Campaign Crawlers

The McCaining of McCain

Can he escape the tangled web of campaign finance regulation?

By 2.25.08

It is highly ironic that the father of campaign finance reform would emerge as the presumptive Republican nominee only to find himself embroiled in a controversy over whether he violated the kind of strict regulations he long championed. But that is exactly where John McCain finds himself.

The details of the controversy may be enough to make election lawyers swoon and most normal people nod off, but they are worth wading through because they provide yet another reminder of why the over-regulated campaign finance system is absurd and needs to be scrapped.

Last year, when McCain was struggling to remain a viable candidate, he applied to be part of the public financing system, which offers cash-strapped candidates the opportunity to use taxpayer money to fund their campaigns (among other benefits), but has the drawback of crippling spending restrictions.

As McCain racked up victories in early primaries, he no longer had use for public financing. The day after he all but clinched the nomination on Super Tuesday, his campaign sent a letter to the Federal Election Commission in an attempt to withdraw from the system.

The Democratic National Committee on Monday filed a lawsuit challenging McCain's right to leave the system, arguing that even though he never received federal money, he still derived benefits from his special status.

If McCain is locked into the system, he will be limited to spending a total of $54 million until he formally receives the nomination at September's Republican National Convention. Since he already has spent roughly $50 million, he would effectively be handcuffed for six months.

So conservatives who enjoy seeing McCain suffer a campaign finance-induced headache are in the unenviable position of siding with DNC chairman Howard Dean.

THE McCAIN TEAM argues that because candidates including John Kerry, Richard Gephardt, and Dean himself were allowed to withdraw from the system, McCain has the right to do the same. But there are several issues complicating whether McCain is legally out of the public financing system.

While the FEC does allow a candidate who initially applied to be part of the public financing system to withdraw if the candidate hasn't received any money from the U.S. Treasury, one of the conditions is that the candidate cannot use the potential to collect funds as collateral for a loan.

In December, when the McCain campaign was still in financial trouble, it took out a $1 million loan, and the loan agreement included a pledge that if he did poorly in the New Hampshire primary, he would reapply for federal funds.

According to several lawyers consulted by TAS, the pledge he made in the agreement could be seen as "constructively" using the prospect of federal funds as collateral, thus locking him into the system, but the McCain campaign has insisted that it is on solid legal ground because it didn't actually use as collateral the matching fund certificates.

The next issue, of somewhat lesser significance, pertains to the fact that McCain used his public financing certification to get on the ballot in Ohio. When TAS asked McCain about this on a Friday conference call with bloggers, he laughed, and said, "I'm confident we could have gotten on the ballot under any circumstances, so I don't know about whether we had to use that vehicle or not."

But in actuality, getting on the ballot in Ohio is a monumental task, requiring signatures in each Congressional District. The campaigns of Rudy Giuliani, Mitt Romney, and Fred Thompson all spent a lot of time and money to get on the ballot in the state, but McCain was able to use his certification to coast through the process back when his campaign was short of staff and cash.

Brad Smith, a former FEC commissioner who teaches at Capital University Law School in Columbus, Ohio, argued that while ballot access is a less pertinent issue than the issue of collateral, it could still be used to build a larger case that McCain was "using funds to gain an advantage."

THE OTHER COMPLICATION for McCain is that there are four vacancies on the 6-member FEC, so the body cannot reach a quorum to rule on the matter one way or another.

The McCain campaign insists that it has a constitutional right to withdraw from the system, and that it doesn't need the FEC's rubber stamp. But another legal view is that applying to be in the public financing system is the equivalent of entering into a contract in which terminating the agreement requires the consent of both parties.

Adding to the irony is that part of the reason there aren't enough FEC commissioners is that Barack Obama put a hold on one of the Republican nominees last year.

Smith, who has been a fierce critic of burdensome campaign finance regulations, said that the McCain campaign probably has the better of the argument, but because this area of law is so new, the issues raised remain open questions and McCain's case is not a "slam dunk."

Clearly, McCain intends to ignore the spending restrictions and operate as if he has legally withdrawn from the system. Smith predicted that either the FEC will never be able to reach a quorum during the election, at which point the case becomes moot, they will convene and vindicate him, or in the worst case scenario, McCain will be fined a maximum of $25,000 way down the road.

If anything, the issue will become a public relations problem for him, Smith said. Even if he is cleared legally, it opens McCain up to criticism that he hired clever lawyers to game the system, which is exactly the type of practice that he has been railing against for years.

But the bottom line to Smith is that it highlights how ludicrous the current system is, which he said is wasting $200 million in taxpayers' money every four years.

"The whole reason for taxpayer financing is that it's supposed to make campaigns cleaner and alleviate these concerns about corruption," Smith said. "But what did it do here? It's actually creating concerns about corruption... It's kind of ridiculous. It's counterproductive. It's supposed to free up candidates from fundraising so they can talk about issues. But what are we talking about? We're talking about compliance with arcane elements of campaign law."

Earlier this month, it was Barack Obama who was taking heat from McCain for backing off a pledge to enter the public financing system if his Republican opponent agreed to do the same.

"The law has less to do with preventing corruption, and simply is a tool, a weapon, that the candidates have that they can try to beat each other up with if it's to their advantage," Smith said.

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About the Author

Philip Klein is The American Spectator's Washington correspondent. You can follow him on Twitter at: http://twitter.com/Philipaklein