How Did the Public Financing of Presidential Candidates Come About?

"We have supported public financing, but the unabashed actions of this president to undercut our democratic process with floods of special interest money have forced us to abandon a broken system." --Former Vermont Governor Howard Dean, speaking to supporters at a news conference Saturday November 8th.

Thus Dr. Dean became the first Democratic presidential candidate in nearly 30 years to opt out of the public finance system. The Dean Camp sees that forgoing public finance and the restrictions that it imposes is the only way to compete with the Bush Juggernaut. President Bush, who will have no opponent during the primaries, also opted out of the system and has been projected to raise over $200 million. There is now a good chance that this will be the first general election, since Nixon vs. McGovern, in which neither major party candidate is being federally funded.

In 1971 Nixon had a situation similar to George W. Bush. He was swimming in a sea of private donations while the Democratic party was $9 million in debt. To combat the ever growing gap in funding, the Democrats, under the leadership of Larry O'Brien, pushed public financing through Congress as an amendment to a tax-cut bill. The amendment easily passed through the Democratically controlled Congress. Nixon threatened to veto the bill but finally agreed to sign under the condition that it would not take effect until 1976.

The bill gave taxpayers the option of allocating $1 to finance presidential candidates in primary and general elections as well as subsidizing the Democratic and GOP national conventions. In 1993 the amount was increased to $3 to offset declining participation. This solution only temporarily increased funding; since 1994 the amount yielded has dropped from $71.3 million to $60.6 million in 2000.

In the primaries, the government matches the first $250 of each private donation a presidential candidate receives, as long as that candidate accepts public funds. In 2000 candidates were entitled to receive up to $16.9 million in public funds; in the 2004 election candidates are eligible for up to $18.7 million and are limited to around $45 million in spending. They are allowed an extra $4 million in legal and accounting spending above the cap. During the 1996 Republican primaries, Steve Forbes was the first major party member to forgo public funding since its inception. He did it again along with Bush during the 2000 primaries. Bush was the first to win a primary without public aid.

Candidates who agree to accept public funding for general elections, which both Bush and Dean have indicated they will, receive full federal financing by means of a grant. In 1976 each major party could draw up to $20.4 million. This amount has increased each election by the amount of $6 to $10 million to compensate for inflation. In 2000 Bush and Gore each received $67.5 million; in 2004 each candidate will receive $74 million. No major party member has ever skipped public funding for the general elections.

The irony of the 2004 campaign is that in order to compete the Democrats are contemplating abandoning the very system they
installed to be competitive with the Republicans thirty years ago.
Howard Dean and the rest of the Democrats worry that Bush's nearly unlimited spending during the primaries would give him too great an advantage by the time the fall campaign begins. With no competition in the primaries Bush could use his $200 million to spin doctor his up-and-down first term while the Democrats battered and bruised each other, leaving the eventual Democratic winner broke by the spring while Bush's ads played constantly. The Democratic winner would enter the general election in a weak position with little or no funding for the 4 months between the end of the primaries and the beginning of the general election.

Fear of this outcome prompted Dean to abandon public financing once it became clear he was able to raise substantial funds through the Internet. He has raised $25 million so far, $5.3 million during the two days after he announced he would not take public funds. He has asked for 2 million voters to donate $100 toward his campaign. Dropping out of the public finance system cost him $19 million in federal subsidies.

Many believe that the public finance system is quickly dying. Dean's decision to opt out of public financing makes it difficult for other Democratic candidates to use public funding and remain competitive. The effect of the withdrawal of major candidates from the system is that only lesser-known candidates will remain, reducing public enthusiasm for the system. Public support has weakened considerably over the past two decades. From its high in 1980 until now, the percentage of taxpayers checking the participation box has dropped from 28 percent to 11 percent. No participation means no funding and according to a report by the Campaign Finance institute "the whole public finance system faces the real threat of insolvency by 2008."

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