For a party that likes to champion the little guy, the Democrats have a big problem. For years, Republicans have dominated the competition for small donors, leaving Democrats increasingly reliant on a claque of wealthy, big-dollar benefactors, primarily from Wall Street and Hollywood, to fuel operations. Now, with the new campaign-finance reform law banning huge "soft money" contributions after the fall elections, Democrats are confronting a Darwinian challenge: adapt or face financial extinction. "This has to do with the survival of the party," warns Democratic National Committee Chairman Terry McAuliffe.
As DNC chairman, the wealthy upstate New York entrepreneur, who has started companies involved in real estate, banking, insurance, and marketing, is at the center of a financial and technological challenge unlike any faced by a national party in modern times. He has the daunting task of leading his party into the unknown post-reform era while erasing more than $7 million in debts. What's more, when McAuliffe, 45, took the top job 15 months ago, he quickly learned that the money gap between the parties was compounded by a serious technology deficit at the DNC.
While Al Gore got 51 million votes in 2000, the party had only 400,000 names in its database (thousands of whom had moved or died). It had e-mail addresses for just 70,000 voters--vs. 1 million for the GOP. "Something was fundamentally wrong," McAuliffe says. "The Democratic Party has 21st century ideas, but we had Stone Age technology."
Is McAuliffe the right person to modernize his party? The good news for Democrats: Their boss is a prodigious fund-raiser who has wheedled more than $600 million for party causes over the years. But his specialty--raising tens of millions in unlimited soft money contributions from wealthy individuals, unions, and corporations--will be relegated to history's scrap heap in six months. And McAuliffe is untested in the brave new world of hard money, where cash must be solicited from individuals at $2,000 a pop and unions and corporations are limited to $5,000 political action committee donations.
What's more, the energetic fund-raiser has been dogged by ethics complaints such as a profitable early investment in now-
bankrupt telecom Global Crossing Ltd. Despite his skills, some party activists think his wheeler-dealer image sends the wrong signal to voters. "The Democratic Party should be about helping people in need and not about using your connections to enrich yourself and your friends," says former DNC consultant Jennifer Laszlo Mizrahi.
Undeterred by his critics, McAuliffe is forging ahead with plans to modernize party operations. Among his top priorities: building a list of "collectors" committed to raising $25,000 in small contributions, much like the "Pioneers" who helped George W. Bush raise more than $20 million in 2000. McAuliffe's audacious goal: "Replace $100 million in soft money with hard money."
Without his mega-soft-money events that have grossed upwards of $25 million, McAuliffe plans to launch a series of concerts and smaller festivities featuring celebrities such as comedian Chris Tucker and salsa singer/actor Ruben Blades. These events are designed not only to raise money but also to expand and rejuvenate the party's mailing list, now dominated by retirees. The DNC also plans to use its Web site to simulcast these concerts and offer interactive receptions in exchange for a small donation and an e-mail address.
The model for this new strategy: an Apr. 24 gala that raised $2.7 million at Harlem's Apollo Theater and featured former President Clinton, Michael Jackson, Tony Bennett, and k.d. lang. A second concert is planned for Washington's MCI Center on Oct. 8.
But glitz and glamour only go so far. McAuliffe will depend on a greatly expanded database to yield hundreds of thousands of new donors. Already, he says, the party has expanded its e-mail list from 70,000 to about a million, and will have cataloged 43 million potential Democratic voters by the end of June.
Party officials think they're seeing a return on McAuliffe's $10 million-plus tech investment. The DNC raised a record $27.5 million in the first quarter of 2002, including a best-ever $8.1 million from direct mail. Still, Republicans more than tripled the DNC in hard money. And skeptics still wonder if McAuliffe's efforts are more rhetorical than real. "Every Democratic chairman says the right things, but they never get it done," says former Republican National Committee Chief of Staff Tom Cole.
In the end, talk won't be enough. With new campaign rules taking effect and a prolific GOP fund-raiser in the White House, McAuliffe has little room for error. The master of soft money will either adapt to the changing times or go down in a long line of DNC bosses who talked big but failed to deliver.
Corrections and Clarifications
"Can Mr. Soft Money rescue the Dems?" (Government, May 20) should have said that illegal foreign contributions were made in 1996 to the Democratic National Committee, not to the Clinton-Gore campaign. Current DNC Chairman Terry McAuliffe, as finance chairman of Clinton-Gore until early 1996, was not implicated in the DNC scandal. Also, while McAuliffe was a consultant to Global Crossing's founder and chairman, Gary Winnick, he was not a consultant on Global Crossing. He was an early investor.
By Richard S. Dunham in Washington
Get BusinessWeek directly on your desktop with our RSS feeds.
Add BusinessWeek news to your Web site with our headline feed.
Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.
To subscribe online to BusinessWeek magazine, please click here.
Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
