The cacophony of issues vs. jingle of campaign cash

Of all the campaign advantages President Bush possesses, one of the greatest may be financial: Having raised $170 million so far, and on track to raise more than $200 million before the Republican convention, Mr. Bush has smashed all records and presented rival John Kerry with a daunting deficit to make up.

Yet for a variety of reasons, Democrats are increasingly confident about their ability to match Bush's war chest - or at least minimize his fundraising edge.

Senator Kerry, who is embarking on a 20-city fundraising tour, is raising money at a faster clip than expected - fueled in part by a record amount of online donations. His campaign now expects to raise $80 to $100 million by the end of July. At the same time, a number of Democratic-leaning interest groups are helping to level the playing field by running anti-Bush ads in key battleground states.

But still more central, many analysts say, is that the relative heft of campaign war chests may be less important in this election. While campaign advertising can play a big role in elections with no dominant issue, this year's mix of war, terrorism, and job losses at home virtually guarantees that November's results will hinge much more on external events than on political spending.

"It's not necessarily the case that Kerry has to match Bush's spending," says Anthony Corrado, a campaign-finance expert at the Brookings Institution. "This is a referendum on the president, [and] the electorate will judge Bush based on real-world events."

Democratic officials say they've been surprised by the amount of money pouring into the Kerry campaign. Most attribute it to two factors: the intense dislike of Bush among Democratic voters, and the equally strong sense that Kerry has a good shot at defeating the president. The party is also making use of a new fundraising tool - the Internet - with Kerry following the path carved out by former Vermont Gov. Howard Dean.

In addition, Kerry is being indirectly aided by outside groups known as 527s, after the segment of the tax code that exempts them from federal regulation. The Bush campaign argues that these groups are illegal, since they raise and spend large sums of "soft money," which the McCain-Feingold campaign finance law banned from political parties.

But while the FEC has yet to rule on the matter, the groups are already playing a key role. According to a study by the Wisconsin Advertising Project, the Bush campaign spent $15.5 million over the past month on ads in battleground states, while the Kerry campaign spent just $1.5 million. But groups like MoveOn.org and the Media Fund spent $3.5 million and $5.9 million, effectively evening out the terrain.

"It's hard to discount the role of the 527s," says one Democratic official. "Collectively, they will have a dramatic impact, which is why Republicans are trying so hard to get rid of them."

Moreover, much of Bush's spending so far can be seen as simply an effort to catch up. During the Democratic primary battle, Democrats spent $32.5 million on advertising in battleground states - much of it attacking Bush - while the president sat on the sidelines.

In some ways, this year's political map may also play a role in reducing the importance of a massive war chest. With just 17 states considered battlegrounds, campaigns may be able to target their money more efficiently. Bush may try to expand the playing field - spending money in states like California, for example - but most analysts see the electorate as so polarized that additional battlegrounds are unlikely to emerge.

Of course, Bush's campaign cash still constitutes an advantage. Much of its impact can't be immediately measured, with a significant amount of money going to building up organizations in key states - tracking and registering voters, and laying the groundwork for massive voter turnout operations.

And some of Bush's spending has already had an effect: In the past few weeks, after his campaign began running television ads attacking Kerry's record on defense and taxes, the president moved ahead of the Massachusetts senator in head-to-head polls, while Kerry's unfavorability ratings ticked up.

Indeed, experts say if there's a phase of the campaign when money matters most, it's now - when the public images of the candidates and the contours of the race are being shaped.

"It's a real difference in terms of how each of the candidates defines each other," says Candice Nelson, a political scientist at American University.

Yet already, Bush's early efforts to go on the offensive and define Kerry are being offset by external events. The ongoing furor surrounding former counterterrorism czar Richard Clarke's charges that the Bush administration was slow to recognize the threat posed by Al Qaeda, and was obsessed with going to war with Iraq, has taken a toll on Bush's poll numbers: According to a Newsweek poll, approval for Bush's handling of the war on terror - his top political asset - has dropped from 65 percent to 57 percent.