July 1, 2008

Washington, D.C.

July 1, 2008

Political Update

Well, it happened again. A Keefe Rule worked. “The candidates who raise the most money win their party’s nomination.†And it happened in a record setting way… Four candidates raised more than one hundred million dollars. One of them anted in almost $35 million of his own – another put in $12.5 million; both sums unheard of in previous years.

The records started early. In the first reporting quarter, Senator Hillary Clinton weighed in quickly with a record amount of $36 million in the bank… having raised $25 and transferred $11 in from her Senate campaign fund. That wowed the crowd… and cowered her opponents… who saw three to six million dollar quarters as big numbers. But then Senator Barack Obama trumped her. He saw her pot and threw in a couple of extra million… and the money race was on.

Before it is all over, the two leaders, Obama and Clinton will have pulled in more than a half billion (that is a “bâ€) and all of the fund raising records will be history. The also-rans were also-rans in the money race, as well. They did pretty well by previous standards. They just got into a game with stakes they could not match. When you see that Rep. Tom Tancredo raised more than $8 million and Rep. Ron Paul took in $35 million (so far – he is still hustling the bucks) you begin to understand that money flowed like water in this political year.

Let’s start with the Champ, Barack Obama. He has reported raising almost $300 million through the end of May… and he has stepped up his efforts as he heads into the pre-convention period. But he did not do it “the old fashioned wayâ€. He turned the formula on its head and pulled his cash in from small contributors. Here is an analysis of the Obama income at the end of May:

94% of campaign contributions have been under $200
93% have been under $100
77% have been $50 or less
52% have been $25 or less
When you factor in large donations, the average contribution is $91.

This ability to get the small contributor was significant. Obama was able to go back to his contributor list over and over through the long months of the primaries and refresh his war chest. Clinton, on the other hand, specialized in maximum contributions of $2,300 each and had no ability to reach in for a second helping when she needed it most. It was a decisive element in the campaign… Obama had money when he needed it and Hillary ran out.

Ran out, you say… How can someone run out of money when they raised $229 million? That would seem to be enough, when no other pre-convention campaign in American history had ever cost nearly half that. Hillary ran out and dug into her own pocket to the tune of $12,175,000 to get through the electoral process. She ended up with a debt of at least $25 million, including her self funding. The retirement of that debt has become a principal matter of discussion between the Obama and Clinton campaigns. She wants to get rid of that debt quickly… and wants his help – and will get it.

Senator John McCain had a frightful financial ride through the primary campaign. He, like Hillary, thought big when starting and built a costly campaign. He thought the money would come… but it didn’t and he struggled mightily to keep from going broke last fall. Then, reacting to reality, he changed his spendthrift ways and tightened his campaign belt. The money was still slow in coming, but he finally got on track and was able to finance a winning campaign. By the end of May, he had brought in $104 million…equaling Romney without the help of his personal checkbook.

Interestingly, the Republican who finished second in delegates, Governor Mike Huckabee, finished sixth in fund raising among the Republican candidates with $16 million. Romney and McCain were in the lead at just over the $100 million mark; Rudy Giuliani (remember him) took in nearly $60,000,000 (where did he spend it?); and Ron Paul’s Libertarian pals staked him to over $40 million; and Fred Thompson ended up with $23 million. Huckabee has to get the efficiency award… most delegates per dollar for this year.

The Democrats were spread… John Edwards used his prior exposure to advantage and raised over $50 million. Bill Richardson took in $23 million, Chris Dodd, $17 million; Joe Biden, a disappointing $12 million… Even Dennis Kucinich took in $4.5 million. Mike Gravel was low man… with just a half mil.

Money, Money and More Money in Fall

With this past as prologue, how will money shape the race this fall? It is likely to be a big factor. Obama has already declared that he will not take the Federal Funds of $89 million, despite his previous suggestion that he would accept the money and the spending limits that go with it. McCain appears likely to take the Federal financing – following through on his long time commitment to public financing.

What does this mean for the campaign? Will it be lopsided… with the Obama campaign drowning his opponent in cash? The answer is probably yes and no. McCain has made too much of a big deal out of Obama’s change of heart on accepting the Federal funds and limits to do the same turnabout himself. He will take the Treasury money and limit his personal campaign spending accordingly.

That is where the fun begins. Forget about the Obama cash machine for the moment; let’s try to see how McCain stays competitive. He will have about $10 million a week for his campaign… his personal campaign, that is. The first thing to do is to offload activities and expenses from that account onto other friendly payers. The Republican National Committee will be brought into play. Combined campaign committees will be developed with other Republican campaigns so that the cost of grass roots activities and organization building can be minimized to the candidate committee. The candidate will rely on friends with 527 committees (independent campaign spending committees, so called because of their IRS designation) – though their activities and messages cannot be directly controlled by the candidates team. This week, for example, the National Rifle Association announced that it will spend $40 million to support the McCain candidacy “because of his support of the Second Amendment†(which is fascinating since McCain’s posture is very similar to that of Senator Obama’s). Other such programs will follow and they will not be made public.

The McCain team will not have to invent any of this. The Republican Presidential Campaign Team has been at it for decades… going back to the Nixon days. They have perfected the use of specialized committees and techniques for maximizing campaign resources and they usually swamp the Democrats who have never been as adept at this science.

But 2008 may be a different story… if the projections being bandied about the Obama fund raising prospects come true. If his small donor, internet fund raising continues to expand, it is possible that he will triple the number of donors by Election Day. And if it does, the gross contributions could be in excess of $600 million, based on the contribution averages from his first year experience. Also, there are now a new crop of large gift donors available from the Clinton Campaign… It is really phenomenal.

Look for his June FEC report to indicate what is happening. Will he have a big jump in contributions? Some are suggesting he will take in $100 million in June…. Or will it be a more reasonable number. That will give us some indication of whether this snowball will keep gathering momentum through the fall.

What the Obama money machine portends is a truly unlimited campaign budget for the Democratic candidate. He will have an opportunity to contest in all nooks and crannies of this nation, in red states and blue and in demographic sets that are only marginal convertible. It is an awesome potential. The Obama campaign has already begun its nationwide assault… It has dispatched organization teams to many previously unrecognized states… it has media running in very blue states. The play is on.

Independence Day – America’s Birthday

Margaret Thatcher said it best… the United States is the only nation in the world that was founded on an idea… the concept of freedom.

That is what we celebrate this week on Independence Day. And it is what we need to renew our focus on in the year ahead. Freedom is not flourishing today. The encroachments on individual liberties that have emanated from our government’s obsession with security following the 9/11 attacks have weakened our individual privacy. Ms. Thatcher would likely observe that we are less American than we were.

The fights in Congress over the government’s right to wiretap individuals telephone calls is just one indication of the pervasive nature of the problem. The economy, national defense, national security, and all of the rest are important issues for this election year. But let us not neglect the cornerstone on which our nation was founded… Freedom.

Delegate Count

Democrat Republican

Barack Obama 2,201 – needed 2,118 John McCain 1575 – needed 1,191

Schedule

August 25-28 Democratic National Convention Denver, Colorado

September 1-4 Republican National Convention Saint Paul, Minnesota

November 4 Election Day

Meanwhile, In Iraq

Lest we forget, Americans keep dying and keep being injured in Iraq.   The official count as of June 30, 2008, of the dead since our involvement began on March 23, 2003 is 4,113.  The count of American service personnel wounded in Iraq has now passed the 30,500, according to the Department of Defense.

Now we need to keep our eyes on another trouble spot. June was the deadliest month for U.S. troops in Afghanistan since the war there began in late 2001, as the reconstructed Taliban troops have stepped up attacks in an effort to regain control of the strategic country. The 28 U.S. troops were killed by roadside bombs, small-arms fire and rocket attacks, much like the experience in Iraq. The total nearly equaled the 29 announced U.S. troop deaths last month in Iraq.

While we have been focused on Iraq, there have been 533 U.S. combat deaths to date in Operation Enduring Freedom, which includes Afghanistan and other areas. About 32,000 American troops are stationed in Afghanistan, along with about 30,000 from other countries. British troops also experienced one of their worst months for combat fatalities since the invasion of Afghanistan, with 13 killed in June.

The summer traditionally brings increased fighting in Afghanistan, where mountainous terrain becomes more passable. More bad months are ahead.

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Robert J. Keefe

Principal – Meridian Strategies, LLC

1920 L Street, NW, Suite 410 – Washington, D. C. 20036

Telephone:  202 223-8839  – Cell:  202 255-8161  – E mail: rkeefe@verizon.net