From Bloomberg:

Obama, McCain Say They Would Agree to Public Campaign Financing

By Kristin Jensen

March 1 (Bloomberg) -- Democrat Barack Obama and Republican John McCain said they'll accept public funds -- and spending limits -- for the 2008 presidential election if they win their party nominations and their opponents agree to do the same.

The two U.S. senators reacted today to a ruling by the U.S. Federal Election Commission allowing Obama to raise money for a general campaign and return it later if he decides to accept federal funds. Obama said he'll keep money for the general election in a separate account and not spend it.

Their moves may shore up the three-decade-old public funding program, which was in danger of collapse as candidates opted out to avoid the program's spending limits. Democratic frontrunner Hillary Clinton led the way in rejecting the system by beginning to raise funds for the general campaign right away.

``If Senator Obama is the nominee, he will aggressively pursue an agreement with the Republican nominee to preserve a publicly financed general election,'' Obama spokesman Bill Burton said in a statement e-mailed to reporters.

McCain's campaign manager, Terry Nelson, then followed suit.

``The McCain campaign will now begin the process of accepting these general election funds, following the new FEC guidelines,'' Nelson said. ``Should John McCain win the Republican nomination, we will agree to accept public financing in the general election if the Democratic nominee agrees to do the same.''

Watergate

The public finance system was created after the Watergate scandal as a way of reducing the influence of big donors. While McCain, of Arizona, sponsored a 2002 law intended to rein in campaign fund raising, he hadn't yet committed to taking public funds to salvage public financing.

Clinton's campaign is considering a change in its position after the FEC ruling, spokesman Phil Singer said. The campaign of former Democratic vice presidential candidate John Edwards didn't have an immediate comment.

Rudy Giuliani, the former Republican mayor of New York, hasn't made a decision on federal financing yet, though he will now start raising money for the general campaign, said spokeswoman Maria Comella. Kevin Madden, a spokesman for former Republican Massachusetts Governor Mitt Romney, said his focus ``remains on the primary'' though the ruling ``expands the universe of available financing options.''

Until now, every major party presidential candidate has participated in the federal financing system since it began. It offers matching funds in primary campaigns and a one-time grant in the general campaign, funded by Americans who tick a box on their tax returns sending $3 to the program.

Public Money

The problem is the public money isn't keeping pace with the amounts candidates can raise on their own through big fundraisers or Internet appeals. FEC commissioners said today they voted to allow Obama, of Illinois, more flexibility to try to preserve the program even if the ruling raises more questions later.

``The public funding system rests on a very fragile base,'' said Hans Von Spakovsky, one of the three Republican FEC commissioners. He and fellow commissioners approved Obama's request on a 5-0 vote, with Commissioner Michael Toner absent.

Under federal law, an individual may donate $2,300 to a candidate for the primary campaign and the same amount for the general election, as long as the candidate doesn't accept public funding. The second donation must be returned if the candidate doesn't win his or her party's nomination.

In 2004, Democrat John Kerry and President George W. Bush opted out of the public financing system in the primaries. They accepted the $75 million general election campaign grant and agreed to abide by the corresponding spending limit.

In this race, analysts expect the Democratic and Republican candidates to each raise and spend $250 million in the general phase of the campaign. Clinton, 59, a New York senator, began raising the maximum $4,600 donation for the primary and general campaigns from the start.

The FEC ruling allows Obama, 45, to stay competitive while keeping open the option of public financing.

``I appreciate Senator Obama's ingenuity and his innovation,'' said Commissioner Ellen Weintraub, one of three Democrats on the FEC. ``It's a good policy result.''