From the October 2007 issue of Wealth Manager Web • Subscribe!

Campaign Cash

We will certainly see all sorts of spending records set this season," explains Massie Ritsch of, a watchdog group based in Washington with a mission to provide transparency--the full disclosure of who gives money to which politicians. And this is big business: All those A-list campaign consultants, lawn signs, get-out-the-vote drives, Web sites and (above all) 30-second television ads exist only because of the endless boiler room phone operations, email blasts, direct-mail drops, cocktail parties and banquets through which courses the lifeblood of the modern-day political campaign.

After second-quarter filings, the presidential candidates have tallied up more than $265 million. As of the June 30 filing deadline, Sen. Hillary Clinton is in pole position on the Democratic side with just over $63 million raised. But while Sen. Barak Obama trails with $59 million raised, they are both far ahead of the two front-runners vying for the Republican nomination. Former Massachusetts Gov. Mitt Romney leads with $ 44 million raised, and former New York Mayor Rudolph Giuliani has raised $37 million.

Contrary to popular impressions, the loot is raised at the most retail level--almost all of it from small donations. "What's interesting is that 99 percent of donations to presidential campaigns comes from individuals," explains Ritsch. "Of those, only 0.5 percent give more than $200." To way oversimplify, the current campaign finance law--known as McCain-Feingold--limits individual contributions to $2,300 per election. So, the real limit after a primary and general election is $4,600. (Details are available at

The bulk of the money raised comes through "bundlers" who, in essence, trade their connections and in some cases, leverage, to people willing to write checks for amounts up to the federal limit in exchange for perks and titles. These are the fat cats we hear about. If the boss invites you and your spouse to a $1,000 a table benefit, is that "optional"? And for the most part, this type of subtle encouragement is not illegal, although the Federal Election Commission prohibits corporate executives and labor leaders from "facilitating" contributions from their subordinates or reimbursing them for "donations."

Meanwhile, it seems that money isn't just money--it's an opinion. The U.S. Supreme Court, in its 1976 decision in Buckley v. Valeo, essentially concluded that free expression can be counted in dollars. Money spent to influence elections, the court concluded, is a form of constitutionally protected free speech. "The current system as we know it shuts out many people, many viewpoints, and dictates not only who gives money, but ultimately who gets to run," explains David Donnelly, National Campaigns Director for Public Campaign, a "527" group that argues in favor of public financing. "The public's choices become narrow."

John Samples, Cato Institute scholar and author of The Fallacy of Campaign Finance Reform, chuckles when asked why government should not regulate campaign financing: "First, public support has dropped since 1974 on this idea, as seen by how many check off that box on their tax forms...That idea starts with the notion of a benevolent state. Are we supposed to believe that politicians are greedy human beings, full of self-interest up until the point they write laws restricting their huge advantage in staying in office?"

The most important thing, as Samples makes clear, is always to watch who's scratching whose back. Mostly, politicians scratch their own. He suggests that while some look at the large number of donors as a positive trend, it creates a need for oppressive fundraising demands. "It's not Lincoln versus Douglass anymore, where we can stand out on the corner and debate. If the First Amendment means anything, it is the right to engage in political activity. And to do so costs money," Sample says.

In its recent term, the Supreme Court loosened rules on political advertising, eliminating a restriction on who can fund so-called issue ads about candidates in the 30 days before primaries and the 60 days before general elections. As part of McCain-Feingold, corporations, nonprofits funded by corporate money, and labor unions were "blacked out" unless they set up political action committees, which have strict contribution limits and must disclose their backers. Now, those entities can, within certain limits, tap their treasuries at will to run ads about presidential contenders.

Says Arn Pearson, campaign reform director for Common Cause, a good-government group that favored retaining the restrictions, "The floodgates are pretty much open."

Robert Margolis is a New York-based writer and history teacher. .

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