Finances force second McCain shake-up

updated 2:36 p.m. ET July 2, 2007

WASHINGTON - John McCain's campaign, trailing top Republican rivals in money and polls, is undergoing a significant reorganization with staff cuts in every department, officials with knowledge of the shake-up said Monday.

Some 50 staffers or more are being let go, and senior aides will be subject to pay cuts as the Arizona senator's campaign bows to the reality of six months of subpar fundraising, these officials said.

They spoke on condition of anonymity because the plans have not been made public. An afternoon conference call was scheduled to announce the results of second-quarter fundraising.

Once considered the front-runner for the GOP nomination, McCain came in third in the money chase behind Mitt Romney and Rudy Giuliani, raising $13.6 million in the first three months of the year. He is struggling to reach that total in the second financial quarter, and wasn't expected to match it.

Officials said the fundamental leadership of the campaign will not change; Terry Nelson, a veteran of President Bush's winning 2004 campaign, will remain campaign manager but may volunteer his time instead of drawing a salary.

Nelson declined to comment, and Brian Jones, the campaign's communications director, did not immediately respond to requests for comment.

An early withdrawal?
At its peak, McCain's payroll covered 150 staffers; this is the second round of layoffs.

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The financial difficulties have fueled speculation that McCain would drop out of the race but he dismissed that notion Thursday, calling it "ridiculous." He argued that voters won't start paying close attention until the fall, and said: "I don't know why I would even remotely consider such a thing in the month of June, or July."

Six months before primary voting begins, McCain is struggling for some semblance of momentum.

His popularity among Republicans has dropped since the start of the year. He has become intimately linked to the unpopular Iraq war, and, in recent weeks, he's drawn criticism from already wary conservatives for his support of Bush's immigration reform bill. He declined to participate in an early test of organizational muscle in the leadoff state of Iowa this summer, and, he's fighting the perception that he's yesterday's candidate.

McCain's support in national polls has slipped. He is in single digits in some surveys in Iowa and South Carolina, trailing Giuliani, the former New York mayor; Romney, the ex-governor of Massachusetts, and Fred Thompson, the actor and former Tennessee senator who's not yet in the race officially.

Financial fall
As 2006 ended, McCain had cast himself as the inevitable candidate and built an expansive national campaign organization that melded top operatives from Bush's political team with his own base of longtime loyalists from his failed 2000 presidential run.

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But the money hasn't come in as planned, and the initial spending was excessive. From January through March, McCain spent nearly $1.6 million on payroll for his staff, the highest among Republican candidates. Romney was second with $1.1 million and Giuliani spent nearly $900,000.

As the second financial quarter began in April, the campaign cut some consultant contracts and low-to-mid-level jobs, and revamped its finance operation.

Despite the changes, McCain's fundraising continued to lag, and officials said more staff cuts were needed to ensure he had enough money to compete in the early voting states and run television ads.

The shake-up comes as McCain embarks on his sixth trip to Iraq, where he will spend the July 4 holiday with U.S. troops. In his last visit to Iraq in April, he was widely criticized for saying he was cautiously optimistic of success even as he toured Baghdad under heavy military guard. Iraqis accused him of painting too rosy a picture and U.S. critics argued he was out of step with reality.

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