(FORTUNE Magazine) – Shortly after getting bounced out of the 2000 election by the pugilistic George W. Bush and his giant war chest, Arizona Republican Senator John McCain decided to help the country get religion about money in politics. Thus was born the 2002 McCain-Feingold law, the latest in a string of do-good attempts to break up the enduring romance between big money and politics. Now McCain is a major player in what is shaping up to be the first $3 billion presidential race in U.S. history—with his law actually contributing to the pricetag.

"We're entering a brave new world of presidential fundraising," says Michael Toner of the Federal Election Commission—one that will make the past two campaigns look quaint by comparison.

Campaign-finance veterans predict that by November 2008, the two major-party nominees will have raised $500 million apiece, a fivefold increase over Bush's record-breaking haul in 2000. On top of that $1 billion, Toner predicts that the top-tier primary candidates will need to raise $100 million to be taken seriously. Let's say Toner's formula applies to at least four other candidates, two in each party—that makes another $400 million, plus tens of millions spent by lower-profile candidates.

In February, Democrats Hillary Clinton and John Edwards both said they would forgo public funds and the spending caps they require. Other candidates are expected to follow that lead, making this election the first in which candidates skip the public funding system in both the primary and general elections. (Bush and Kerry took public funding and abided by caps after their nominations.)

But the $1.4 billion-plus raised by candidates will hardly be the end of it. In 2004 the two national parties combined—the Republican National Committee and the Democratic National Committee—spent $783 million to support their candidates. Add to that $319 million spent by the top ten political action committees in 2004. Then there are the 527 groups, those tax-exempt money chests that enable wealthy donors, as well as labor unions and trade groups, to end-run the McCain-Feingold soft-money limits. In the last presidential election, the biggest 527s combined spent nearly $450 million, according to Political Moneyline.

Even if party, PAC, and 527 money remained the same as last cycle, increased candidate spending would push this presidential race into the $3 billion zone. The wide-open—and polarized—presidential race is one reason for that sum. But the McCain-Feingold law had its own perverse effect. The law eliminated unlimited, or "soft money," contributions to political parties; in return the law's architects agreed to raise the cap on direct contributions to candidates.

But instead of limiting the dollar flow, here's what happened: The parties continued raising money at a record clip, and 527s exploded. Meanwhile, candidates gained the ability to collect checks for $2,000, instead of $1,000. Adjusted for inflation, they now collect checks from individuals for $2,300. Senator Clinton is already collecting two checks from donors—$2,300 for the primary and $2,300 for the general—even before she has the nomination.

The cost of the 2008 campaign will certainly be a lot more than anyone ever imagined when Congress passed the much vaunted McCain-Feingold law. But of course we've seen this plot before: Loopholes rendered the Teapot Dome–era reforms moot. And the Watergate-era reforms led to the explosion of soft-money donations to political parties. "Aren't you glad we got all the big money out of politics?" Toner asks with a chuckle. REPORTER ASSOCIATE Joan L. Levinstein

The Breakdown

The 2008 presidential race: FORTUNE's estimate*

Candidates

$1.4 billion

+

DNC/RNC

$814 million

+

Top 527s

$467 million

+

Top PACs

$332 million

Total

$3 billion

*Candidate spending: Experts' projections based on candidate decision to forgo public funds and spending caps. Party, PAC, 527 spending: Inflation-adjusted estimates based on actual 2004 spending.

REPORTER ASSOCIATE Joan L. Levinstein contributed to this article.