There is an easy explanation for the first - Congress has underfunded the presidential system. Hillary Clinton, Barack Obama, Mitt Romney and Rudy Guiliani are raising and spending far more money than would be the case if they participated in the public funding system. The FEC website does indicates that if primary elections had been held in 2007 each candidate would have been limited to about $41 million. That figure will be adjusted upward in 2008, but the order of magnitude will be about the same.
The leading candidates have already exceeded those spending limits. Clinton ($91 million) and Obama ($80 million) have dwarfed them. And though the Republicans have not been able to raise as much, both Romney ($63 million) and Giuliani ($47 million) have also exceeded the amount they would have received from the public funding system.
One thing is clear. If we want our presidential nominees to be independent of private interests, the public funding system will have to be increased. Otherwise politicians who wish to be free from dependence on special interests will continue to be at a funding disadvantage.
The second problem concerns the size of the donations received by the leading candidates. In the aftermath of the passage of the Bipartisan Campaign Reform Act of 2002 and the use of the internet by the Howard Dean campaign in 2004 there was the hope that small donations would increase in importance and reduce if not supplant the dominating role of big contributions. The anticipation was that with BCRA shutting down soft money loopholes, candidates would work harder to raise funds from small donors and the internet would provide them with the means successfully to do so.
That hope has not been fulfilled. So far during the 2007-08 political cycle, fewer than 350,000 people, or 0.16 percent of the adult population, have provided political contributions large enough to be itemized ($200 or more).
What is worse, the front-runners for each party, Clinton and Romney, have collected only slightly more than 10 percent of their funds from people who contribute $200 or less and the same is true for Guiliani. Obama is the leading candidate who most depends on small contributions, but even in his case small contributions amount to less than 25 percent of his funds.
It is at the other end of the donation spectrum that the action lies. All four leading candidates raise about one-half of their funds from people who contribute $2,300 or more, with Clinton and Guiliani topping the list at more than 60 percent. Funding presidential campaigns is still the sport of big donors.
The third pattern is the remarkable similarity in the importance of the financial sector in funding all four of the leading candidates. This sector alone contributed slightly more than 20 percent of the money collected by Clinton and Obama. For Romney and Guiliani, contributions from this source came to almost one-third of their respective totals, and in both cases it was the leading fund-raising category.
The role of the financial sector in political fund-raising deserves special mention because of the crisis that is currently threatening the economy. What happened to cause this crisis was that mortgage lenders found ways to induce borrowers to take loans whose costs were beyond their means to repay. At the same time those lenders took advantage of a regulator failure by the Federal Reserve and devised techniques to evade exposure to those bad loans. As defaults mounted, new loans of any kind became more difficult to obtain. With that the case, economic activity has been impeded, threatening the country with a recession.
Obviously in the near future the loopholes that allowed all of this to occur will be the subject of intense public debate and proposed remedial legislation. But by making contributions to all of the leading candidates, it is quite clear that the financial community is preparing for this moment of truth. It seeks to ensure that they will have access and the ability to influence who ever enters the White House in January 2009.
The sad fact is that the United States system of funding presidential campaigns remains elitist and undemocratic. A public funding system that would make the process more equitable does exist, but is largely unused because it is badly underfunded. In the absence of public funds that would allow them to be competitive, political office seekers depend upon a relative handful of individuals whose large contributions make up the bulk of the money they raise. By spreading their wealth to all contestants, special interests are able to reduce the likelihood that they will be held accountable for their misdeeds.