David Axelrod says the White House is ramping up its fundraising goals for the 2012 campaign. W.H. open to Dem outside groups in 2012

The White House is bracing for an onslaught of $500 million or more in spending by outside Republican groups opposed to President Barack Obama's 2012 reelection, prompting Obama advisers to give the green light to big Democratic donors to set up similar outside groups to counter the GOP’s effort.

That posture marks a significant shift by a White House that had discouraged outside players in the political arena in 2008.


"There's no doubt they were just warming up and will be coming after us next," David Axelrod, a senior Obama adviser, told POLITICO in an interview. "If they spent $200 million on Senate races, they are capable of adding a half-billion to a billion in a race for control of the presidency."

To counter the anticipated wave of attacks, Axelrod said the White House is ramping up its campaign fundraising goals by equal amounts.

And, when asked three times, Axelrod refused to wave off — and seemed to expect — a similar, well-funded campaign by wealthy Democratic donors and the party's activist allies in labor and the environmental communities in the 2012 campaigns for the White House and Congress.

"Our strong preference is for a campaign finance system that is transparent and open and in which the American people can see what's going on," Axelrod said. "But I am sure the physics of this is that there will be people offended by this and they will be inspired to get involved."

Translation for Democratic groups: We know you are coming, but please disclose your donors.

That is the approach that two liberal groups, America's Families First Action Fund and Commonsense Ten, took when they engaged late in the midterms to create a "firewall" around enough Democrats in hopes of preserving the party's majorities in the House and Senate. Both groups disclosed their donors with the Federal Election Commission, unlike most of the newly created Republican groups that organized under different tax codes that allowed their donors to remain anonymous, including an influx of some corporate givers.

Senate Democrats held on; House Democrats didn't.

Some Democrats have complained openly that Obama’s 2008 admonition against outside groups spending money during his presidential run carried over to 2010, leaving Democrats on the sidelines without a well-tuned infrastructure of groups to help embattled candidates.

At the same time, Republican groups were springing up to pump cash into midterm races across the country — to the tune of nearly $200 million in expenditures.

Some frustrated Democrats have suggested they have no intention of being outgunned again in 2012, and Axelrod’s comments suggest that will be OK with the White House.

"I have no doubt after having watched $200 million rain down on Democratic candidates that there will be folks concerned about that and emboldened to get involved," Axelrod said.

The inflation in presidential fundraising expected by both camps in 2012 is due in large measure to Obama’s decision to finance both his primary and general election with private donations rather than accepting public matching funds, as GOP hopeful John McCain did. Obama raised more than $650 million as of October 2008. When his convention and transition costs were included, Obama became the first candidate to raise roughly $1 billion for his presidential bid.

While Axelrod said the president will rely on a grass-roots-driven fundraising operation again for his reelection, the GOP outside groups in 2012 will be able to raise money faster since they don't have to abide by similar caps on donations.

Already the founders of American Crossroads, the new Republican group co-founded by former Bush advisers Karl Rove and Ed Gillespie, are working to rebuild their campaign war chest and prepare for the presidential contest.

“This was a dry-run to 2012,” said one Republican insider familiar with Rove’s habit of testing new political tactics in off-year elections.

A key to Crossroads’ ambition of scaling up to a presidential campaign-year level will be expanding its donor base, including persuading corporations that were reluctant to engage in the Republicans’ 2010 experiment to get off the sidelines and get into the game.

This year's U.S. Supreme Court decision in Citizens United v. the Federal Election Commission freed corporations and labor unions to sink millions in general treasury revenue into political advertising and other campaign tactics.

Still, many corporate general counsels had urged caution since it was unclear whether investigations and lawsuits would ensue or whether the Democrats, having survived such an onslaught, would hold hearings that would expose their donations, several GOP sources said.

The election night drubbing that Democrats endured has diminished those fears.

“I think there are corporations that are going to be more willing to come forward,” said Vin Weber, a former Republican House member who worked with one of the Crossroads groups. “This would be a new funding source, not just an increase of giving from wealthy individuals.”

If those efforts are successful, Obama could face the full fury — and immense treasuries — of corporate America when he seeks a second term.

Of course, none of that is a foregone conclusion. While the Crossroads experiment appears to have come off without a hitch, the Internal Revenue Service may well show some interest in the so-called charitable and educational groups that emerged as the toughest political players of 2010.

And, according to Bill Miller, political director for the U.S. Chamber of Commerce, business giving is often tied to the level of threat they face.

“If there is no continued threat to those people, they might give you some money but they won’t give you the money that says: ‘Take the bad guys out.’ We took the bad guys out,” said Miller, in reference to the House Democratic majority’s defeat.

The chamber, which was active in House and Senate races and will be so again in 2012, does not intent to break its tradition of not engaging directly in presidential campaigns, said Miller.

However, the threat posed by Crossroads and its potentially expanded, anonymous corporate financing raises the stakes for the White House as it maps out its agenda for the next two years and prepares for the 2012 campaign.

An aggressive push to hike corporate taxes could inflame boardroom adversaries while a decision to ease off could keep them at bay.

The White House has recently sent signals that it wants to ease tensions with the business community if only to find common ground that can get the economy and job production moving.

However, Axelrod said the threat of opening the floodgates to corporate financial involvement in the 2012 presidential will not change Obama’s agenda.

"My assessment is there will be a fair amount of special interests money. We've had some tough battles, and there are folks who want to turn the clock back," he said, noting Wall Street interests in hobbling a new consumer agency at the Federal Reserve and insurance companies that want to scale back health care reform.

"I suspect they will get some of that money," Axelrod said in reference to the Republican outside groups.

Even so, Axelrod added, "I can guarantee that no one will be sitting at the table and saying, 'We won't go forward with this initiative because we are afraid it will antagonize someone, and Karl Rove can raise an extra $5 million from it.’ That's not how we rule."

American Crossroads and its affiliate, Crossroads GPS, along with a third Republican group, American Action Network, spent a combined $65 million attacking Democrats in the midterms in ads and direct mail, according to FEC disclosure reports.

Although the vast majority of their donors are unknown, sources close to the groups said billionaire businessmen, hedge fund operators and private equity traders are responsible for the bulk of the cash.

The traditional corporate community, for the most part, stuck with its typical course of action: Making anonymous donations to the U.S. Chamber of Commerce, which invested $33 million in ads and direct mail that helped install a GOP House majority.

“The risk of being outed as a donor wasn’t the reason the people went to another outlet,” said one Democratic lobbyist with two corporate clients solicited by Crossroads emissaries. “It was the risk of being outed as giving to the Karl Rove group.”

Although the Crossroads project was conceived at Rove’s home and the GOP strategist regularly attended meetings and reached out to the party’s major donors, Rove lately has tried to put some distance between his partisan profile and the organizations he helped create.

But his branding won’t be easy to erase, and his political reputation and savvy will remain an important part of the pitch to future donors as Crossroads fine-tunes its operation for the next round.

In the 2012 elections, a new round of Senate Democrats will be up for reelection “and the presidential will be layered on top of that. It’s important for our groups to be able to share information and triage responsibilities to ensure that a huge range of activities get covered,” said Steven Law, Crossroads’ president.

In recent interviews, Law and Crossroads Political Director Carl Forti cautioned that the political landscape could change in important ways over the next two years and Crossroads and its affiliated organizations will need to adapt.

“We just copied what [the Democrats had] done previously, and it worked well for us,” said Forti. “In the interest of continuing to evolve, we have to look at what the next cycle brings and how to attack it.”

In the midterms, Crossroads provided a menu of free services to GOP candidates — advertising and voter turnout support — and acted as an informal meeting room for other politically active GOP groups to share plans and coordinate activity.

The primary objective of the project: Maximize Republican resources, widen the battlefield, and make Democrats spend money and energy on races they never anticipated would come into play.

With tweaks, the same strategic theory can easily be applied to a presidential year, by forcing Obama to play defense and abandon the aggressive campaign tactics of 2008 that led to surprising wins in such historic GOP strongholds as Virginia and Indiana.

But, first, Rove, Gillespie and other organizers had to prove their theory could work so donors would rally around it. To do that, they pulled a page from the 2000 handbook.

In the messy aftermath of President George W. Bush’s first election, Rove and former RNC Chairman Ken Mehlman began testing turnout tactics that could create advantages for Republicans. After micro-targetting voters in 2001 special elections and the 2002 midterms, the Republican camps went into 2004 with a well-tested machine that helped Bush win another term.

Fast-forward to 2008, and Republicans today are assessing the merits of the Crossroads 2010 experiment.

Ironically, one conclusion is that some Democrats managed to hang on in tough races, such as the Nevada reelection of Senate Majority Leader Harry Reid, because of a superior get-out-the-vote operation that was developed after the birth of Rove's 72-hour program, Forti said.

Correction: This story was updated to note that American Action Network is not legally affiliated with American Crossroads.



CORRECTION: Corrected by: Alicia Lozano @ 11/09/2010 01:20 PM Correction: This story was updated to note that American Action Network is not legally affiliated with American Crossroads.