DCCC Seeks to Pare Debt
Six months into the 2004 election cycle, the House and Senate Democratic campaign committees are still wrestling with $11 million in combined debt, while the two GOP committees are now in the black, highlighting the widening disparity in financial outlooks for the parties.
With interest on their debts, even in this era of low rates, running into thousands of dollars per week, Democrats are facing significant costs in carrying so much red ink, although party leaders claim it hasn’t had an impact on their operations to this point.
The National Republican Congressional Committee has wiped out a $7 million debt it carried at the beginning of January, while the National Republican Senatorial Committee entered the cycle essentially debt free.
The NRCC and NRSC will also split the proceeds from a $22 million fundraiser with President Bush two weeks ago, another sign of the strong financial position enjoyed by the GOP thanks to its control of both Congress and the White House.
“They’re screwed,” former two-term NRCC Chairman Tom Davis (Va.) said flatly of the prospects Democratic leaders now face.
Davis said high debt levels will “limit the flexibility” of Democrats because they will be forced to dedicate funds to service those liabilities, while Republicans can more easily put money into expensive direct-mail or telemarketing programs designed to identify and sign up new donors.
Davis added that the situation was ironic given that senior Democrats in both chambers urged their rank-and-file to vote for the McCain-Feingold campaign finance bill in 2002, which outlawed the use of soft money, a major source of funds for the Democrats.
“They voted against themselves. They voted against their own best interests,” Davis said.
Several Democratic strategists said the debt problems at the two party committees is another example of how Democrats have fallen further and further behind in the unending money chase.
“First of all, [the Democratic Congressional Campaign Committee and Democratic Senatorial Campaign Committee] are getting outraised two or three to one by the Republicans,” said a top Democratic strategist, speaking on the condition of anonymity. “On top of that, the committees owe all this money. It’s a very, very troubling situation and I don’t see it getting better any time soon.”
Democrats do have some factors working in their favor. The DCCC and DSCC are together sitting on more than $8 million in cash, while the NRSC and NRCC had a total of just $4.3 million in the bank as of April 30. This comes despite the fact that the two Republican committees have dramatically outraised the Democrats, $40 million to $15.2 million, between Jan. 1 and April 30.
The DCCC plans to erase more than half of its $6 million debt by the end of June, according to committee officials. The DCCC had only paid off $4,150 of the total by the end of April.
Although the DCCC’s liabilities have actually grown in the past couple of months, committee insiders blame it on additional vendor costs rather than problems covering expenses. While the DCCC, like the other committees, hasn’t been able to staff up to the levels of previous cycles thanks to the loss of soft money, Democratic operatives said the ascension of Rep. Nancy Pelosi (D-Calif.) to the post of Minority Leader, the highest rank ever held by any woman in a national party, has given a boost to the DCCC’s direct-mail program.
“Debt is not a serious problem for us right now,” said a high-ranking DCCC official, despite the fact that the committee is paying well over $500 per day in interest in its $5 million in outstanding loans from Bank of America. Those loans, due in March 2004, were made at prime rate. “We’re not worried about it.”
But many Democrats acknowledge that they are at a huge disadvantage fiscally, and the McCain-Feingold law further exacerbated that problem by cutting off unregulated soft-money donations from corporations, labor unions and wealthy donors.
Without soft money to help cover the cost of some operating expenses and to use in swaps for hard money with state Democratic parties, the DCCC and DSCC have faced questions about how they will manage their liabilities.
The DSCC owes $5.4 million and had $2.4 million in cash on hand at the end of April.
The committee borrowed all of the owed funds from Bank of America in October 2002 at a rate of prime plus 0.5 percent. The prime rate is currently 4.25 percent.
The DSCC had made nearly $500,000 in loan repayments through April, absorbing a significant chunk of the $6.3 million it has raised overall.
DCCC Chairman Jon Corzine (N.J.) insisted that debt payments have not been a problem so far because interest rates are so low, keeping the costs of borrowing money down.
“It’s a lot different problem when interest rates are at 8 or 9 percent as opposed to — what’s the prime rate at now, 3 or 4 percent?” said Corzine.
Corzine declined to reveal the DSCC’s timetable for paying off the multimillion-dollar debt, but made clear it’s not something he’s likely to do anytime soon.
“We will pay it off when it fits within the concept of our cash flow,” said Corzine, a former bond trader who was chairman and CEO of Goldman, Sachs & Co. before running for the Senate. “It’s the least of my worries.”
His GOP counterpart, NRSC Chairman George Allen (Va.), argued that large debts will eat away at the Senate Democrats’ ability to put dollars into critical races, meaning some money they rake in now will inevitably go toward paying down their debt, meeting interest payments on that debt or both.
“I’d rather be raising money to help candidates than trying to raise money to pay off interest payments and debt,” the Virginia Republican said.
More troubling for Democrats, Allen said, was the fact that they now have to pay off this huge debt with only hard money — individual donors can give just $25,000 a year to party committees, as opposed to unlimited donations of years past — essentially forcing today’s donations to cover debts racked up during the era of soft money.
Allen wondered whether, with interest rates as low as they are, the Democratic committees would simply live with their debts for years to come, managing and mitigating it but never eliminating it outright. “It just may be that they’ll live on with it indefinitely,” Allen suggested.
Mitch Bainwol, the NRSC executive director during the 2001-02 cycle, said Senate Democrats “threw everything they had, plus about $5 million they didn’t have, into last cycle. They didn’t have a choice, but it’s a tough way to start a cycle.”
The NRSC, on the other hand, made millions of dollars worth of “swaps” with state Republicans parties, especially the Florida GOP, trading the committee’s soft dollars for the state parties’ hard dollars and using these funds to pay off its debts just before the soft-money ban went into effect on Nov. 6.
The NRCC has made a concerted effort to pay off its bank loans since the start of the year, according to Chairman Tom Reynolds (N.Y.). The New York Republican publicly tore up the paperwork for its last $1 million in liabilities at a press conference right before the Memorial Day recess.
“I made a promise at the beginning of this year to pay down my debt,” said Reynolds. “We’ve done it, and now we’re working on putting money in the bank.”
The NRCC, however, has spent roughly $16.6 million on telemarketing programs run by an Ohio-based company with strong ties to conservatives, and actually reported only $1.7 million in cash on hand, despite raising $31 million overall. NRCC officials claim the committee has picked up 170,000 new donors thanks to this program, as well as paying off the NRCC’s bills, although none of the other campaign committees has adopted a similar telemarketing strategy.
The May 21 Bush dinner could ultimately yield a $10 million windfall for the NRCC once it finishes paying its costs for the event. The NRSC will receive a smaller payment.
Paul Kane contributed to this report.