Though the New York Times story about Sen. McCain's alleged improprieties with a lobbyist is dominating the news, another story could prove equally or more important to the success of McCain's candidacy. Yesterday's FEC decision barring McCain, at least temporarily, from withdrawing from the presidential public financing system for the primary season could affect McCain legally, by limiting his ability to spend money until the Republican party convention this summer (and even potentially subjecting McCain to fines for violating campaign finance laws), and politically, by taking the wind out of the sails of his recent attacks on Sen. Obama for suggesting Obama may back out of a pledge to take public financing for the fall campaign if his Republican challenger does. The developments look to be good news for Obama, at least in the short term.
Here's the relevant background: Federal law establishes voluntary presidential public financing system, which provides matching funds for participating candidates in the primary period (matching the first $250 donated per contributor) provided the candidate accepts spending limits. There's both a national spending limit of around $54 million through the time of the candidate's nomination during the summer convention and more easily-circumvented state-by state limits. In the general election, participating major party candidates receive a flat grant (expected to be about $85 million in the 2008 election) provided they agree to raise no funds (except up to $20 million for administrative and legal expenses) for themselves in the general election. In 2004, both George W. Bush and John Kerry opted out during the primary season. Bush raised $258 million in contributions and Kerry raised $241 million during the primary season. Both opted in during the general election, though there was ample fundraising for the national parties to supplement the federal limits.
Obama and Clinton decided to opt out during the primary season. This turned out to be a smart decision especially for Obama, who is breaking fundraising records, especially from small donors. McCain at first decided to opt out as well, so that he would not be bound by the spending limit. Obama pledged to opt in during the general election, provided he was the party's nominee and his Republican counterpart agreed to do so as well. McCain agreed to the pledge. Obama is raising money for the general election now, but has promised to return it if he opts in for public financing.
Here's where things got tricky. When McCain's campaign hit the summer doldrums, he decided to opt into the public financing system (a decision John Edwards made as well as his campaign faltered). But then McCain rebounded, and he sent a letter to the FEC withdrawing his decision to opt in. He relied upon a 2003 FEC decision that allowed Richard Gephardt to withdraw from the system given that Gephardt had not yet received any federal funds yet. Meanwhile, as Marc Schmitt has documented (see here, here, and here), McCain, in applying for a campaign loan, apparently promised to remain a candidate and opt back in to the system in the event his campaign faltered again.
McCain sent a letter to the FEC telling them he was withdrawing from the system for the primary. He also and went on the attack against Obama, claiming as a flip-flop Obama's failure to reaffirm his pledge to take public financing in the general election. (Obama's response has been that he will only make the agreement under certain conditions: "The candidates will have to commit to discouraging cheating by their supporters; to refusing fundraising help to outside groups; and to limiting their own parties to legal forms of involvement. And the agreement may have to address the amounts that Senator McCain, the presumptive nominee of his party, will spend for the general election while the Democratic primary contest continues.") McCain continued to pound the flip-flop point, until this week.
Yesterday the chairman of the FEC, David Mason, sent a letter to McCain telling McCain that he can't withdraw from the public financing system for the primary until the FEC has enough members to constitute a quorum. The FEC is without a quorum because of a fight between Senate Democrats (led by Obama and Sen. Feingold) and Republicans over President Bush's nomination of Hans von Spakovsky to the FEC. Von Spakovsky, as I've explained in Slate, was one of the administration's "voter fraud warriors" responsible for, among other things, approving Texas's controversial mid-decade redistricting and Georgia's photo identification law for voting. In retaliation for Obama and Feingold's hold on von Spakovsky's nomination, the Republican leadership put three other nominations on hold. Now the FEC does not have enough members to engage in certain actions, such as granting McCain the right to withdraw from the campaign finance system.
The Washington Post reports that McCain has already spent $49 million (much of it subject to the spending limits) and now he's in a pickle. He can try to go to court to try to get a court to order the FEC to grant his request for a withdrawal but we are in uncharted territory. Can a court order the FEC without a quorum to grant McCain's request? Can a court grant the request itself? There is no precedent on these questions of which I'm aware.
Even if Republicans were now willing to sacrifice von Spakovsky and approve other nominations to the FEC, that will take some time. Even assuming Democrats will cooperate, the Senate is now in recess. It won't happen tomorrow. So there's a good chance, without swift judicial action, that McCain will risk being found in violation of campaign finance laws.
That's probably not a problem legally (though it could be), and it is not clear that the party can fill in the gap for McCain while he's in limbo on his fundraising. But McCain faces at least a political problem. More than anyone else, Sen. McCain's name is synonymous with campaign finance reform (think McCain-Feingold). If he's arguably in violation of the law, that will tarnish his reputation. He may be able to make technically correct arguments that he is not in violation, but the smell is bad. And with this issue lingering, it will be hard for the opt out-opt in-opt out McCain to make political hay out of. Obama's hedging on whether to opt in during the general election.
What got both Obama and McCain into these problems in the first place is that the public financing system needs updating. The spending limits need to be increased, along with the matching funds. But, as Mark Schmitt has pointed out, McCain voted against maintaining the current system, and for all of his reform credentials he has done nothing to update it to the 21st century. Maybe McCain has no one to blame but himself.