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Last Updated: Monday, 12 January, 2004, 14:10 GMT
Big money still rules US politics

By Kevin Anderson
BBC News Online in Washington

President George W Bush begins his re-election bid with a $99 million war chest that dwarfs that of all of his likely Democratic challengers combined.

And he expects to raise tens of millions more even before the Republican convention this September.

President Bush has $99 million in the bank for his re-election campaign

Although the US Congress passed an historic campaign finance reform bill, money still plays a huge part in American politics.

Millions of dollars that used to flow to the political parties now go to interest groups that, in some cases, do not have the same requirements to reveal their contributors as the candidates or the parties.

The losers...

Reform advocates in the US cheered the passage of the most sweeping overhaul of campaign finance rules in the US since 1976.

Soft money refers to political funds raised outside the Federal Election Campaign Act
Until the 2002 McCain-Feingold law, states allowed individuals, companies and unions to give unlimited amounts direct to state parties
These funds could be spent on grassroots organising, advertising and voter drives that indirectly helped all the party's candidates, including presidential candidates
In the 2000 campaign, the two parties raised nearly $500m in soft money

Known popularly by the name of its authors Republican Senator John McCain and Democrat Senator Russ Feingold, it banned corporations, unions and wealthy individuals from giving unlimited amounts of money to the political parties.

Both political parties lost under the new reform law, according to Ben Ginsberg, national counsel for the Bush-Cheney campaign, and Joseph Sandler, general counsel for the Democratic Party.

Both parties lost a huge source of income. There will be less money for their candidates and voter registration drives. But of the two parties, the Democratic Party has fared worse under the law, Mr Sandler said.

The party will miss soft money, which it has used in the past to help its de-facto nominee when they run low on money after the primaries.

The money is not going away - it's just going to different people
Stephen Moore, The Club for Growth
The Democrat nominee may be financially exhausted after what is expected to be a bruising primary campaign, just as George W Bush begins to dip into the millions that make up his re-election fund.

Democrats are working to rebuild their base of small donors and activists that many in the party say was allowed to wither during the era of soft money.

...and the winners

But the big money donations that used to be given to the parties did not leave American politics.

"The money is not going away. It's just going to different people," said Stephen Moore, the president of a group called The Club for Growth.

The donors found a new outlet: Issue organisations like the Club for Growth that are not included in the contribution limits set out in the McCain-Feingold law.
Club for Growth ad
In this ad, a couple tells Howard Dean to go back to liberal Vermont

In Washington, these groups are known as 527s or 501cs, a reference to sections of the US tax code that regulates such tax-exempt organisations.

Mr Moore has been combing the Republican Party's old database of big donors looking for people who might give money to his pro-economic growth group.

The large dollar donations that used to flow to the parties are now flowing to groups like Mr Moore's.

And the money is coming from the left as well as the right. Billionaire financier George Soros has given $5m to MoveOn.org, a liberal activist group working to defeat George Bush.

In the 2004 elections, these groups are engaged in a political shouting match with duelling attack ads.

MoveOn.org has been running ads in key swing states like Ohio and Florida criticising the Bush administration for spending $87bn in Iraq and Afghanistan instead of in the US for schools, teachers and healthcare.

Referring to President Bush, the ad says: "We're not being led. We're being misled."

With less than two weeks before the Iowa caucuses, the Club for Growth has just launched an ad attacking Democratic front-runner Howard Dean.

In the ad, a couple is asked what they think of Mr Dean's plan to raise taxes on families by $1,900, based on his pledge to roll back President Bush's tax cuts.

The man says, "I think Howard Dean should take his tax-hiking, government-expanding, latte-drinking, sushi-eating, Volvo-driving, New York Times-reading ...,'' and the woman continues, "... body-piercing, Hollywood-loving, left-wing freak show back to Vermont where it belongs.''

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