What Happens to Hillary's $8 Million Debt?

President-elect Obama today named Hillary Clinton as the person he’ll nominate for the job of secretary of state. (She’ll be the first U.S. Senator from New York to get that job since John Foster Dulles in 1952.)  Which raises the question of her lingering debt from the presidential campaign.  

What is Mrs. Clinton going to do about the $8 million owed by her ’08 presidential campaign?

After conceding the Democratic nomination to Obama earlier this year, the former First Lady was in the red to the tune of almost $22 million, the largest presidential campaign debt in history.  She has already eaten the $13 million of her own money that she lent to jump-start the campaign.  So she now has to deal with $8 million, the lion’s share of which is owed to major companies that did her television commercials and polling.  According to the October SEC reports, the Clinton campaign has just over $1.1 million on hand.

Can she legally be retiring the debt as a federal employee?  According to former Federal Election Commission member and campaign finance expert Hans Von Spakovsky, the answer is yes — since she ran for President but not the Senate or House.  As Von Spakovsky told me, “There is no problem under the Federal Election Campaign Act in a former candidate raising and soliciting funds to retire a campaign debt.  If a former candidate becomes a federal employee, then the Hatch Act’s prohibitions would normally apply and while a federal employee can contribute money to political campaigns, the employee cannot solicit or receive political contributions.   However, there is an exception in the Hatch Act for the President, the Vice President, and political appointees confirmed by the Senate as long as none of the activity is paid for by government funds.”

Mrs. Clinton’s dilemma may well be that, while it is legally possible for a secretary of state to retire a debt from running for President, the perception of it may not look that good.  Contributors would be under intense scrutiny as to whether they do business in, say, Communist China or Iraq or Venezuela or other “hot button states” in which the secretary of state will be dealing.  As FEC spokesman Bob Biersack told the New Republic (November 19, 2008) when asked about this subject, “[T]here may be rules in ethics and government…There may be all kind [sic] of reasons you many not want to be raising money when you’re secretary of state.”  

Although Obama has promised to deploy his far-reaching and formidable fund-raising apparatus on behalf of his former opponent, there is no evidence yet that the president-elect has signed a nationwide fund-raising appeal on her behalf or planned any special events.  The concept of one office-holder who has emerged triumphant raising money for another who has lost is a dicey situation.  Don Lyon, a conservative minister who had challenged liberal Republican Rep. John B. Anderson for renomination in 1978, spent several years retiring his debt from that race and a subsequent losing race for Congress in 1980 (when Anderson retired to run for President).  Lyon’s campaign manager R. T. Gregg  told me that when he got Members of Congress to sign letters on behalf of his candidate, “They yielded very little.  People will give to their political heroes, but not that much to who their heroes tell them to.”  

After he became vice president in 1981, the ever-gentlemanly George H.W. Bush reached out to John B. Connally (with whom he had had a long-standing political feud in Texas) and signed a nationwide letter urging recipients to help the debt Connally accrued from his own 1980 bid for the Republican presidential campaign.  This noble effort clearly did not do much good for Connally, who died with the campaign debt as well as the business debts that led him to declare bankruptcy later in his life. 

John Glenn spent twenty years trying to pay off the $3 million he owed from his unsuccessful bid for the Democratic presidential nomination in ’04.  Finally, the former Ohio senator and astronaut worked out an arrangement with creditors in which they accepted a percentage of the money they were owed.  The Glenn-for-President campaign of 1984 finally shut down in 2006.

Even for a winner, debt retirement can take some time.  Most of us have seen the film of John F. Kennedy’s birthday party at Madison Square Garden, in which Marilyn Monroe serenades him with “Happy Birthday, Mr. President.”  Most of us don’t know that the guests at the party were charged to help pay off the debt from Kennedy’s winning presidential campaign two years before.