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White House Auction

By Rodney A. Smith

Tuesday, July 21, 1998; Page A19

While the exact impact of money in the presidential nominating process cannot be measured, the historical facts leave no doubt that cash is king. Since passage of the Federal Election Campaign Act in 1976, the candidate raising the most money has always received his party's nomination.

Theoretically, presidential primaries are national debates about important public policy issues. In practice, the nominating process has degenerated into an auction open only to insider candidates with the financial muscle to bid. And of course, under the current rules, independently wealthy candidates can spend as much as they want, as long as they use their own money.

Candidates without personal wealth are not so fortunate. If they want to run for president they must navigate an all but impassable financial course that only the most fortunate and adroit can survive. As a consequence, many well-qualified presidential contenders never even try.

Our Constitution does not establish money as a prerequisite for running for president. Personal wealth should neither qualify nor disqualify a person from running for president. Unfortunately, the anomalies of federal election law have elevated both personal wealth and mass marketing fund-raising prowess to the most important credentials in the presidential nominating process.

Here are some of the financial barriers facing presidential contenders trying to play by the rules:

Managing scarce financial resources: In the year 2000, the overall spending limit in the 50 states and four territories will be approximately $110 million. The limit for the primaries will be roughly $34 million plus 20 percent to cover fund-raising costs. Historically, these spending limits have encouraged a front-loaded "blitzkrieg," gain-the-lead spending strategy. Rule changes made at the 1996 Republican National Convention now give up to a 10 percent delegate premium to states selecting delegates on or after May 15 -- which supposedly encourages a longer, stay-the-course spending strategy. In reality, this change creates two conflicting spending objectives in a situation where managing scarce financial resources is already impossibly complex.

Inflation and Contribution Limits: Since the enactment of the Federal Election Campaign Act in 1976, inflation has driven up the aggregate spending limits some 350 percent, while the $1,000 contribution limit has remained unchanged. In other words, a $1,000 contribution in 1976 is worth only about $285 in 2000. This decrease in the value of the dollar has not been offset by an increase in the number of major donors. Thus, presidential campaigns are now forced to place greater reliance on larger numbers of smaller donations, which are much more expensive to acquire and also require considerably more technical fund-raising expertise to successfully recruit en masse.

The Number of $1,000 donors: Since 1976 there have been 38 financially significant presidential campaigns. Only four of these campaigns have recruited more than 10,000 donors who gave $1,000 each (Bush '88 and '92, Clinton '96, and Dole '96). The question in 2000 is: How will presidential campaigns raise the additional $30 million-plus needed to compete? And at what cost?

Availability of Matching Funds: In 1976, 28 percent of Americans filing tax returns checked off the Presidential Matching Funds designation. By 1995 the number had dropped to 13 percent. The FEC openly admits in an internal memo dated Oct. 31, 1997, that "it is already apparent that the balance in the fund will be insufficient to provide timely matching payments to primary candidates." Thus, every presidential candidate accepting matching funds will have to make extensive use of bridge loans (loans using certified matching funds as collateral) from banks that are unfamiliar with the treacherous financial anomalies of presidential politics.

Maximizing the Amount of Matching Funds Received: Since 1976, 86 presidential candidates have qualified for federal matching funds. Yet only one candidate, Ronald Reagan in 1984, has ever received the maximum amount of matching funds permitted by law. The maximum a presidential candidate can receive in 2000 will be about $17 million. Assuming an average contribution of $150, a presidential candidate would have to submit and gain FEC approval of 113,000 qualified contributions to receive the maximum amount. Building small-donor files of these magnitudes, from a standing start in just a year's time, is an expensive, Herculean accomplishment, out of reach for almost all prospective presidential contenders.

Maximizing the Rate of Matching Funds Received: Since 1980, the best matching funds rates registered by major presidential campaigns are: '92 Buchanan, 73 percent; '88 Kemp, 57 percent; '84 Reagan, 61 percent; and '80 Howard Baker, 62 percent. Generally, the greater the mix of large contributions relative to small contributions, the lower the percentage of matching funds. But the ultimate matchability of any contribution is heavily dependent on the skill and accuracy of the accounting systems and procedures utilized by a campaign. The subjective judgment of FEC auditors also directly affects the amount of matching funds received. Thus, the matching funds operation utilized by a presidential campaign is an important source of funding as well as a complicated accounting function.

Combining the six factors listed above into a single presidential campaign creates a complex cash flow nightmare of monumental proportions. In truth, every presidential campaign has a constant, escalating need for funds. But the sources of funds available to a presidential campaign are finite, erratic and expensive.

The presidency is simply too important an office to allow its general election contestants to be only the very rich and/or a few fortunate insiders who know how to maneuver through a complicated maze of funding restrictions. Instead of relying on restrictions, limits and penalties, Congress needs to focus on legislation that encourages mass participation, requires full and meaningful disclosure and creates an environment in which the well-informed voter is the rule, not the exception.

To curtail the power and influence of large donors and special interest groups, dilution is the solution -- not limits. We encourage people to register. We encourage people to vote. We must also encourage people to contribute. Tax incentives are an obvious mechanism for accomplishing this.

There have been many legitimate concerns expressed about the negative and potentially corrupting aspects of smoke-filled rooms and "unrestricted" large contributions in our political process. But allowing our presidential nominating process to degenerate into an auction is worse than the supposedly sordid system it replaced.

The writer has been a fund-raiser for a number of Republican political campaigns.

© Copyright 1998 The Washington Post Company

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