How Will Clinton Resolve Campaign Debt?
New York Sen. Hillary Clinton handily won West Virginia's Democratic presidential primary on Tuesday, but the longer the race goes on, the deeper the Clinton campaign goes into debt.
Clinton owes money to printing companies, air charters, phone companies and political consultants. She even owes herself. And now, with Illinois Sen. Barack Obama still leading the race, an active discussion is developing as to how Clinton might settle those debts if she drops out.
Campaign spokesmen say the debts total about $20 million. But that appears to be a low-ball figure, based on a creditors list from the end of March. Since then, Clinton has run costly campaigns in Pennsylvania, North Carolina, Indiana and West Virginia. Primaries will be held in Kentucky and Oregon next week.
As of six weeks ago, the campaign owed $10.3 million to creditors. It currently owes $11.4 million to the candidate.
And only winners have an easy time dealing with debt, says Michael Toner, former chairman of the Federal Election Commission and former counsel to Republican Mitt Romney's presidential campaign.
"Debt retirement is the hardest task in American politics," says Toner. "A lot of donors are not excited to give money to retire debts from somebody who's not going to win the presidency."
Clinton's Options for Repaying Campaign Debt
Beyond that blanket statement, Clinton's situation gets murky, and quickly. If she were to drop out, the common practice would be to pay off creditors slowly, bargaining them down to settle for partial payments. Clinton would best protect her reputation, however, by paying off creditors first.
The 2002 McCain-Feingold campaign finance law, however, pushes her the other way — setting no deadline for paying creditors but giving her only until the August convention to repay herself. After that, all but $250,000 of her $11.4 million in loans would automatically be converted into unrecoverable campaign contributions. The Millionaires Amendment in McCain-Feingold sets that deadline to prevent self-financing candidates from collecting and pocketing contributions years after their campaigns have folded.
But Clinton also would have other options.
Her campaign says nobody is talking about it, but Obama could ask his 1.5 million donors to chip in: a gesture that would also promote Democratic Party unity. At the same time, Democrats might be more eager to channel all their money into the general-election showdown through Obama's own campaign; through the Democratic National Committee, which lags far behind its Republican counterpart in fundraising; and through congressional races.
One further option is especially creative.
Clinton raised roughly $22 million for the general election, mainly from donors who hit the legal limit for primary campaign contributions and wanted to give more money. Some lawyers say she could take that general-election money and the commercial debt and redirect them both to her 2012 Senate campaign.
Redirecting the general-election contributions would require each donor's consent. But Clinton could not keep that money for any other use. And according to some campaign finance attorneys, it could mean that some donors could give to her presidential primary effort three different times.
First, they gave by writing a check for the primary. Next, their general-election check would be redirected to the Senate campaign and used to pay down the old presidential primary debt. And finally, they could write a check directly to the Senate campaign — also to be used to pay off the debt.
This might sound like money laundering to some, and campaign finance lawyers in Washington are debating whether the regulations allow it or not. Toner, for one, says they do. "There is a long history of candidates transferring funds to future election cycles and then being able to go back to those same donors for the maximum contributions," he said.
The question may ultimately need an answer from the Federal Election Commission — which could be a long time coming, as the commission is crippled this year by a Senate deadlock and has no working quorum.
Historic Examples of Presidential Campaign Debts
Presidential campaigns have run up debts for generations. Political scientist Ray La Raja, author of a history of campaign finance laws, notes that whatever the situation Clinton finds herself in, she won't have the choices that were available in 1916, when Democrats went into the red re-electing Woodrow Wilson. After the party promised but failed to finance the campaign from a base of small contributors, La Raja said, "President Wilson's rich roommates from Princeton paid off the debt, equivalent to about $13 million in today's dollars."
But LaRaja also notes that if Clinton is unable to repay her personal loans, those dollars still might be well spent, building support in some states where she might campaign again in just a few years.
Copyright 2023 NPR. To see more, visit https://www.npr.org.