Loan Talk Underscores McCain's Money Problems

As Sen. John McCain (R-Ariz.) continues to mull whether to accept public financing for the remainder of the GOP presidential primary campaign, his campaign manager is speaking openly about the possibility of taking out a seven-figure loan to avoid the limits that come with accepting public funding.

McCain shakes hands with a World War II veteran as he campaigns Wednesday in Columbia, S.C. (AP Photo)

Rick Davis, who took over control of the day-to-day operations following a huge staff shuffle this summer, has broached the subject of a large loan to fund the campaign's activities in early states. The idea was discussed as recently as a phone call this week with senior staffers, according to sources familiar with that conversation.

Jill Hazelbaker, McCain's communications director, said the candidate himself has never considered the possibility of taking out a loan to avoid the spending limits that come with accepting public financing. (In Iowa, the spending cap is around $1.5 million while in New Hampshire it is approximately $800,000.)

Regardless, the debate within McCain's inner circle over the campaign's fundraising shows the financial straits now facing the one-time frontrunner.

In reports filed at the end of September, McCain showed $5.7 million raised over the past three months. While he had roughly $3.5 million left in the bank, just $1.8 million of that total can be spent on the primary. When factoring in the $1.7 million in debt McCain carried, his campaign is barely breaking even.

Given those financial struggles, it was baffling to many observers inside and outside the campaign when McCain approved a significant expenditure of funds on a 100,000-piece direct-mail drop in Iowa this week. McCain, who skipped Iowa in 2000, has struggled to build support in the state; privately, his aides have downplayed the importance of the state to his hopes at winning the nomination.

Not so New Hampshire. McCain continues to run strong in the state, with most polling showing him in a competitive three-way race with Mitt Romney and Rudy Giuliani. McCain has spent scads of time campaigning in the Granite State -- the site of his 2000 upset over George W. Bush -- and has already run television commercials there.

Given McCain's limited resources, there is a strong argument to be made that he should focus all of his time and money on New Hampshire in hopes of winning an upset victory there and using it to catapult him into contention in South Carolina, Florida and beyond.

There is no set date for when a candidate must decide whether or not to take public money for the primary, although one election lawyer said that in order for McCain (or any other candidate) to be able to borrow against the publicly provided money, he must inform the FEC of his decision by early November. Only of the top-tier candidates on either side -- John Edwards (D) -- has said he will take public financing for the primary.

John Weaver, a former senior adviser for McCain's presidential campaign, said there is no real option left for McCain other than to take public financing.

"They have the luxury of not having a choice in regard to accepting matching funds and giving their army hope of having enough funds to compete in the early primary states," Weaver said. "John has always been the superior candidate in the field, and not taking matching funds deprives this superior candidate from competing for the nomination. Not accepting matching funds out of pride is malpractice."

By Chris Cillizza  |  October 18, 2007; 1:15 PM ET
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