July 2, 2007 — -- The Democratic presidential candidates have erased and reversed Republicans' historic edge in raising money for campaigns, reflecting growing enthusiasm among Democrats and adding to the GOP's already considerable burdens going into 2008.
Two Democratic candidates -- Illinois Sen. Barack Obama and New York Sen. Hillary Rodham Clinton -- shattered previous quarterly fundraising records in the three-month period that ended Saturday. Obama raised $31 million for his primary campaign, while Clinton raised $21 million; both figures broke the previous record for a Democrat's best fundraising quarter this early in an election cycle.
Meanwhile, underscoring the financial woes the Republicans face, Arizona Sen. John McCain bowed to the financial pressures facing his campaign Monday by announcing staff layoffs and pay cuts for top campaign officials.
McCain's campaign raised just $11.2 million last quarter -- less than the disappointing $13.1 million he raised in the first quarter -- a development that threatens his status as a front-runner, if not his entire candidacy. The campaign said it has only $2 million on hand -- less than the $5 million it had in the bank at the end of the first quarter.
"We need to downsize our operations," said Terry Nelson, McCain's campaign manager. "We confronted reality, and we dealt with it in the best way that we could so that we could move forward."
"We face a difficult fundraising environment right now, and certainly difficult in comparison to what our Democratic counterparts are able to raise," Nelson added. "And I think that will go for the entire field of candidates when our numbers are compared to their numbers."
The other Republican presidential candidates have not yet released their fundraising totals for the second quarter. But early indications are that no GOP candidate will approach the stratospheric figures achieved by Obama and Clinton, who have now banked more than $100 million between them for primary contests that are still more than six months away.
"Over four years, we've caught up to 40 years of being behind," said Jenny Backus, a Democratic consultant who is not affiliated with any of the presidential campaigns. "The gap is completely gone. It's an assumption we made forever that just isn't true."
Obama's eye-popping total -- raised by tapping 138,000 individual donors for an average of barely $200 each -- is particularly extraordinary given that he is running consistently second in national polls. He can go back to small-dollar donors over and over again before the primaries; individuals can give up to $2,300 to any candidate for the primaries, and another $2,300 for the general election.
Obama's haul suggests a grass-roots enthusiasm among party activists that hasn't translated into support in national polls when matched against Clinton, who is far better known to the public.
"This is an incredible total for a candidate who is actually losing in the polls by 15 or 20 percent," said Larry Sabato, director of the Center for Politics at the University of Virginia. "It's unprecedented for a candidate who is not leading in the polls to do so much better than the nominal front-runner."
At least since the Watergate era, Republicans have been able to count on a significant financial edge over Democrats. As recently as 2000, Republican nominee George W. Bush raised nearly twice as much for his primary battles as did Democratic nominee Al Gore.
In 2004, Democrat John Kerry raised more than any member of his party had before, but still fell $35 million short of President Bush's fundraising. Early indications suggest that this won't be a problem for Democrats in 2008.
In the first quarter of 2007, the eight Democratic presidential candidates collected $95.2 million, compared with $62 million for the field of 11 Republicans, according to the Federal Election Commission.
By the time second-quarter numbers are tallied, the gap could be even larger: Aside from McCain's woes, the GOP's top fundraiser to date, former Massachusetts Gov. Mitt Romney, has warned that he did not match the $21 million he brought in during the first three months of the year.
In addition to Obama and Clinton, two other Democrats -- former North Carolina Sen. John Edwards and New Mexico Gov. Bill Richardson -- also had strong quarters, bringing in $9 million and $7 million, respectively, for the quarter.
Democratic strategists say they are benefiting from the wide unpopularity of President Bush. And the Democratic Party has been far more advanced in using the Internet as a fundraising tool, as evidenced in the $17.2 million Obama alone has raised on the Web.
"The strong desire for change runs deep and wide among Democratic and independent voting blocs," said Stephanie Cutter, a Democratic consultant who is not backing any of the candidates. "It's unlikely that Republicans will ever hold a money advantage again, and if they do, it's a generation away."
Among Democrats, the second-quarter figures reveal a stratification in the financial resources available to the candidates. Clinton and Obama are raising record sums -- meaning they will be able to run advertising virtually everywhere they want this fall and winter.
Edwards, with $22 million raised for the primaries, and Richardson, with $13 million, should be able to invest heavily in the early-voting states of Iowa, New Hampshire, Nevada and South Carolina. But they could be strapped for cash in the big states that follow.
As for the rest of the field, led by Sen. Chris Dodd, D-Conn., and Sen. Joseph Biden, D-Del., disappointing fund-raising figures could leave them hard-pressed to compete -- unless they find new sources of cash fast.
McCain's figures mark a huge disappointment for a candidate who was once the presumed front-runner. His aides announced a smaller-scale shake-up at the end of the first quarter, but that did not bear fruit.
"At one point, we thought we could raise $100 million over the course of this campaign, and we constructed a campaign to fit that," Nelson said.ABC News' John Berman contributed to this report.