Give me the Money, Honey

[Warph]

Nov. 5 (Bloomberg) -- Barack Obama obliterated every political fundraising and spending record in U.S. history.

The Illinois senator harvested more campaign cash than anyone before him, using both the Internet and traditional high-roller dinners to bring in more than $650 million from some 3 million donors for his presidential campaign. The 2004 Democratic presidential nominee, John Kerry, raised less than half that amount, as did George W. Bush and Al Gore combined in 2000.

Obama's fundraising revolutionized the way presidential campaigns are financed and may kill the Watergate-era system of providing public money for the general election. His cash advantage helped him defeat New York Senator Hillary Clinton, who began the campaign as the presumptive Democratic nominee. Obama, 47, then swamped Republican candidate John McCain in the last two months.

``I don't think he wanted the campaign's identity to be that he could raise a lot of money, but it was indispensable for the Washington-insider community that wanted to dismiss us and would have, if not for that money,'' said David Axelrod, Obama's chief strategist.

Early Appeal
Obama's appeal was almost instantaneous. He raised $24.8 million for the primary during the first three months of 2007, leading the entire field of Democratic hopefuls. Clinton raised $19.1 million.

That early success was ``mind-boggling'' and was more than double the campaign's $12 million goal, Axelrod said.

Obama, 47, went after the small donors early and returned to them often. He took in $8 million online in the first quarter of 2007, quadruple the campaign's goal of $2 million, Axelrod said. At a February 2007 rally in Las Vegas, Obama volunteers fanned through the crowd, gathering the names and e- mail addresses of people who could be asked for small donations again and again.

Almost half of Obama's money came from people giving $200 or less, compared with 34 percent for Arizona Senator McCain, according to the Center for Responsive Politics, a Washington- based research group. In 2004, 31 percent of Massachusetts Senator Kerry's money and 32 percent of Bush's funds came from donors who gave $200 or less.

`Changed the Paradigm'
``Nobody could have imagined numbers like this or participation like this,'' said Alan Solomont, who has raised money for Democratic presidential candidates, including Obama, for two decades. ``This campaign has broken the mold and changed the paradigm.''

By the end of 2007, Obama had raised $102 million. He won the Jan. 3, 2008, Iowa caucuses and raised another $36 million that month, more than double Clinton's $14 million take. Obama used that money to compete in New Hampshire and then to fund organizations and advertisements in almost all of the 22 states voting on Super Tuesday, Feb. 5.

``We were the establishment candidate and he outraised us,'' said former Clinton fundraiser Hassan Nemazee.

Obama reversed himself in June and became the first major party candidate to forgo federal funding for the general election, calculating that he would be able to raise more than the $84.1 million in federal funds that candidates would receive. His campaign argued that his large number of contributors was, in itself, a form of public financing.

Funding Overhaul
Supporters of such funding, including Senator Russell Feingold, a Wisconsin Democrat, said the Watergate-era rules must be overhauled before the next election.

Freed of spending restraints, Obama raised at least $200 million in September and October, more than doubling the amount available to McCain, 72, who accepted the public funds.

``Barack went into the knife fight with a machete and McCain went in with a pen knife,'' Republican consultant Craig Shirley said.

McCain, who had fundraising troubles in the primary, probably wouldn't have been able to take in enough money to make it worth his while to decline the federal funds, said Stephen Wayne, a professor of government at Georgetown University in Washington.

In addition, the Republican campaigned as an opponent of special interests. Along with Feingold, he was the co-sponsor of the 2002 law banning union, corporate and unlimited individual contributions to the political parties, making it harder for him than for Obama to backtrack on taking public money, Wayne said.

`Scarlet Letter'
``The act was his trademark, but it also proved to be his scarlet letter,'' he said.
With his extra money, Obama almost tripled McCain's advertising expenditures as Election Day drew near. He spent $21.5 million to McCain's $7.5 million from Oct. 21-28, according to a University of Wisconsin study. During the last weekend of the campaign, Obama ran 5,947 ads in seven competitive states compared with 3,358 for McCain, 77 percent more, according to the Nielsen Co. On Nov. 3, Obama ran 3,410 ads in those states; McCain ran 1,900.

Even before the final ad blitz, Obama had spent $190.2 million on media, compared with $76.7 million by McCain. The money allowed him to both fend off McCain's attacks and go on the offensive. In addition, he was able to expand his campaign to states traditionally inhospitable to Democratic presidential candidates, such as Virginia, North Carolina and Indiana.

Through Oct. 15, Obama also spent $46 million on staff salaries, more than double McCain's $20.1 million, helping to open field offices and build a get-out-the-vote operation.

``Anybody who says they have not been shocked by the magnitude of this achievement is making it up,'' said former Democratic National Committee National Chairman Steve Grossman, who raised money for Clinton before moving to Obama.

To contact the reporter on this story: Jonathan D. Salant in Washington at jsalant@bloomberg.net