Page last updated at 17:55 GMT, Friday, 12 September 2008 18:55 UK

Q&A: US Campaign finance rules

Now that both John McCain and Barack Obama have accepted their parties' presidential nomination and the presidential election is officially underway, different campaign finance rules apply.

The BBC News website took a look at how the system works.

Now that we know who both candidates are, what are the new finance rules?

John McCain has opted to take federal funding for his campaign, which means that since 1 September - the official start of the campaign - he has been barred from accepting private donations.

What has Barack Obama decided to do?

He has opted not to participate in the public-financing system for the general election.

What would have happened if he had opted in?

He would have received $84m (42m) of public money to fund his campaign, in return for agreeing to accept no private contributions (unless they were used to fund the legal and administrative costs of complying with the campaign finance rules).

Mr McCain will receive the $84m.

Why did Mr Obama decide to opt out?

The Obama campaign says that "the public financing of presidential elections as it exists today is broken".

Barack Obama: Raised $389m (195m)
Cash on hand: $66m
John McCain: Raised $174m
Cash on hand: $33m
Figures as of 31 July 2008

It accuses its Republican opponents of using loopholes to play the system, by getting big donors to give money to the party's central committee (rather than to Mr McCain himself), and by allowing well-funded independent groups to make attacks on Mr Obama.

That having been said, the Obama campaign has been much more successful at raising money than the McCain campaign, so opting out of public financing will allow it to spend as much of its money as it wants.

And with Mr McCain still bound by the restrictions, Mr Obama will enjoy a massive cash advantage over his Republican rival.

How much of a funding advantage will Mr Obama have?

As of the end of July, Mr Obama had raised more than $389m (195m), while Mr McCain had raised just over $174m. Mr Obama had $66m cash on hand left to spend, while Mr McCain had nearly $33m.

Observers project that over the course of the general election campaign, Mr Obama could spend as much as $300m (150m), while Mr McCain will be limited to spending the $84m (42m) allowed to him under the public financing rules.

Mr Obama will also be helped by the Democratic National Committee, which is allowed to raise money and campaign on his behalf.

But Mr McCain will also be able to draw on the support of his party committee - the Republican National Committee - which has proved to be a stronger fundraiser than its Democratic equivalent.

What are the disadvantages for Mr Obama of his decision?

Mr Obama is campaigning on a pledge to "bring change to Washington". Mr McCain will now attempt to paint Mr Obama's decision to opt out of public financing (having previously indicated that he would opt in), as an example of "business-as-usual" Washington opportunism.

Mr Obama argues that because the vast majority of his campaign donations have come from small donors, he is adhering to the spirit of campaign finance reform, if not the letter - he may not be sticking to spending limits, his argument goes, but he will not be beholden to rich individuals, large corporations or powerful interest groups.

Why was the public financing system established?

In the mid-1970s, following the Watergate scandal, many people in the US were concerned that big money donations were having a negative impact on the political process, and that politicians were being unduly influenced by the individuals, companies and interest groups from whom they were receiving campaign contributions.

There were also concerns that the rising cost of elections meant that only the richest or best-funded politicians could afford to compete in elections.

The system of public financing was set up to ensure that candidates were not beholden to their campaign contributors and to open up the political process to people who did not necessarily have access to large amounts of money, but who could demonstrate popular support.

What other campaign finance rules were introduced?

A limit was placed on the amount of money an individual could donate to a particular candidate - at the moment, this cap stands at $2,300 (1,150).

Did the reforms work?

Throughout the 1980s and 1990s, candidates used a number of loopholes to avoid the restrictions on fundraising and spending, and the cost of elections and the size of donations continued to skyrocket.

What loopholes did campaigns exploit?

One important loophole was the use of so-called "soft money" - money donated not to individual candidates, but to political parties or independent organisations, who could spend the money on party-building, get-out-the-vote operations and "issue advertising".

Issue advertisements were often practically indistinguishable from regular campaign advertisements, but as long as they avoided explicitly advocating the election or defeat of a candidate (ie they did not use words and phrases such as "vote for," "vote against," "support," "defeat," or "elect") they were legally allowed.

Were there any attempts to crack down on the use of soft money?

Yes. In 2002, Congress passed the Bipartisan Campaign Reform Act (also known as the McCain-Feingold reforms, because they were drawn-up by John McCain and Democrat Russ Feingold).

The Act banned national political party committees - the Democratic National Committee (DNC) and Republican National Committee (RNC) -from accepting or spending soft money contributions.

Although the Act succeeded in preventing the DNC and the RNC from using soft money, donations to independent groups known as 527 organisations (because of the section of the US tax code under which they are granted tax-exempt status) have increased.

Electoral College votes

Winning post 270
Obama - Democrat
McCain - Republican
Select from the list below to view state level results.

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific