Politics Awash in Dollars, But Parties Mired in Debt

Remember all the money raised by Democrats and Republicans for the 1996 election? Well, it wasn't enough.

The Democratic and Republican parties are in the red. The Democratic National Committee is $14.4 million in debt, and its Republican counterpart owes $7.5 million, party officials say.

That means both parties face the prospect of digging out of a financial hole before they can once again begin amassing campaign war chests for coming elections.

The parties' debts are over and above campaign deficits recorded in party-affiliated committees in Congress and at the state and local levels. Year-end reports filed with the Federal Election Commission show Democrats face an additional $11.2 million and the GOP an additional $9.9 million in debts from such committees.

"It reflects this whole business of money and campaigns and all the problems that come with them," says Dom Bonafede, a professor at American University in Washington. He says the same dynamic that landed Democratic fund-raisers in trouble in 1996 may soon be at work once again.

"The higher the [campaign] costs, the more money they need to raise. And the more money they need to raise, the more desperate they become. And the more desperate they become, the more willing they are to skirt the law," he says.

No reprieve in sight

This year is expected to be relatively quiet for both parties, with governors' races only in New Jersey and Virginia. But 1998 will likely be key to the battle for control of Congress. Both parties will need large financial resources to carry out their strategies.

That explains why President Clinton has continued to appear at one fund-raising event after another since the election. He has faced criticism for focusing on raising money even as his party and the White House are being investigated for questionable fund-raising tactics in the last election.

Last year the Democratic Party refunded $1.5 million in suspect donations solicited by DNC vice chairman John Huang. Mr. Huang is now the target of several investigations. The party has pledged to return an additional $1.5 million in questionable contributions, but because of the money shortfall party officials say they won't do it until late June.

But analysts say that, compared with the more than $800 million that both parties spent, the debts seem small. "If you think of a ... $400 million corporation, a [$14 million] debt is not that much," says Herbert Alexander, a campaign-finance expert at the University of Southern California in Los Angeles.

Mr. Alexander notes that the Democratic Party had debts from the 1968 Hubert Humphrey presidential campaign until the early 1980s. More recently, the Democrats have had campaign debts throughout the 1990s but never as large as this year.

With the continuing fund-raising scandal, the Democratic Party's financial strength - and its ability to compete in future elections - could be undermined. Potential problems include:

* A possibility the party may have to return more donations.

* The continuing high cost of legal, accounting, and other services the party is paying for as part of its cooperation in on-going investigations. The amount could reach $4 million.

* A potential backlash by prospective donors who are either turned off or scared away by the investigative and media spotlight on Democratic fund-raising.

Will the fount dry up?

"Every fund-raising event that the president or the vice president has is going to be scrutinized, and some people may not be as ... willing to give if they are in a spotlight," says Alexander.

Party officials are hoping that doesn't happen. "It is always slow in the beginning of the year. People are tired after an election, but we've done pretty well in fund-raising," says Amy Weiss Tobe, spokeswoman for the Democratic Party. The party's goal is to raise $50 million this year.

By comparison, the Republicans seem to be in pretty good shape, analysts say.

Party spokeswoman Mary Crawford says the GOP was forced to borrow money late in the election to counter multimillion-dollar ads paid for by major labor unions attacking incumbent Republicans in Congress. She says the party plans to eliminate all debt by year's end.