Obama's Internet Money Machine and the Future

A friendly warning to everyone (including myself) who is celebrating the unprecedented success of the Obama money machine: be careful what you wish for.

There are many factors in the perfect political storm that is forming around Obama: outrage at the Iraq war, generational shifts in key American communities, and the extraordinary charisma of the candidate himself, among others. But none is more important than the arrival of such a fresh and appealing political persona right at the moment when Web 2.0 social networking has matured to where it is a viable political tool. As a result, the outsider candidate is awash in a pile of cash that dwarfs anything the country has ever seen, a sum not even dreamed of by even the most callous and corrupt insiders of old: over a quarter of a billion dollars so far, and he is two months away from even being declared the nominee. Sources in the Obama campaign are saying the campaign may bring in $100 million more in June alone.

From the outset, pundits had predicted this might be the first US presidential campaign in which the sum total of money raised by all candidates topped $1 billion. Take the curve of Obama's fundraising over the last few months and project out through November, and it appears that Obama could raise a billion dollars by himself!

Among Obama supporters, like myself, this has been celebrated as an Internet-driven turning of the tables on the kind of money politics that has dominated America for so long. 1.5 million people have given Obama money, and nearly half of them have made donations of $200 or less. (All these small donors -- who the campaign is in regular contact with via email -- can legally give much more, which is one reason why it might not be that far-fetched to extrapolate his current fundraising curve for 5 more months.)

Surely this sort of opening-up of political campaign financing has to be counted as a huge victory for democracy, right? All those years of hype about the democratic potential of the Internet are finally coming to fruition.

There is another side to this, however, that I think it is important to keep in mind: national American politics is now going to be much more expensive than it has ever been, by a long shot.

Some perspective: in 2004, GW Bush raised $367 million, a historic record. Obama will raise more than that before the convention.

Or look at it this way: just under half of Obama's contributions have been in amounts of $200 or less. For demonstration purposes, let's say that the average small donation was $100. If you do the math, that works out to small donors giving Obama $70 million, leaving big donors responsible for $200 million. With luck someone with better data than I have will respond to this blog with more detailed numbers. Whatever the actual numbers are, it will work out that the huge majority of Obama's money has come donations over, not under, $200.

Yes, this is a wonderful thing that the Internet has democratized political financing in an unprecedented way. What is even better, the fact that the progressive guy figured out the new money regime first may catapult him from freshman senator to the White House, opening one of the most exciting chapters in American political history.

But it is not insignificant that in the process, vast sums of money are flooding into the political arena. Remember that until we suddenly found ourselves on top, most of us Obama supporters thought it was crucial to make American politics less expensive, not more.

What will be the real long term impact of all this on American politics? I don't know, and I think anyone who claims they can see into that crystal ball needs to calm down. When the smoke has cleared, I think we will find that, as is so often the case, new technology once widely adopted, won't make anything better: rather, it will take our same old problems and play them out again, with slightly different dynamics, but on a much larger scale.