Posted by Brad @ 8:14 pm on February 18th 2008

Going Down the Public Finance Road; Selling Your Soul for Campaign Cash

John McCain has been on the attack lately against Barack Obama on the subject of Obama dancing around a psuedo-pledge he made with John to make the general a publicly financed election should he be the nominee. Obama’s actual statement was more artful and less iron-clad than McCain is making it out to be, but he’s got a small point, and so he should (and is) pressing it to a very minor political advantage. Obama, of course, will weather it, and then head into the general election where he is very likely to outraise McCain by as much as 4 to 1 and subsequently will spend a great many millions of unanswered dollars that will, I’m sure, buy him a lot more goodwill than this piddling story will earn him ill.

But as Hilzoy (guest blogging for Sully) notes, going down the road of public financing pledges leads to some pretty interesting finds. We all know that John McCain spent most of the summer really, really on the ropes, and financially, his campaign up until not really much more than a month ago was something akin to a dying fish on a beach gasping futilely for air. We also know he had to make a lot of strange bargains, bizarre loan agreements, and all kinds of other byzantine guarantees to bankers to be able to continue his campaign (including the strong possibility that, at least in letter, he already has inadvertently opted into public financing). Mark Schmitt at the American Prospect, in response to McCain’s pushing the public finance cart, uncovers some pretty brazen and almost luridly insane agreements that John “Campaign Finance Reform” McCain had to agree to to fund his now successful quest for the nomination. Including this one:

“Additional Requirement. Borrower and lender agree that if Borrower [McCain’s campaign commitee] withdraws from the public matching funds program, but John McCain then does not win the next primary or caucus in which he is active (which can be any primary or caucus held the same day) or does not place at least within 10 percentage points of the winner of that primary or caucus, Borrower will cause John McCain to remain an active political candidate and Borrower will, within thirty (3) days of said primary or caucus (i) reapply for public matching funds, (ii) grant to Lender, as additional collateral for the Loan, a first priority perfected security interest in and to all Borrower’s right, title and interest in and to the public matching funds program, and (iii) execute and deliver to Lender such documents, instruments and agreements as Lender may require with respect to the foregoing.”

What that means is he received private money in exchange for a promise that he would accept public money, and if he opted out of public financing and loses the next primary state, he would have to, literally, pretend to keep running just so he could opt into public financing and use that money to pay back the bank.

Got that?

He leveraged the public finance system—that which is intended to take private money out of politics and clean up the game—to receive private money, on the stated agreement that should he fail, he would agree to lie to the American public for just long enough so that he could fleece the public money system (i.e. taxpayer dollars) to pay off his (private) debts.

I am not making that up.

Were you to do something like that in the business world, of course, it would legally be called “fraud”, a very serious felony, and you would be locked away for many years, fined to hell and back, and essentially be expelled from the business community for being an immoral toad.

You kind of have to read the rest (a similar take here) to get a true sense of how amazing it is that such an arrangement wouldn’t land somebody in jail. In any case, one wonders whether this is a Pandora’s Box that McCain ought to have opened. Just from a first-glance at this and other stories regarding what McCain had to do to stay in the race, it’s starting to look like he sold his campaign finance soul.

13 Comments »

  1. This is particularly galling for me, originally a supporter of McCain on campaign finance, because, as you know, I spent much of this election at the helm of a political 527, and thus had to deal with McCain-Feingold on a nearly daily basis. I came to the conclusion that the only way to successfully navigate the system was to be incredibly wealthy and well connected. I and my crew, regular stiffs trying to have a voice in the electoral process, had to jump through so many goddamn hoops and spend such a disproportionately large amount of time pulling our hair out and clearing everything with legal counsel who, generally speaking, don’t understand the system either and tend to just fly by the seat of their pants (it doesn’t exude confidence when all the lawyers you consult have to “guess” as to whether what you’re doing is perfectly legal or a felony that will result in a crippling fine that would likely bankrupt you). The system is almost DESIGNED to shove guys like me out and guys like George Soros in.

    But I did my due diligence to try my damnedest to honor the spirit and letter of the law, while John McCain, originator of said spirit and letter, is taking out loans and signing contracts saying if he can’t pay it back with private, corporate campaign contributions, he’ll just fleece the public financing system for it.

    Ugh.

    Comment by Brad — 2/18/2008 @ 8:41 pm

  2. There was something about a related subject on MSNBC or one of the other news channels a few days ago, where it was pointed out that candidates that lend their campaign money will potentially continue raising funds to pay themselves back.

    My understanding is that the campaign finance reform that McCain and Feingold successfully pushed was a limitation on funds that can be given to parties, a limit on non-affiliated organisations naming candidates and an increase in the limit on the amount that could be given to candidates (and index-linking that amount). However, I don’t see what the problem with this is; loans are given based on collaterol and the public matching funds are from freely-given donations from the public (so it’s not exactly ‘fleecing’). So, I agree that it’s not very pleasant and it should certainly be (as it is) out in the open, but the worst that happens is that the public stop ticking the $3 checkbox (although that’s not entirely a voluntary contribution, as it’s subsidised by people that don’t check it off in the sense that it’s the only tax item I know of where the taxpayer gets to decide on what the money is spent)? That should probably please the opponents of the matching funds.

    Comment by Adam — 2/18/2008 @ 9:50 pm

  3. I don’t fully understand the concept of the $3 checkbox (I’ve never checked it myself). Is it the case where everyone who checks the box raises the deficit by $3? Either that or they raise everyone’s taxes by (on avg.) 3/120,000,000 (or however many taxpayers there are)? So, everyone who checks the box is contributing $.0000000x or so of their own funds?

    Comment by Redland Jack — 2/18/2008 @ 10:00 pm

  4. The checkbox just deprives the government of $3 of revenue, because it doesn’t change your taxbill. Thus, they probably raise taxes slightly (or run a bigger deficit) to make up for it. Of course, in a balanced budgets world, the latter wouldn’t happen, but that would probably be a World Without Congress or President.

    Comment by Adam — 2/18/2008 @ 10:44 pm

  5. Brad, you’re right that campaign finance reform should never have been passed.

    You are, however, letting Obama off the hook way, way too easily with regard to what you call his “pseudo-pledge”. It was doublespeak, intended to create an impression in the minds of the voters, which he’s now walking away from due to the expediencies of the moment.

    He has been, in short, very Clintonian about the matter.

    Comment by Rojas — 2/19/2008 @ 1:54 am

  6. Well yes, it was absolutely doublespeak, and he’ll get exactly the flak one would expect for it. Which is to say a minor attacking point that his opponents successfully (and deservedly) ride into the ground for a few weeks.

    What do you call it when a candidate stakes his reputation and throws his entire capital behind cleaning up money in politics—which turns out to be a disaster—and then to top it all off when the screws get turned on him, starts staking bets against how much he can get out of public financing to finance his private contributions?

    Comment by Brad — 2/19/2008 @ 4:17 am

  7. The correct (and truthful) Obama answer:

    “John is correct, in that I have changed my mind on this matter. I’ve seen, throughout the course of this campaign and as a result of the massive fundraising successes that I’ve been lucky enough to be a part of—bringing in more small donors to the political process than any other campaign in American history—that people want their voices heard. They want to be a part of the campaign, they want to invest in a new vision of the future, and they ARE being heard, loud and clear. And I’ve decided it’s not my place to get in the way of that.

    I understand, however, why Senator McCain’s experience on this front might lead him to feel differently.”

    Comment by Brad — 2/19/2008 @ 4:23 am

  8. If he really wanted to be a dick he could then offer, in line with the spirit of McCain-Feingold, to not accept donations from corporations, political organizations, or monied interests, and instead, the two candidates could restrict their fundraising to only party money, and only individual contributions of 200 dollars or less.

    Comment by Brad — 2/19/2008 @ 4:30 am

  9. If not for McCain-Feingold, limits to individual donations to candidates (limits which had existed for some time) wouldn’t have been raised or index-linked (or rather, McCain-Feingold was the bill in which the limit was raised and the index-linking applied).

    Of course, there was a bunch of other stuff in McCain-Feingold (which I wouldn’t call a ‘disaster’ so much as a ‘failure’ in that it hasn’t ‘cleaned up politics’ if that was its ostensible aim). Obama has reason to be grateful for the hard-money limit, which has effectively given him a fundraising advantage over Clinton (and everyone else), but I can see why he’s backtracking on his previous pledge.

    Comment by Adam — 2/19/2008 @ 8:15 am

  10. John is correct, in that I have changed my mind on this matter. Iíve seen, throughout the course of this campaign and as a result of the massive fundraising successes that Iíve been lucky enough to be a part ofóbringing in more small donors to the political process than any other campaign in American historyóthat people want their voices heard. They want to be a part of the campaign, they want to invest in a new vision of the future, and they ARE being heard, loud and clear. And Iíve decided itís not my place to get in the way of that.

    Well, then, time somebody asked the rather obvious follow-ups:

    1. If this is about “people wanting their voices heard”, do you believe, then, that money is equivalent to political speech? Do you still support campaign finance reform?

    2. If money is a way of people having their voices heard, then wouldn’t it be unacceptable to restrict donations regardless of their size or origin? Do the wealthy have less of a right to express themselves than the poor?

    3. Why didn’t you care about “people having their voices heard” prior to having so many voices raised on your behalf?

    Sorry, Brad, but I think this is bigger than you do. What we have here is the first clear instance of Obama abandoning personal principle when it becomes politically convenient for him to do so. One has to wonder on what other issues he might make similar “adjustments”.

    The package may represent a change, but the man inside looks like more of the same.

    Comment by Rojas — 2/19/2008 @ 10:30 am

  11. If he really wanted to be a dick he could then offer, in line with the spirit of McCain-Feingold…

    If Barack Obama tries to lecture John McCain about ‘the spirit of McCain-Feingold,’ he’s going to get his head handed to him.

    The best he can hope for is that this issue just goes away after he takes his hits on it. But I think the hits are going to me fairly substantial.

    Comment by Rojas — 2/19/2008 @ 10:34 am

  12. Rojas said: 2. If money is a way of people having their voices heard, then wouldnít it be unacceptable to restrict donations regardless of their size or origin? Do the wealthy have less of a right to express themselves than the poor?

    That might be the case if he were proposing a more stringent limit for wealthy donors than poor donors. He could probably make the argument, though, that limiting wealthy and poor alike to the same cap on contributions is akin to limiting them to a single vote each.

    I find your #3 point more persuasive. As to #1, I’m not sure where I sit on money being a form of protected speech or self-expression.

    Comment by Talarohk — 2/19/2008 @ 11:35 am

  13. He’s comparing it to speech, Talarohk, not to votes.

    Would you be OK with the federal government limiting everybody to one hour of free speech to day in order to ensure that everybody could express themselves equally?

    The point is that these are the logical outgrowths of Obama’s logic. I happen to think his new position is the correct one, but we need to know whether his new standards apply to everybody. And if so, what changed his mind?

    Comment by Rojas — 2/19/2008 @ 1:30 pm

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