As the presidential primary season ratchets up with critical battleground contests in Ohio and Texas this week, attention turns to perhaps the most important factor in each of the races: money. With 11 straight primary and caucus victories, Democratic candidate Barack Obama has plumped his coffers to a staggering $50 million, as of the most recent financial disclosures last month. His rival, Hillary Clinton, has raised her total to $35 million.
How do they spend all this money? Mary Jacoby, a reporter for the Wall Street Journal, says campaigns find plenty of ways to dispense with cash. They hire armies of people as consultants, handling media relations, making political decisions and organizing direct mail initiatives. Then there's the matter of wardrobe: Obama's natty suits aren't free. And Clinton, Jacoby says, spends bucketloads on her hair.
Plus, everyone has to eat, so vendors across the country have been tapped to cater campaign events. "You don't want to be one of those vendors," Jacoby says, "when the campaign goes out of business."
Jacoby points out that going out of business wasn't a far-fetched problem for several of the top-tier hopefuls. Clinton had to dig into her own finances in January, loaning her campaign $5 million at a critical low point. John McCain, now the leading Republican candidate, famously went broke this summer, requiring a loan of $6 million dollars that was in part guaranteed by a life insurance policy the bank required him to purchase.
McCain has applied for public campaign financing, but it's not clear yet whether he'll accept that money and the restrictions that go with it.
Likewise, Obama has talked about going the public-finance route, but it's not certain he will. Jacoby says the system of public funding is out of date. In part because of online fund-raising, presidential hopefuls are far more nimble and able to seek funds from a larger number of supporters. Even with federal limits on individual campaign giving, candidates are able to raise far more on their own than they would get through public funding. The only thing going for public financing, Jacoby says, is if you're broke, the Federal Elections Commission will cut you a check.
What happens when a candidate raises a bunch of money but drops out of the race? When a campaign stops functioning — or "suspends" operations, as candidates typically put it — the primary goal is to settle all their debts. Rudy Giuliani, for example, had $9 million left when his campaign quit, Jacoby says. He and other suspended campaigns can use any remaining money to support other candidates, the party, or even to mount another run for the big chair in the Oval Office.
"I'm not sure [Rudy's] ever gonna run for anything ever again," Jacoby says. But his money? "It's a nice way to distribute cash to make friends and spread good will among other politicians who could help [him] in the future."
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