Bay Area Local: endorsing Teresa Alvardo in Santa Clara County, April Vargas and Dave Pine in San Mateo County

It's interesting to actually know some of the people running for office pretty well.  I've met Teresa Alvarado a number of times over the years in my day job of protecting open space from sprawl, and she's a committed environmentalist running for county supervisor in the biggest and most conservative supervisor district in Santa Clara County.  If she wins in this very tight race, her influence in representing the areas where developers are often pushing for sprawl could be a tremendous influence in protecting all 700,000 acres of Santa Clara County.    If you know anyone who knows anyone in South San Jose/Evergreen, Morgan Hill, San Martin, or Gilroy, please please please send them to her website at the link.  And they can also listen to a debate between Teresa and her fellow candidates.

I've known April Vargas and Dave Pine, both running for separate county supervisor seats in San Mateo County, for years as past and present members of my organization's board of directors.  You won't find a harder worker than April, in many ways the anti-politician due to her lack of egotism.  Dave is also smart and committed, and I think he's running without real opposition.

I'll use this opportunity to get back on my hobbyhorse against candidates loaning money to their campaigns.  I don't object to candidates donating to their campaigns, but loaning money creates a situation where a winning candidate receives a direct financial benefit from contributors whose donations to the campaign then gets paid to the candidate to retire the loans.  Candidates and contributors might not think of it in those terms (although I'm sure some do), but it's a messed up system that should be changed.  A legal prohibition might run into problems from the current Supreme Court that thinks unlimited money is fair because everyone is free to loan millions to their campaigns, but it's worth a shot.  Teresa and April haven't loaned money to their campaigns, but each have opponents who have.

Finally, I might as well disclose that I'm personally thinking about running for local office - haven't made any final decisions yet.  Could be interesting....

Campaign debts and a nifty money-laundering trick

Bloomberg has a good article on the state of play for Clinton's campaign debts that also helps define the problem of candidates loaning money to their own campaigns. Her campaign owes $20 million, $11 million to herself and $5 million to the unliked Mark Penn.

Reforms initiated by John McCain (credit where due) address some of the problems of candidates loaning money. Other campaigns can help fundraise but can't simply pay off the debts. Debts can be repaid in full before the election, but "only" $250,000 can be repaid to candidates after the election.

The candidate loan problem remains, however, in the period between when the election is actually decided, like it is now for the Democratic nomination to be held in late August, and when the election actually occurs. Winning candidates will get deluged with money from contributors trying to curry favor by putting money in the candidates' pocket through paying off the loans candidates made to their campaigns. Losing candidates who are still powerful, like the Senator from New York, will be even more grateful to people who pay them off.

And while other candidates can no longer bribe a competitor to drop out by paying the loan the candidate made to herself, the fundraising help is significant. Finally, there remains the $250,000 contribution that can happen anytime. Candidate loans to themselves should be abolished.

I also wanted point out a neat trick in money-shifting from Bloomberg:

Unlike the rules for her personal loan, Clinton can tap her Senate campaign account to pay off the vendor debts. While the account had $277,480 as of March 31, she could ask the donors who gave her $23 million for the general election if they would be willing to re-designate that money for her 2012 Senate re-election campaign. That would give her more than enough cash to repay everyone but herself.

People gave to the general election fund because they maxed out the $2,300 allowed for the nomination. Redesignating the money for her Senate campaign and then using that money to pay vendor debts means contributors can exceed the $2,300 cap for the nomination. I didn't know about this, and I wonder how many other loopholes are out there.

UPDATE: NY Times sez it's unclear whether the money-shifting trick is legal.

John McCain also loaned money to his campaign (in 1982)

Turns out that McCain also delved into murky area of loaning money to his campaign, albeit in 1982. He loaned $167,000 from his wife's fortune to break into politics and win a contested Republican primary in an open seat. That's $376,000 in today's dollars, and has the same ethical problem of subsequent campaign donations repaying the loan and going directly into his pocket. Arizona Democrats looking to dig up some dirt on McCain might research who donated money to his campaign after he won the primary - the district was heavily Republican, so any donations from that point on until the debt was paid, had the sole effect of going into McCain's bank account.

McCain had no other tough Congressional or Senate contests, so I doubt he loaned money again. I was able to check FEC records for his 2000 and 2008 presidential campaigns, and no personal loans are listed.

I suppose it's also worthwhile to ask whether Obama loaned money to any of his early campaigns.

If Exxon can lie, then so can I

Not much climate blogging out there on this issue: Exxon-Mobil did a significant blogger outreach over a year ago, promising to stop lying about climate change by funding climate denialists. I had some doubts about it. Turns out I wasn't doubtful enough. Environmental Law Prof Susan Smith has the goods (and she's not happy at being taken in herself). Exxon gave $180,000 to Frontiers of Freedom, a denialist astroturf group in 2006, when they said they stopped doing that. Smith lays out the denialist nonsense that FoF comes up with.

To be generous to Exxon, maybe they decided to stop lying through funding in the middle of 2006 after giving away the money, and were just inexact in their January 2007 discussion. We'll see what they disclose for 2007 donations, then.

Enough with Exxon's lies, what about mine? I said I'd stop writing about Hillary Clinton's $5m loan. Ha! Via emailer Jeff, Matt Yglesias and Ben Smith are still on the issue. Smith found out that Clinton's charging 1.26% interest on her loan, apparently unheard of even in the murky world of candidates loaning money to their campaigns (UPDATE: turns out it's not unheard of, Kerry charged a far higher rate to his own campaign in 2004). I posted this comment at Yglesias' site:

What's interesting to me though is that [the interest] may set up HRC to treat non-payment of the loan, should she decide to forget about getting repaid, as a capital loss to set off against her other capital gains.

In other words, if she just gave $5m to her campaign, she's $5m poorer. But instead, if she loans the money following IRS regs for arms-length below-interest loans, and decides later to not get paid, she writes off $5m against any capital gains she and Bill make in the tax year. Bill's cashing out of a partnership, so he'll have a lot of capital gains. Not a bad way to get $1m-plus tax benefit off her donation. The rest of us get no tax writeoffs from political donations.

I'm just speculating though. A tax specialist/accountant should really look into this.

A question for the Clinton campaign about the $5 million loan

Here's the question:

"Can you guarantee that all the small donor contributions to the campaign will be used for electing Clinton president instead of paying back the $5 million loan and ending up in her pocket?"

I think it's a fair question. Suppose that Sarah Saintly, a widow living on a small fixed income, gives her last extra cash to the campaign in the belief that Clinton had the best chance to beat the Republicans and enact a progressive legislative agenda. Sarah has the right to know whether a portion of her money will not be used for that purpose and instead be redirected into the pocket of the multi-millionaire Clinton family. And if the Clintons loan more money to their campaign as has been suggested, an even larger-percentage of Sarah's donation goes the the Clintons instead of the purpose Sarah intended.

Some other questions: what are the terms of the loan? Does the campaign have to pay back with interest? That could really lend itself to abuse. The McCain campaign released the document showing the bank loan it received - can we see the actual document?

When will we know if Clinton will loan more money to her campaign, and how much? Will Bill Clinton loan money to the campaign? Is there any legal distinction between a loan from Hillary and a loan from Bill?

It might be a little difficult for the Obama campaign to push the issue - prominent supporter John Kerry apparently did the exact same thing as Clinton in 2004. Still they should - it's the right thing to do and will help their campaign. And nothing would stop reporters from asking these questions.