When Mitt Romney started raising serious money for his Presidential run throughout the summer there was one hitch. He was getting checks from a lot of big money donors that were back-loaded. The donors maxed out for the primary election and the general election, which meant half of their money couldn’t get spent until he accepted the nomination at the end of August. Suddenly the Romney campaign faced a cash crunch for the remainder of the “primary.” They had a lot of money in their bank account but a substantial amount of it could not be spent until a set date. So they did what any upstanding financial wizard would do – they borrowed against the money in the bank.
Before the Republican National Convention, Mitt Romney was the Republican nominee in all but name. By law, however, he could only spend primary donations until he officially became nominee. To increase cash flow during the interregnum, the Romney campaign borrowed $20 million.
“We realized that we could collateralize this debt with $20 million of general-election funds that were already sitting in our bank account,” a senior Romney aide says, speaking exclusively with National Review Online.
“This is permitted by Federal Election Commission rules,” the aide explains. “In the past, the FEC has specifically contemplated candidates putting up their public financing payments as collateral.” Since Romney is not taking public funds, his finance team found another option.
So far, the Romney campaign has paid off almost half of this $20 million debt, leaving them with around $11 million to go.
Debt crisis! Debt crisis!
This would actually be a good model to fund future infrastructure investments. We’re doing it in Los Angeles. Through a scheme passed in this year’s transportation bill, the city is taking the 30 years of tax revenues through Measure R, a half-penny increase in the sales tax dedicated to mass transit projects, and getting the money up front to build the projects in ten years, paid back using the 30 years of revenue. So the infrastructure gets built faster, more jobs get created in the short term, and the lasting effects of the infrastructure improvements linger longer.
And Mitt Romney has shown the model through how he financed his primary campaign in August. It’s as if borrowing money has some economic value that makes sense to use, not some terrible scourge on society that turns us into a nation of debt slaves!