I cross posted my “McCain Proving Himself a Canny Campaigner” article over at RedState and former FEC Commissioner and a great friend of bloggers Brad Smith was kind enough to respond to my argument that Obama would be crazy to forgo privately financing his campaign in the general election.

Smith alerted bloggers back in 2005 to some of the more onerous requirements of McCain-Feingold while sounding the alarm over how the FEC might interpret the law. So I was pleased to receive such expert instruction on the ins and outs of campaign finance from someone intimately familiar with the process.

First, Brad left this comment:

The Tax Subsidy May be worth it by Brad Smith

The tax subsidy for the general election, if the candidates take it, is about $85 million. It is a MUCH better deal for the general election than for the primary. That’s why even Bush took the general election subsidy.

Think about it – $85 million, to spend between the end of the GOP convention on September 4 and the election on November 4. That’s a healthy $1.42 million per day. By comparison, through the end of 2007, Obama had been campaigning for over a year and spent about $85 million.

Additionally, because the subsidy comes with no strings attached, there are no fundraising costs. Typically, fundraising costs can eat up about 20% or more of the funds raised. In other words, to get $85 million to spend, you would have to raise more like $100 million. Obama’s total amount raised in all of 2007 was just over $100 million. At this point, he is raising about $1 million a day, but is probably spending about that much, too. Let’s suppose he wraps up the nomination after March 4 (a dubious proposition), he will still need to spend probably $300K a day through the summer. If the Democratic battle extends all the way to the convention, or even June, Obama will likely have to devote all his fundraising to the primary.

Now, you can start raising the general election money now, true, but Obama is still battling Hillary for the nomination, and he’ll need to raise other money to stay on the airwaves between the time he might wrap up the nomination and the Democratic Convention ending on August 28.

And it gets tougher. Even subsidized candidates can raise money for a “GELAC” account, “General Election Legal and Accounting.” This is privately raised but will typically total about $20 million. McCain can certainly raise that for the general. So McCain would have to match that $20-30 million McCain raises for his GELAC, plus the $100 million for campaign expenditures, just to match a subsidized McCain in the General Election.

In short, it is not at all clear that Obama can raise enough to battle for the Dem nomination AND fund his GELAC account AND raise still more for the general in an amount in excess of $100 million, which would be about what he would need to have parity in the general election with a subsidized McCain.

In the end, I don’t think this will matter a whole lot.

Brad Smith
Professor of Law
Capital University Law School

My response:

Thanks for your input, Brad by Rick Moran

But if Obama can raise $30 million a month – mostly from an online donor base – I would think that he would be stupid to limit himself to the $85 million in federal funds that would be available to him after July 1 when he might have $100 million by that date if he chooses to go the private route.

This is assuming he wraps up the nomination in April.

He would then have an additional two months of fund raising before the convention. Is there any reason he couldn’t raise $150 million?

I see your point about overhead but we’re talking money raised in amounts undreamed before. The temptation may just be too great.

But Brad pointed out one salient point I had not considered; monies for the general election couldn’t be spent until after the conventions:

He’s raising a million a day for the primary by Brad Smith

The federal funds for the general are not available to him until the end of the Democratic Convention on August 28. Until then, he has to raise money privately. Assuming, as I calculated, he really needs about $120 million from the end of August to election day to be competitive with a subsidized McCain, he has to raise about $2 million a day, minus anything he can save up for the general election before then.

Meanwhile, before the end of August he must raise money to fund his primary battles and his expenses of staying visible etc. through the convention? Plus he’ll have the hassle of raising funds, taking up time that could go to other events. You’re talking about him probably raising another $200 million total, maybe more, between now and November. I’m not saying he can’t, but I’m not sure he can, either. That’s nearly double what he raised in his first year of campaigning.

Even Bush and Kerry took the subsidy for the general. There’s a first time for everything, but I’m not sure that Obama’s fundraising capacity is really that great.

Another way to look at it is this: Barack has to keep spending now to fight Hillary. So he’s got to be spending more than McCain. Beyond that, between now and the general election, can he outraise McCain by $100 million? He’s not close to that big an advantage for the last year – why can he do it over the next 8 and a half months?

Brad Smith
Professor of Law
Capital University Law School

Brad Smith makes a very compelling case for Obama taking federal funds rather than trying to raise money for the general election outside of those limits.

By the way, Brad is also the Chairman and Co-Founder of The Center for Competitive Politics, a non profit group:

CCP’s mission, through legal briefs, studies, historical and constitutional analyses, and media communication is to educate the public on the actual effects of money in politics, and the results of a more free and competitive electoral process.

I expect most of us who blog will be bookmarking this site for its potential as a vital reference for information on campaign finance.