Parties square off with best campaigns money can buy

This was supposed to be the year when campaign finance reform liberated American politics from the tyranny of the almighty dollar. And guess what? The 2004 presidential election will be the most expensive event in global political history with a final price tag of $1.5bn (£838m) or more when all is said and done in three weeks' time.

This was supposed to be the year when campaign finance reform liberated American politics from the tyranny of the almighty dollar. And guess what? The 2004 presidential election will be the most expensive event in global political history with a final price tag of $1.5bn (£838m) or more when all is said and done in three weeks' time.

With a poorly concealed lack of enthusiasm, George Bush on 27 March, 2002 signed into law the McCain-Feingold bill, named after the Republican and Democratic senators who sponsored it. In theory, it abolished "soft money," the device by which wealthy donors and political pressure groups could pour colossal sums of money into the campaign, to be spent on loosely defined party activities. In practice, the measure has been to campaign spending as King Canute's defiance was to the great cycles of the oceans.

The law of political funding, like that of tax avoidance, is immutable. Close one loophole, and another will open. "Soft money" may have technically disappeared but a new spending vehicle has emerged, the so-called "527 organisation" named after a permissive and previously unnoticed clause of the federal tax code.

These 527s can raise as much money as they like, including million-dollar donations from wealthy individuals - of whom the financier and Democratic supporter George Soros is but the best known. The only stipulation is that they must be independent from party and candidates. In practice the 527s are a new form of political advertising, operating in informal liaison with particular parties.

Even so, they are just one of the reasons why spending this year has eclipsed the then record $975m raised by Mr Bush, Al Gore and their respective parties in 2000 - a sum widely considered a bloated obscenity and which fuelled the pressure for the McCain-Feingold reform.

Election 2004 has been the perfect campaign finance storm. For the first time the internet emerged as a major means of fund gathering, bringing a myriad of small donors into the process for the first time. An unprecedentedly polarised electorate had made supporters of Mr Bush and John Kerry especially ready to open their wallets.

Finally, both Mr Bush and Mr Kerry announced in 2003 they would opt out of system whereby the federal authorities would provide a matching contribution to whatever a candidate raised, up to a fixed ceiling, in the period up to his convention. They were free to raise as much as they could. And they did. The Bush campaign collected $260m in the first phase, while Mr Kerry raised some $230m. For the last two months of the campaign, each candidate receives $75m of public financing. Simultaneously, their respective party national committees have raised much more.

In this last category, the Republicans have always had the edge. In 2004 however, the Democrats have achieved equality, thanks to the $150m raised by the "independent" 527s, three quarters of which has been raised by Democrat-leaning groups.

Money of course is not everything: the 527 with the greatest impact has been the now-infamous Swift Boat Veterans for Truth whose TV ads casting doubts on the Kerry record in Vietnam dominated the campaign in August - all at an initial cost of $50,000. But day after day, millions of dollars worth of 527 ads swamp the airwaves, helping explain why campaigns are more expensive in the US than anywhere else.

British elections are fought by hundreds of individual candidates in hundreds of separate constituencies, each too tiny to have a TV market of its own. That is why a mere £40m was spent in the entire 2001 UK general election campaign.

Nor will the spending end on 2 November. The vast sums poured into the campaign are but part of a wider financial contest between the parties, to create the infrastructure - think-tanks, media outlets and the like - needed to win the battle of ideas. And here the real heavyweights matter most of all. For the Democrats, Soros - who may have spent $25m out of his own pocket on the 2004 campaign alone - is one of a small group that also includes Andy Rappaport, a Silicon venture capitalist and Peter Lewis, a reclusive Ohio-based insurance businessman.

In this particular game, however, the Republicans are far ahead. Their billionaires' line-up is headed by Richard Mellon Scaife, the Pittsburgh-based financier who may have donated $600m to fright-wing causes. Among its other members are the Coors brewing dynasty.

And whatever the result on 2 November, more ideological struggle - and therefore more political spending - is guaranteed. A Kerry loss would force the Democrats to work out a retooled set of principles for the 21st century.

A defeat for Mr Bush might ignite a Republican civil war, pitting other factions of the party against the neo-conservatives who would inevitably be held responsible. A Bush victory on the other hand, would only increase the power of the Republican financial juggernaut.