The Money War Between Obama & Clinton -- Why It Matters

Posted by Ashish on 02.06.2008

Clinton's funds are sinking while Obama's are soaring...

As reported earlier, Hillary Clinton announced today that she loaned her campaign $5 million from her personal finances in January and may loan more of her personal funds to the campaign in the coming weeks and months, confirming that the Clinton campaign is already facing a financial pinch following what was essentially a Super Tuesday draw.

Meanwhile, Barack Obama's camp just announced that they have raised over $5 million in the last 24 hours alone! This is pretty stunning because it means that he could raise another $30 million in February (he raised $32 million in January, compared to $11 million for Clinton).

The Clintons will NOT be able to loan endless amounts of money to their campaign like Mitt Romney has been doing, and the longer this goes, the harder it is going to get to overcome their financial situation. This is a strategic problem on their side. They opted to build their campaign on donations from big donors who donated the max of $2300, figuring that they would be able to secure the nomination by February 5th. This is also why they have completely ignored all post-February 5th states (Clinton's website still doesn't have anything on any post-February 5th states except Virginia and Maryland while Obama's has had specific pages for all of them since the beginning). Obama opted to raise money with a grassroots campaign. So for every $2300 max donor Clinton had, Obama had to get 23 people to donate $100. It's obvious now which route is working. While Clinton is more or less out of donors (many of whom are now frustrated after early promises that Clinton would win this race easily), Obama's camp is now getting more money from people who aren't anywhere close to the $2300 max, and continue to get donations from new individuals. Infact, the Obama camp says only 2% of their current donors have donated the max, while over 70% of Clinton's donors have contributed the max.

Texas, Ohio, and Pennsylvania are big states that will require a lot of funds to properly organize and advertise in. Clinton will be fine through March, but if this goes on to April, May, and June like most now expect, she will eventually face a major problem of not having enough money.

There are various reports out today that many of her campaign staffers are now working without pay. Where did you hear this last? From the Rudy Giuliani campaign which ended up closing down a few weeks later. Obviously the Clinton campaign isn't ending anytime soon, but they have a fundamental problem in that they aren't proving to be successful in recruiting new donors.

Realizing this, Clinton tried to change her status today, labeling Obama as the "establishment candidate" and the "frontrunner." I think it's a bit of a stretch to get people to believe either of those when the person saying it has the last name of one of the most powerful families in American politics. Still, she has little choice now but to try and frame herself as the underdog. Let's remember that this is the same Clinton that ran as the inevitable nominee for all of 2007.

But let's remember that ultimately, money isn't all that matters. It does matter, but it's not all that matters. Whether Obama is able to get efficient use out of that money in terms of actually having it translate into more votes for him remains to be seen, though it did work very well on Tuesday when he was able to use his superior finances to build strong organization all across the nation and thus win the majority of states. Clinton was able to hold on to the states that she had built organization in from the start, but she doesn't have much, if anything, in place in the remaining states (except maybe Texas) and will now have to basically start from scratch.