Bring On The Cash!

Thi

s is the time the Democrats have long dreaded, the scenario they knew they could not avoid. It is that moment in every Hollywood cliff-hanger when the star gets within sight of a happy ending, only to find another twist in the plot. Yes, they have produced a presumptive nominee for President, and he has risen dramatically in the polls against George W. Bush. But just as John Kerry is getting ready to enter the winner's circle, his bank account is depleted and he's just beginning to refill his coffers. Meanwhile, his opponent, who has spent only a quarter of what he has raked in, is sitting on $100 million and is getting ready to unleash a barrage of ads that will define Kerry before he has a chance to introduce himself to voters who do not know much about him at all.

The irony is that in anticipation of these circumstances, Democrats have spent the past year searching for exemptions in the McCain-Feingold campaign-finance-reform law that they themselves had long championed. One method they are banking on: a network of new organizations known as 527s (after the section of the IRS code that gives them tax-exempt status), which can raise unlimited money for advertising and voter-registration efforts, as long as they don't coordinate with the candidate. But that strategy faces a crucial test this week at the Federal Election Commission (FEC).

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The FEC is about to define what kinds of political activities these 527s will be allowed to perform. If the commission's decision goes the Democrats' way, Kerry will be able to count on tens of millions of dollars of indirect assistance from Democratic-leaning groups. If not, the Massachusetts Senator could find himself having to continue raising money the hard way — in the small increments the law allows — along with getting limited help from the Democratic National Committee (D.N.C.), which is under the same legal strictures. Either way Kerry is going to be outspent. In a world where soft money is technically banned, the Republicans have the advantage: they have always had more donors who can contribute the maximum in hard money--$2,000 per person — that the law allows.

That is why, as Howard Dean's campaign sputters to what looks like its end, the Kerry campaign and the Democratic Party are devising a way to capture the Internet-driven fund-raising potential that Dean unearthed. After years of concentrating on donors rich enough to dash off five-and six-figure soft-money donations to compete with the legions of Republicans able to write hard-money checks for $2,000, the party of the little guy will have to lure little checks from the Democratic base. "One of the keys to victory for us," says Florida Democratic fund raiser Mitchell Berger, "will be to take those $100 middle-class donors and convince them that their $100 really means something." But even though it has vastly expanded its donor list, the D.N.C. still managed to raise less than half of what its Republican counterpart did.

The Democrats have been counting on these 527s to raise an extra $190 million. These organizations, which have bland names like America Votes and America Coming Together, have drawn big guns, including international financier George Soros, who has pledged $10 million to several groups. Because the 527 organizations are created outside of the political parties, it is harder to figure out who is behind them and exactly what it is they do. One innocuous-sounding group calling itself Americans for Jobs, Health Care and Progressive Values ran scathing ads against Dean in South Carolina and New Hampshire that featured a picture of Osama bin Laden. The group initially refused to name its donors; not until last week — well after those primaries — did it make known that its funders included former New Jersey Senator Robert Torricelli, a Kerry fund raiser, and Daniel Abraham, who made a fortune with Slim-Fast Foods. The idea of a group financed with large donations setting up shop, besmirching a candidate and getting out of town before anyone can figure out who they are is precisely what campaign-finance reform was meant to prevent.

But 527s — even if they get a complete go-ahead from the FEC — are not a magic bullet for Democrats. It's hard to get big donors as excited about opening their checkbooks when you can't offer face time with the candidate. With a 527, money does not necessarily buy you access — and access is precisely what the 2002 McCain-Feingold law sought to end. In that sense, the legislation has been a success, and the proliferation of 527s is evidence of that. But despite their new ubiquity — especially on the Democratic side — the most partisan of the new organizations have been falling far short of their $190 million goal. America Coming Together — a voter-mobilization effort led by former AFL-CIO official Steve Rosenthal and Ellen Malcolm, head of the women's political-action committee EMILY's List — had raised only $12.5 million by the end of 2003. And the Media Fund, which plans to run ads and is led by ex — Clinton consigliere Harold Ickes, has raised only $3 million.