By Emily Cadei, CQ Staff

This year’s presidential election, already touted as a history-making contest on so many fronts, could also mark a very wonkish first: the first matchup in which both nominees are prominent advocates of public campaign funding, if Barack Obama ends up as the Democrat opposing Republican John McCain . It’s a prospect that longtime advocates of public financing eagerly anticipate, since their pet issue rarely gets any sustained attention on the national political hustings.

But in recent weeks, both senators’ campaigns have retreated from their earlier commitments to take public financing as they reckon with the cumbersome spending limits the system imposes — and each campaign is, of course, also heatedly accusing the other of rank hypocrisy in talking about end-running the public financing system. Further complicating matters, the Federal Election Commission — the agency charged with enforcing campaign finance law — lacks the quorum of commissioners it needs to conduct official business, so there is no immediate prospect for any independent investigation of such charges.

THEY MAY AGREE: Obama and McCain have both spoken favorably about public financing of the presidential campaign — and each may conclude that it’s in his best interest to eschew the system in the fall. (AFP/GETTY IMAGES / PAUL J. RICHARDS)

Bradley A. Smith, a former FEC chairman who opposes present campaign finance regulation, dismisses all the jousting as a “soap opera” that points up the system’s inherent weaknesses: a byzantine scheme of legal enforcement; ineffective measures to deter corruption; and financial obsolescence in an age when national campaigns rake in as much as $1 million a day in donations, much of it from small-money donors.

But even as the warts-and-all public system, first used in the 1976 election, prepares to potentially play a contentious role in the fall campaign for the first time, some longtime public-money advocates are insisting that there’s no such thing as bad publicity. “I’m kind of like, throw me in the briar patch,” said Meredith McGehee, the policy director at the Campaign Legal Center, which would like to grow the pot of taxpayer money made available to presidential candidates so that more of them would use it. “As somebody who’s spent so much time lobbying on these issues, to now have the question of lobbyists, special interests and financing campaigns a part of the national debate, that’s great.”

Public Funding Parries

Even eight months from Election Day, the McCain and Obama teams are already testing out preliminary lines of attack on the issue. Meanwhile, Obama’s rival, Sen. Hillary Rodham Clinton of New York, has made no commitment to using public financing if she becomes the Democratic nominee — and has steered clear of the dispute between Obama and McCain as she’s wrestled with her occasional campaign cash shortfalls.

The McCain campaign has assailed the Illinois senator for appearing to back off his statement of a year ago that he’d commit to spending public money in a general election — which would require him to eschew any of his own fundraising — if the GOP nominee would do likewise. But that apparent pledge came before Obama’s primary campaign set all manner of fundraising records, netting $91 million in just the first two months of this year. If he wins the nomination, he’ll have few incentives to discard such a powerful weapon going into the general election.

These days, all Obama will say on the subject is that he’ll address general election financing if and when he secures his party nod. McCain has derided that as “doublespeak” — while also reminding voters of the 2002 law he cosponsored with Wisconsin Democrat Russ Feingold to outlaw “soft money” donations.

The Funding Gap Flips: Click here to view the chart

But Democratic campaign officials counter that the Arizona senator is doing his own gaming of the public finance system, because of a $4 million loan his campaign procured — after suffering something of a financial meltdown last summer — from Fidelity and Trust Bank in Bethesda, Md. The Democratic National Committee has filed a formal complaint with the FEC, saying McCain is “playing fast and loose with the facts.” In the DNC’s view, the loan agreement shows that the McCain campaign collateralized the loan with a promise to participate in the public financing system during the primaries.

The McCain campaign disputes that. But if the FEC rules for the Democrats, the presumed Republican nominee would find himself in a bind, because he has gone on to raise and spend more in private donations during the primaries than would be allowed under public financing during the nominating contests. And a candidate is urged, if not quite required, to get the FEC’s permission before dropping out of the public funding system.

Trevor Potter, a former FEC commissioner who is the McCain campaign’s general counsel, insists his candidate isn’t obliged to remain in the primary public finance system — although McCain still plans on taking only public money for the general election, as long as the Democratic nominee does, too.

But if that person ends up being the fiscally flush Obama, it looks increasingly likely that neither nominee will end up financing his fall campaign with public funds. If that happens, they will be the first major-party nominees to reject public financing in the general election since the program’s inception 32 years ago. And it would be a remarkable turn of events given that McCain and Obama have been two of the Senate’s more outspoken advocates of limiting the role of private cash in the financing of elections.

The Panel That Wasn’t There

This year’s campaign finance soap opera is playing to an essentially empty house: The FEC has practically been neutered during the campaign, an outgrowth mainly of President Bush’s recess appointment of Hans von Spakovsky to the commission for part of 2006 and all of last year. Von Spakovsky has been renominated, but Senate Democrats are again blocking his confirmation because they don’t like the way he handled voting rights cases while he was a mid-level official at the Justice Department.

That leaves only two commissioners on the six-person panel, with four needed for a quorum to conduct business.

Senate Majority Leader Harry Reid of Nevada has proposed up-or-down votes on von Spakovsky and the three people to fill the other vacancies, expecting that von Spakovsky would be rejected and the others confirmed. But Minority Leader Mitch McConnell of Kentucky says the GOP would mount filibusters to that approach and will agree only to move the four nominees as a bloc. The standoff tends to work to the benefit of McConnell, an opponent of restraints on private-sector campaign donations.

Best-Laid Plans

Advocates seeking to curb the influence of money in politics have long heralded public financing. “It allows candidates to run for president without being dependent on or obligated to influence-buying bundlers or special-interests donors, and allows them to spend more of their time communicating with their constituents as opposed to being engaged in a never-ending money chase,” said Fred Wertheimer, the president of Democracy 21, a leading advocate of tighter campaign finance limits.

A rewrite of campaign finance rules enacted after Watergate established two separate, voluntary systems for publicly funding presidential nomination bids and general election campaigns — a matching funds system for the former and a flat grant for the latter — which remain more or less intact to this day. The system was initially financed with a voluntary $1 checkoff on individual tax returns; that amount is now $3.

For 25 years, presidential candidates largely embraced the system. But in the past decade it has clearly fallen out of favor, mainly because the FEC system’s revenue has not come close to keeping pace with the surge in private donations. In 2000, Gov. George W. Bush of Texas became the first eventual major-party nominee to decline public matching funds, because he was able to raise $194 million on his own to compete for the Republican nomination. In 2004, Democratic rivals John Kerry and Howard Dean declined the primary matching funds as well.

Even so, in both years, the nominees took public money for the general election campaign, which the law describes as the period between when the nominations are formally awarded and Election Day. But that arrangement might be too confining for any of the remaining candidates — McCain, Obama or Clinton — each of whom should have no trouble raising much more for the fall campaign than the $84.1 million each nominee is due to receive from the public fund.

Public-financing advocates concede that the system needs to be re-examined. “The spending limits in the primary election are too low,” Wertheimer said, noting that the ceiling works out to about $50 million — less than Obama raised in February alone. “Anyone who can raise money knows from the outset that if you go into that system and you happen to win the nomination, you’re going to be trapped.”

That’s the specter McCain would face in the event of an adverse FEC ruling on his loan agreement, which is why his campaign benefits from the agency’s lack of a quorum to address the Democrats’ complaint. If the Democrats win that case, McCain will technically be barred from spending any more of the money he raised for the nominating contests until after he’s nominated in Minneapolis-St. Paul the week after Labor Day.

But even if all the FEC commissioners were confirmed this week, it’s unlikely they would issue a ruling by this summer. And even if they did find that McCain had violated the spending limits, the most the FEC could do to punish him would be to impose a $25,000 fine — a paltry price to pay, given the stakes, even for a vociferous advocate of public financing such as McCain.

Future Fixes

Good-government advocates insist that the way to make such calculations obsolete is to modernize the public financing system — and the oversight protocols associated with it — by raising the donation limits to the candidates as well as their spending limits, and by making public financing available earlier in the general election campaign. With senators who publicly embrace “reform” likely to head both tickets, public-funding advocates think such changes could come in the next presidential administration.

Democrat Russ Feingold of Wisconsin and Republican Susan Collins of Maine have written a Senate overhaul bill that has won over Obama and Clinton as cosponsors. (McCain says he’s not signing on to campaign-finance legislation while running for president.) A companion House bill has been proposed by Republican Christopher Shays of Connecticut and Democrat David E. Price of North Carolina.

Meanwhile, foes of public financing are just as committed to summoning the political will to block further restrictions on fundraising. Instead of reviving the system, “it’s time to consider abolishing it and returning to First Amendment principles,” said Sean Parnell, president of the Center for Competitive Politics, which says campaign financing should be totally unregulated so as not to infringe on the First Amendment rights of donors.

But with Congress and the White House both potentially moving to a more receptive frame of mind by next year, the public-financing advocates are anticipating a significant ramp-up in the debate after the election — no matter who wins. “The goal,” said Wertheimer, “is to use the 2008 presidential election as it unfolds to make a powerful case for why the system needs to be fixed.”

FOR FURTHER READING:

The Feingold-Collins bill is S 2412; the Shays-Price bill is HR 4294; McCain-Feingold campaign finance law (PL 107-155), 2003 CQ Almanac, p. 14-3, 2002 Almanac, p. 14-7; presidential campaign public financing law (PL 93-443), 1974 Almanac, p. 611.