June 13 (Bloomberg) -- Barack Obama learned the pitfalls of claiming the moral high ground this week when a top adviser resigned under pressure. His next challenge is whether to forfeit a huge financial edge over Republican John McCain or renege on a promise to accept public-funding limits.

Obama pledged in March 2007 to pursue an agreement with the Republicans to participate in the public-financing system, which is designed to limit the influence of big money. That was before he began shattering private-fundraising records.

Strategists from both parties say the presumptive Democratic nominee would have an advantage of more than $100 million in the general election if he declines public money and its spending restrictions. The question is how much criticism he'd take for becoming the first presidential candidate to opt out of the system, which dates back to the Watergate era.

``The pressure once again is to prove that he's a different politician,'' said Kevin Madden, a Republican strategist who worked on Mitt Romney's primary campaign this year. Backing out would have ``all the elements of hypocrisy and expediency that could hurt this pristine brand that he tries to promote.''

The issue may have special resonance because both Obama and McCain are vying to be seen as reformers. Five aides have been forced out of McCain's campaign because of special-interest ties, and former Fannie Mae Chairman James Johnson quit Obama's vice presidential search committee on June 11 after reports that he may have received preferential mortgage terms from Countrywide Financial Corp.

Using the Issue

McCain has signaled he will use the public-financing issue against Obama.

In March 2007, McCain's campaign said the candidate would accept public money if the Democratic nominee did. Obama spokesman Bill Burton said his candidate would ``aggressively pursue an agreement with the Republican nominee to preserve a publicly financed general election.''

By February 2008, the Obama campaign said public financing was only an ``option.'' Obama has refused to be pinned down on whether he'll participate, citing concerns about the effects of outside political groups that can raise millions and aren't controlled by campaigns.

``That's Washington double-speak,'' McCain responded. ``That's not transparency, nor is it keeping one's word to the American people.''

Minimal Damage?

Some strategists say the public-opinion damage may be minimal if Obama raises his own money for the election. And the advantages will be so great, they say, that they can't see how he would accept public financing.

``He'd be crazy to do it,'' said Lynn Cutler, a former vice chairwoman at the Democratic National Committee.

Obama, 46, an Illinois senator, has raised almost three times as much as McCain, 71, an Arizona senator. The downside for Obama is that the national party coffers traditionally filled by the DNC lag behind the Republican National Committee.

That matters because the two party committees act as shadow campaigns, doing their own advertising and get-out-the-vote efforts. A shortfall in DNC fundraising would hurt Obama even as his own campaign tops McCain's. At the end of April, Obama had a cash edge of $15 million over McCain; the RNC exceeded the DNC by $36 million.

Closing the Gap

Republican and Democratic strategists said they don't expect that disparity to last. Obama is sending staffers over to the DNC and should be able to help the committee raise as much money as the RNC, while his own campaign collects and spends at least $100 million more than McCain before the nominating conventions, they said.

``A lot of Obama's contributors have no identification with the sense of being a Democrat,'' said Eddie Mahe, a former deputy RNC chairman. ``They are Obama supporters. With communication from him, `You are doing this for me,' I think he can raise all the money he needs.''

The big question for Obama centers on the two months between the nominating conventions and the Nov. 4 election. If both he and McCain take public financing, each will get about $85 million to spend in that time.

They would also continue raising money for their party committees during that period. And Obama would probably push the DNC's money total over the RNC's if he focused his fundraising efforts only on the committee.

Still, by accepting public financing, Obama might not be able to raise as much money for the DNC as he would for his own campaign and wouldn't be able to coordinate spending efforts.

$500 Million

Should he opt to raise money privately, Obama could bring in as much as $500 million in the two-month general-election campaign, predicted Democratic strategist Joe Trippi. McCain has never raised more than $22 million in a month.

While others have lower estimates for Obama's fundraising, all expect him to outmatch McCain. That's because his list of donors tops 1.5 million and he's gotten a flood of contributions on the Internet.

``It's been an extraordinarily broad-based grassroots effort,'' said Roger Altman, a former deputy Treasury secretary who was a prominent Hillary Clinton supporter. Now that Obama is the nominee, he said, his ability to ``raise enormous sums going forward is huge.''

To contact the reporters on this story: Kristin Jensen in Washington at kjensen@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net

Last Updated: June 13, 2008 00:01 EDT