In money race, Bush carries big advantage

WASHINGTON -- As Democrats turn their gaze from their primary campaign to the general election, the outlook -- financially, at least -- appears bleak.

The most recent official figures show that President Bush had $104.4 million in his campaign treasury as of Jan. 31, while the Democratic nominee-apparent, John F. Kerry, had a mere $2.1 million.

Making matters worse, during the primary race the Massachusetts senator threw his campaign a lifeline with a $6.4 million loan from a mortgage on his Beacon Hill townhouse. It helped him win the Iowa caucuses and New Hampshire primary, but it also left his campaign with a total debt of $7.3 million.

Bush, meanwhile, continued to rake in millions from Republican donors while Kerry was fending off Democratic challengers.

Yet both sides concede those bottom-line figures do not tell the full story about how the Republicans and Democrats stack up now that Super Tuesday has passed and the general election campaign can begin in earnest. Tomorrow the Bush-Cheney reelection committee will air its first ads, $4 million worth in 17 states. Democrats are getting ready to respond.

An incumbent president has an almost unlimited fund-raising ability, each side agrees, meaning money will be no object as Bush seeks a second term in the White House. The reelection committee has a stated goal of raising $150 million to $170 million, but party officials said they may not stop until they have raised $200 million or more.

"With the Democrats at center stage under the spotlight for several months, voters have heard an awful lot of noise," said Terry Holt, national spokesman for the president's campaign. "As we get into the general election, we intend to set the record straight and kind of remind voters of the president's leadership."

The Democratic nominee, meanwhile, will almost certainly be boosted by two factors. One is a raw yearning by Democrats to oust Bush. The other factor is third-party spending on the nominee's behalf by political action groups known as 527s, which party officials believe could contribute $70 million alone this spring.

In addition, the Democratic National Committee is not only debt-free for the first time in recent history, but it also has $17 million in the bank, a direct-mail list with 1.5 million names, an e-mail list with 2 million names, and a goal of raising $100 million this year to support the nominee.

Unlike in 2000, when the party had no money to help Al Gore respond to Republican ads during the lull between winning the nomination in early March and being formally crowned the nominee at the midsummer convention, this year the Democrats have an immediate $15 million kitty waiting for the primary winner, and a promise to deliver more.

"All the tools are in place," chairman Terry McAuliffe said during an interview in the party's headquarters, where a $40 million renovation has spread computers, radio and television studios, and plasmatelevisions throughout the complex. "We are sitting so perfectly, we're ready to explode. . . . There's a tremendous amount of folks out there waiting till we give the signal."

At the same time, both sides have latent concerns.

Democrats fear the Federal Election Commission, which has three Democratic members and three Republican members but is led by a Republican member, will shut down the 527s, including groups such as MoveOn.org and the Media Fund. Both are readying pro-Democrat ads as part of an estimated $40 million to $70 million in advertising expected by such groups this spring.

Republicans have asked the FEC to examine the legality of the spending, arguing it violates soft-money restrictions under the campaign finance law, which the Democrats supported in 2002.

Republicans also fret that Kerry's wife, Teresa Heinz Kerry, will find ways to use her $500 million fortune to shape the race. Party officials say there is a pattern of Heinz Kerry bailing out her husband at politically sensitive times since they married in 1995. They say they are concerned she could funnel philanthropic money from the foundations she heads to advocacy groups that support her husband or oppose Bush.

"There is no way you can do that," Jeffrey Lewis, Heinz Kerry's chief of staff, said regarding the use of foundation money for political purposes. Heinz Kerry, however, has the right to spend her personal funds to respond if she is attacked politically, Lewis said.

Kerry himself, who has had only three fund-raising events since December, will soon return to the money trail. "There is a pent-up demand to see John Kerry, and there's a lot of events we have put off because his campaign schedule has been so jam-packed," said Mary Beth Cahill, Kerry's campaign manager. "There are a lot of fund-raising events scheduled in March and April in order to satisfy that interest. In addition, obviously, we are investing more and more in Internet fund-raising."

All told, the Kerry campaign has received $23.6 million in contributions for the current cycle, according to the Jan. 31 report. Additionally, Kerry transferred $2.7 million from his Senate campaign account to his presidential committee. He also loaned his campaign $6.4 million over a period of weeks in December and January.

Bush, by contrast, has raised $145 million during the cycle, including transfers from other committees, but he has not invested any personal money in the race. His campaign had $72,300 in debts as of the end of January.

While Kerry's loan provided a vital boost during the primary, it also generated scrutiny by his Democratic rivals and criticism by his Republican opponents, and today presents a dilemma for the candidate.

On a personal level, he faces questions about how a senator with an annual salary of $158,1000 can make the $15,000 monthly interest payment on a $6.4 million loan. Kerry's Senate financial disclosure form lists assets totaling about $2 million.

"He has assets beyond what's shown on the personal disclosure form," said Kerry spokesman Michael Meehan. "That is focused on assets you hold for investment purposes." Kerry himself has acknowledged personal trusts worth over $1 million. In addition, he has revealed a stake in artwork.

The loan is also secured with Kerry's half-interest in the Louisburg Square townhouse he owns with his wife. It was recently appraised at $12.8 million. As part of the loan process, Heinz Kerry gave the bank permission to foreclose on her half of the property as well if her husband defaulted on the loan, said a Kerry campaign attorney. Federal election law expressly allows such action.

On a political level, the loan presents Kerry with a more vexing question.

The note requires an interest-only payment of $15,000 each month for the first 10 years, a payment the senator had his campaign make in January, as is allowed by FEC law. The committee said future decisions on how to pay the bill would be made on a monthly basis.

Under campaign finance law, Kerry can continue to have his committee repay the loan until July 29, the night he is expected to be formally crowned the Democratic nominee in Boston. After that, there is a limit on the amount of campaign cash that can be used to repay such loans. The law states that it can be no more than whatever cash on hand the committee has as of that night, plus an additional $250,000.

After those funds are exhausted, Kerry will be personally liable for the loan.

Kerry will have to decide whether to pay down the loan before then with campaign funds, at a time when he will be traveling the country, hat in hand, appealing for money to ward off Bush and an advertising onslaught that begins tomorrow.