OBAMA’S MONEY GAMBLE

This past week, Democratic presidential nominee Barack Obama made official what many political observers had been predicting for months. Despite earlier claims that he would participate in the federal funding system, Obama became the first candidate since the presidential public financing law was enacted in 1976 to decline the federal dollars for the general election (Republican Steve Forbes was the first candidate to opt out of a nomination campaign, and did so in 1996 – now, virtually every major presidential candidate of both parties privately fund their primary campaign efforts).

It’s simple to understand why Obama is taking this action. He believes that his campaign will raise substantially more money than the $84 million in taxpayer financing that would be presented to him upon becoming the official nominee. Exceeding the amount looks like a pretty good bet, since the Illinois Senator has already raised $295 million for the campaign – an all-time record. The Obama for President May balance sheet might have given a few of his strategists some reason to hesitate, however. Last month’s receipts topped $22 million, which proved to be his slowest fundraising month of the year, and was exactly the amount presumptive GOP nominee John McCain secured. Keep in mind, Hillary Clinton was still in the race at this point and both Democrats were working toward the final three nomination events in Puerto Rico, Montana and South Dakota. Obama reported having $43 million in the bank at the end of last month, but only $10 million of that total can be used in the general election. McCain has $31.6 million cash on hand, but will be limited to spending the $84 million in the general election after he becomes the official Republican nominee on September 4^th.

Even without the government money, Obama will almost assuredly have substantially more than $84 million to spend in September and October. Aside from his own campaign, which some estimate could raise an additional $350 million, the outside 527 organizations and the Democratic Party structure will be on hand to help.

The 527s have been a huge asset for Democratic candidates since the passage of the McCain-Feingold law. Despite heavy news coverage about the Swift Boat Veterans for Truth organization, which launched a riveting $24 million attack on

John Kerry’s campaign in 2004, groups supporting the Democratic candidate that year out-raised Republican-leaning organizations by a ratio of greater than 4:1. In the 2008 election cycle -- just among the ten largest 527 organizations -- Democratic-leaning operations have raised $55 million to $25 million for the GOP-leaning groups.

The total Democratic Party structure currently has $89.7 million in the bank, compared to $81.7 million for the Republicans, though the Republican National Committee, which will largely concentrate on the presidential race, has a cash-on-hand advantage of $53 million to just $4 million for the Democratic National Committee.

The Weekly Standard Magazine’s Bill Kristol recently commented that despite the Obama forces clearly being in position to outspend the McCain apparatus, it will be of less consequence because everyone knows both candidates and there is so much free news media coverage devoted to the campaign. While both of these observations are true, the Obama dollar advantage will be of significance. Expect to see a great deal of the excess campaign and 527 money going into voter registration and turnout programs in close states, and others like North Carolina, South Carolina, and Mississippi where a super-charged African American turnout in addition to energized first-time voters conceivably gives Obama an outside shot at victory. Using his financial advantage in states like these will force McCain to counter with his more limited dollars -- just to protect places that he should easily carry.

The other factor that makes Obama’s money gamble less of one is that McCain is not likely to benefit much from the 527 organizations. Long an opponent of such groups, and personally attacking people who fund them, even when they are on his side, gives potential organizers and donors no incentive to help. Therefore, an early result of the new modern campaign law could indirectly lead to its main proponent receiving its greatest sanction.