As soon as Senator Hillary Clinton uttered the words, "I'm in," The New York Times was telling its readers that the presumptive frontrunner "already finds herself in a breakneck competition" for "fund-raising supremacy," which would entail raising at least $75 million in 2007. Michael Toner, chairman of the Federal Election Commission, set the bar even higher: "Call it a $100 million entry fee." In fact, in his "secret" campaign plan leaked to the press earlier this month, Rudy Giuliani's team put its goal for the Republican nomination at that lofty number. Hotline editor Chuck Todd, a veteran setter of Beltway conventional wisdom, has been more aggressive, saying that Clinton could raise as much as $500 million for both the primary and general elections — almost 50 percent more than George W. Bush's record in 2004.
There is little doubt about Clinton's fundraising prowess — and indicators suggest Senator Barack Obama will be able to match her dollar for dollar, setting up a dramatic war to be waged in penthouses, beachfront mansions, and executive dining rooms from Manhattan to Malibu. Yet it's a race that is largely irrelevant to the final outcome. Sure, candidates will have to raise money — lots of it — but not nearly as much as pundits are leading us to believe.
Consider what it cost to run for the Democratic nomination (the only one contested) in 2004. John Kerry spent $23.7 million in 2003; John Edwards spent $16.2 million; and Howard Dean, who far out-raised his rivals, spent $31 million. Dean then spent another $17.2 million in the first two months of 2004 (when the primaries and caucuses actually took place), Kerry spent $15.4 million, and Edwards spent $12 million. Dean's fund-raising and fund-spending was impressive, but did he get anything out of it? Most observers believe that Dean's campaign squandered millions in 2003, and, when the first votes were tallied in Iowa, that appeared to be the case: It was Edwards — whom Dean outspent considerably — who was left standing as the alternative to the other major candidate Dean outspent, Kerry.
The lesson is that there's a law of diminishing marginal returns in political spending. Of course, Dean's dollars gave him credibility with the press, but, at some point, a threshold was crossed, and the extra dollars no longer mattered. For 2008, there is no reason to believe that the threshold will be higher than the $25 or $30 million needed to run in 2004, and the returns on excess funds this time around will be even smaller.
Consider the traditional viewpoint — that a big war chest enables a frontrunner to survive a stumble and a dark horse to ride an early upset win. That may have been the case in 1984 or even 2004, but not so in 2008. The nominating calendar is so front-loaded that we will probably have a presumptive nominee by Valentine's Day: Iowa's first-in-the-nation caucuses kick off on January 14; Nevada's follow five days later; and New Hampshire chimes in with its primary on January 22. A week later is South Carolina's primary, followed by a Super Tuesday on February 5 that already consists of ten states and may soon include larger ones like California and Illinois. In such a sped-up process, the early contests become even more important as springboards to a series of successive primaries. Thus, an early win in Iowa or New Hampshire is essential (despite the addition of Nevada and South Carolina to the opening stages, the original two will still be viewed as the contests that matter), and it may be all a candidate needs to seal a quick victory. With this schedule, it makes no sense to hoard cash for later primaries that won't really affect the final result.
Of course, campaigns will need some money after New Hampshire to turn a strong showing there or in Iowa into future wins. In the past, that meant jetting to New York or Los Angeles to corral donors; and the epitaphs of many campaigns from races past include "they ran out of money." Today, though, there's a 24-hour ATM called the Internet. What's more, with the intense press coverage of this compressed schedule, costly television ads are less important. Partly, that's because primary and caucus voters are usually sophisticated news consumers, and they seek out information about candidates rather than wait for it to interrupt their "Grey's Anatomy" reruns. With this group, a strong YouTube video may be just as crucial as adding 1,000 rating points to a media buy — an insight apparently not lost on Clinton and Obama, who both announced their candidacies via the Web.
So, if it takes only $25 to $30 million to be competitive — that is, to run an operation through 2007 and wage full statewide races in Iowa and New Hampshire, why would anyone set the bar at $75 million or even $100 million?
Again, the culprit is the calendar. A front-loaded nominating campaign inflates the importance of the invisible primary (the time leading up to the first nominating contests) — and money provides an easy metric to measure such a horse race. After all, opinion polls are generally unhelpful; name recognition counts for almost everything until the weeks leading up to the actual contest (throughout much of 2003, Joe Lieberman, for instance, led the Democratic field). Bank statements are the only other way for the press and the political class to tell who's up and who's down.
Since Clinton has proved that she can raise prodigious amounts of money — more than $50 million for a cakewalk of a Senate race — she'll be expected to raise an equally outlandish figure for her presidential campaign. For other candidates, this sets the bar impossibly high; but, like Dean in the 2004 cycle, if a Chris Dodd, a Bill Richardson, or a Tom Vilsack can come close or clear this bar, they will automatically gain top-tier status.
For voters, the centrality of fund-raising for fund-raising's sake means that the best way to support a favorite in this contest, then, is not to go to the polls in your party's primary or caucus — unless you live in Iowa or New Hampshire. It's to write a check — and vote early and often.
By Kenneth Baer
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