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Barack Obama Has a Fund-Raising Dilemma

John Fout

The Illinois senator and Democratic presidential candidate was in New Hampshire recently and received a warning from a potential supporter:

"You can be it," [Maggie] North said at a small gathering at a Hanover restaurant Monday morning that drew eight people. "But you've got to stop -- excuse me for being blunt -- you've got to stop getting involved in the way people are fighting each other, chewing you up a little more."

To this warning from a caring supporter, Obama responded lamely, "That's what you do when you run for president."

This exchange neatly defines the dilemma that he faces in this campaign.

Obama has positioned himself as the "outsider" who will be different -- bringing hope to Washington, ending partisan divisions, reducing the effect of lobbyists and uniting the country. This is heady stuff.

But Obama's weak reply alluded to the problem he faces: reality. It remains difficult to lead with hope when you're not leading in the polls. Politics by nature is a competitive endeavor. At times you have to attack in order to get ahead, and at other times you have to play defense.

Obama has consistently trailed Sen. Hillary Clinton (D., N.Y.) in the polls. Clinton has positioned herself as the candidate of experience who is ready to lead on day one after she wins. The polls prove that the public bought the argument. She increased her lead to about 20 percentage points a few weeks ago.

Washington political strategists would suggest that Obama's only recourse is to go on the attack. And he has followed that tack. In recent weeks, the campaign has taken every opportunity to try to draw differences between Obama and the competition. But it has also created the negativity sensed by the woman from New Hampshire.

This raises the question, is Obama really the outsider who will change the equation, or is he already an insider?

People forget that Obama had several fortunate things happen that propelled him into the Senate. His initial opponent, former Goldman Sachs investment banker Jack Ryan, dropped out because of unseemly behavior.

Obama also received significant help from Washington insiders. He was chosen to give his noteworthy speech at the 2004 Democratic National Convention because of the importance of his Senate seat to change the balance toward a more Democratic Senate. More importantly, he raised significant funds from Washington insiders, including, ironically, some help from Hillary Clinton , who attended a fund-raiser during that campaign.

I discussed Obama's Senate campaign with Massie Ritsch, communications director for the Center for Responsive Politics (the center has a great Web site www.opensecrets.org). Ritsch pointed out that Obama has taken about 8% of his funds from political action committees (PACs) as opposed to about 4% for Clinton, and lobbyists were the 17th-largest industry to donate to Obama's Senate campaign (about 18th-largest for Clinton).

To his credit, Obama accomplished difficult work on an ethics bill when he arrived in Washington -- an unusual achievement for a junior senator. But he also followed the lead of many others. He opened his own PAC -- the Hopefund. The Hill reported that he has used this fund to sprinkle campaign donations to the tune of $5,000 on politicians in early primary states such as Iowa and New Hampshire.

Yet Obama has made a big deal out of not taking money from PACs and lobbyists in his presidential campaign -- a departure from his Senate campaigns. But it's not as if he isn't taken money from Washington insiders and large corporations.

In reality, he is taking their money. The money doesn't come from registered lobbyists in Washington, D.C., but it does come from registered state lobbyists and bundlers. Senator Obama had 255 bundlers listed on his Web site as of July 2007. (Sen. Clinton had 213 Hillraisers for the same period, according to her campaign spokesperson, Phil Singer.)

Are bundlers really any different from lobbyists? I posed this question to Bill Hogan, a researcher at the Center for Public Integrity. The Center will release a fourth installment of a book in the summer of 2008 called Buying of the President: 2008. Mr. Hogan commented that "it's really more about access. You want to ask who are the people with proximity to politicians and that would be registered lobbyists and bundlers."

I believe Obama's bundlers will have proximity to the candidate should he win. For example, one of the largest corporate donors to his campaign is Exelon(EXC Quote). Will Obama take a call from Frank Clark, who is a bundler and also the top executive at Exelon? Obama also has received significant funding from Wall Street firms such as Goldman Sachs(GS Quote), Lehman Brothers(LEH Quote), JPMorgan Chase(JPM Quote) and Citigroup(C Quote). See his largest donors here .

Obama has rivaled Clinton in fund-raising in the 2008 race. It has mostly been accomplished through his bundlers. About 60% of his funds have come through the maxed-out donations of $2,300, which is the magic number of a bundler.

His past history shows the imprint of Washington insiders. Will his future?

Obama faces a difficult task that has been self-imposed. He has to convince the American public that he is different from other politicians and that he will change things once he becomes president. I believe that in order to be successful, he has to lead positively and ignore the negative attacks, or he faces the real possibility of losing those who are inspired by his words.

Just ask Maggie North.