The billion-dollar race for president

Democratic supporters said that the success of the fund-raising, surpassing John McCain's $47 million (27 million), showed the strength of their candidate in a fortnight where Mr McCain's running mate, Sarah Palin, has dominated the news. Opinion polls show that the race between Mr Obama and Mr McCain is dead even. "People don't give money if they think you are going to lose," said Phil Noble, the Democratic party pollster.

The August total tops the $55 million (31 million) Mr Obama raised last February during the primary campaign. In 2004, President George Bush spent $350 million (195 million) and his Democratic challenger John Kerry $320 million (178 million).

This year, with more than $100 million (55 million) rolling into the two parties each month, the election will break through the billion-dollar ceiling by the time the US votes on 4 November. David Plouffe, the Obama campaign manager, said the cash infusion, which includes 500,000 new donors, proves underlying strength.

The new donors demonstrate just how strongly the American people are looking to kick out "special interests" and change Washington, he said. Mr Obama's war chest means he can afford TV advertising in all target states. "That money means he can do anything he wants to do – he doesn't have to make choices," said Mr Noble.

The figures are testament to a revolution in US campaign financing. For years, there were complaints of corporations and unions dominating the political process, with predictions elections would be ever-more decided by big money.

The predictions were right about the cash – but wrong about its source. Since 2003, corporations and unions have been forbidden to donate, and people are limited to $2,300 each, thanks to legislation from Mr McCain and a fellow senator. The rules have turned campaign finance upside down, cutting off the oceans of "soft" money that had washed over the two established parties.

The finance rules are tight: money spent on merchandise counts towards an individual's $2,300 limit and those buying T-shirts and banners at both party conventions had to register names, addresses and amounts. The result has been a revolution: money is pouring into politics as never before, but the cash comes increasingly from the voters, not special interests.

Mr Obama's campaign has also set up a sophisticated internet operation to encourage an army of 2.5 million donors – nicknamed the Obamacans – half of whose donations are under $20. Proponents say the technique understands human behaviour. None but the most committed will write a $5 cheque, find an envelope and a stamp and go to a post box once or twice a month. But donating online takes just 30 seconds.

It also means Mr Obama's supporters have not "maxed-out" early, allowing his staff to keep going back to the Obamacans month after month for cash.

Mr McCain has also seen a cash injection after the selection of Alaska governor Mrs Palin as vice-presidential candidate rejuvenated his party. He opted to take public finance in his primary campaign, which limits his spending to $84 million. However, this does not stop his party raising its own money and spending it on Mr McCain's campaign, the only potential disadvantage for him being the party, rather than the candidate, decides what the cash is spent on.

Dollars are badly needed by both sides. Perhaps 16 of the 50 states could easily swing either way. Reaching the voters means bombarding all TV stations, in all states, all the time. Coming to the rescue of both men is election fever. The US is galvanised about the vote.

Mr Obama's 2.5 million helpers put him out in front, but his stardust has been captured by Mrs Palin, whose speech to the Republican convention saw $10 million (5.5 million) pour into party coffers.

As things stand, Mr Obama, win or lose, will go down as the man who raised more than any other in the history of US presidential campaigns. And if the cash does help him win, he will owe ironic thanks to Mr McCain, whose legislation five years ago made it happen.

System set up in the wake of Watergate

IN SAYING he was rejecting government money for his presidential campaign, Barack Obama has broken with a system first set up in the aftermath of Watergate.

Concerned by secret donations given to former president Richard Nixon by 21 corporations, including airlines and oil companies, congress decided in the 1970s to put elections on a public footing.

The idea was simple: the government would fund the campaigns so that special interest groups would not get a look in and democracy would prevail.

Since Watergate, while candidates raise their own funds for their primary battles, the election itself is paid for from the public purse.

But recent years have seen the purveyors of soft money, including business and unions, find ways around the system.

Most notably this has come from the so-called 527 groups, named after a loophole that allows anyone with cash to run their own political advertisements.

Earlier this year Mr Obama joined Mr McCain in pledging to use public money this autumn.

But in the summer Mr Obama changed his mind: Officially his reason was that, with so many loopholes that can be exploited by big business, the post-Watergate public finance system is broken.

Republicans say it is simply that Mr Obama raised more cash privately than he would get publicly.

But with both parties raising unheard of sums through internet appeals, it is likely that they will each opt out of public finance in future elections.

ANALYSIS

QUESTIONS over Sarah Palin's foreign policy qualifications continued this weekend. The vice-presidential candidate made a well-documented trip to Kuwait and Germany last year to visit US troops, and her staff have revealed she has also visited Canada and Mexico. But aides have clarified that a purported visit to Ireland was little more than a refuelling stop at Shannon during her trip to the Middle East.

On Saturday, a Palin aide said the Alaska governor also travelled 400m into Iraq during her July 2007 trip to the region to participate in a re-enlistment ceremony for a member of the Alaska National Guard.

That answer appears to contradict one given to the Boston Globe, which reported this weekend that McCain-Palin aides had twice revised their description of Palin's Iraq visit.

The newspaper said aides initially said Palin had visited a "military outpost" inside Iraq. It said campaign aides and members of the Alaska National Guard subsequently said she did not venture beyond the Iraq/Kuwait border when she visited the Khabari Alawazem Crossing on 25 July, 2007.

The discrepancy prompted a blistering memorandum to campaign reporters by aides to the Democratic presidential nominee, Barack Obama.

"The McCain campaign has distorted, distracted and outright lied to the American people about her record in a desperate attempt to hide the fact that a McCain/Palin administration would be nothing more than a continuation of the failed Bush policies of the last eight years," the memo read.