November 28, 2008

A Third Perspective on Obama and Small Donors

Earlier this week, the Campaign Finance Institute issued a report, "Reality Check: Obama Received About the Same Percentage from Small Donors in 2008 as Bush in 2004; Obama Also Raised 80% More from Large Donors than Small, Outstripping All Rivals and Predecessors." The release quotes Michael Malbin as saying "The myth is that money from small donors dominated Barack Obama's finances....The reality of Obama's fundraising was impressive, but the reality does not match the myth."

Bob Bauer responded with a blog post calling the CFI report "strange" and "peculiar:" Bob concludes that "small donors, contra CFI, were the 'financial engine of the Obama campaign,' for the reason, not denied by this study, that without them, the record-breaking performance would not have been possible." He suspects that the reason for CFI's analysis is a "worry that the reform program will falter on too strong a showing that such a small donor, Internet-driven candidacy can succeed on private funding alone."

Some of this debate is semantic and depends on categorization. The two divide over whether donors who give more than $200 but less than $1,000 (or donors who give more than $200 in the aggregate through small donations) should still be considered 'small donors." Michael's point seems to be that it is not true that donors giving very small amounts in the aggregate (under $200, who I have termed "micro-donors") "drove" Obama's fundraising. Bob thinks Michael's categorization of small donors is unduly narrow.

There is something more than semantic to this argument. If the Obama campaign demonstrated that one could run a viable presidential campaign fueled principally or primarily by micro-donors, that would be an important milestone for political equality in campaign funding (a point I make in my draft paper). The CFI report acknowledges that Obama raised so much money overall in so many categories (from micro-donors to bundled contributions, mostly at the maximum of $2,300 per person) that it is hard to draw firm conclusions generally. Importantly, we cannot use the Obama campaign to draw conclusions about the viability of a solely (or mostly) micro-donor funded campaign.

Yet despite the fact that the percentage of micro-donors is comparable across other recent primary campaigns (Obama 26%, McCain 21%; Clinton 16%; Kerry 20%; Bush 25%), the overall amount of money raised by Obama from micro-donors is impressive: $117.7 million. Bush (2004 primary) comes in second with $64 million. Obama's campaign doesn't prove that micro-donors can be the primary funders for a presidential campaign, but it sure suggests it is possible.

The numbers are also useful in seeing how campaign fundraising techniques are additive rather than substitutionary. Obama did not choose to replace bundling with Internet-based small fundraising; he aggressively pursued both.

Finally, one of the great lessons of the Obama campaign is the frequency of "repeater" donors, especially at the lower end giving over the Internet. According to the CFI report, over 200,000 Obama donors started off giving contributions of $200 or less and then crossed the reporting threshold by giving more. CFI: "About 93,000 of these repeaters gave in cumulative amounts of no more than $400 for the full primary season. Another 106,000 repeaters ended up between $401 and $999." So some of what must be studied now is not why these donors gave, but why they gave repeatedly. How much was due to enthusiasm for the candidate, how much to the long campaign, and how much to the lower transaction costs of repeat giving over the Internet with saved account information?

There's plenty to chew on here, and people will be studying the Obama fundraising phenomenon for some time. I am personally grateful to CFI for making these data public and allowing us to draw our own conclusions about the normative implications of the 2008 election.

Posted by Rick Hasen at November 28, 2008 06:22 PM