: Okay, so I live in London -- temporarily. I'm an American citizen (my direct line backward has been in what is now the U.S. since the 1740s), registered voter, and I'm returning to the U.S. in 2010. But I wasn't able to donate online using a credit card -- when I tried to select the "donate now" button to see if I could, my IP immediately was flagged and I was told I couldn't. So how were people able to work around that? (I know I could have sent a check, but I am asking just about the credit cards online.)

Bradley A. Smith: I don't know. It may be that the campaign has responded to the criticism by limiting overseas addresses, but that's just speculation on my part.


Anonymous: My parents are now divided politically. Both had been Republicans for decades, but my mother has decided that she is a Democrat. I am glad this occurred long after I moved out. After McCain's air quotes moment in the debate ("life of the mother") my mom decided she wanted to give money to the campaign without dad knowing, and asked if I would pass along a donation from her. From everything I could find on Obama's Web site this would not be okay. Not wanting to get her new party in trouble, mom is working the phone banks and not giving cash. Are we right? Would this have been wrong?

Bradley A. Smith: It is illegal to give money in the name of another person.


Bradley A. Smith: Well, thanks, it has been fun. Here are a few links for campaign-finance junkies: has lots of info on candidate fundraising. I don't agree with their policy prescriptions, but as a source of info, it's good.

The Federal Election Commission site is where you can view the raw data in reports and the like.

The Center for Competitive Politics offers a more deregulatory view of campaign finance. I founded the Center in 2005.

The site of election attorney Bob Bauer, general counsel to the Obama campaign, always has an interesting take on election and campaign finance issues.


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