Explainer: Did That $6 Billion in Campaign Spending At Least Help the Economy?

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Brooks Kraft / Corbis for TIME

Members of the audience make and an "O" during a campaign rally with President Barack Obama in Mentor, Ohio.

After each election, the media tends to brood over a predictable set of issues, like the small mindedness of campaign policy proposals to the nastiness of negative advertising. Another bugaboo of the pious punditry is the magnitude of campaign spending, which reached $6 billion in 2012, according to the Center for Responsive Politics — beating the next most expensive contest by $700 million.

It probably depends on your political persuasion whether or not you believe that this infusion of cash is corrupting the political process. But another question on many minds when they see these figures is, “What effect does this spending have on the economy?” Joy-Ann Reid, managing editor of TheGrio.com and MSNBC contributor thinks that Super-PAC-fueled spending must be having a stimulative effect, saying on Thursday:

“The conservatives Super PACs have proved that economic stimulus actually does work. When you pump money into the economy – I mean, I think these television station groups did tremendously well with this spending. Printers and people who design direct mail. So, ironically enough, their spending probably actually boosted the economy slightly . . . It was a mini-stimulus.”

Unfortunately, calling it a mini-stimulus would be a gross understatement. While $6 billion sure sounds like a lot of money, relative to the size of the $14 trillion U.S. economy, it’s a miniscule amount. Most estimates of the 2009 stimulus package say that the $700 billion affair boosted real GDP somewhere between 1% and 4% – so an extra $6 billion in spending would have a very negligible effect on the national economy.

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Even if you were to focus on areas of the country where campaign cash was concentrated, campaign spending is dwarfed by the Gross Regional Products of those areas. For instance, Ohio’s Gross State Product is just north of $400 billion dollars, far too large for campaign spending to make significant waves even if you generously assume that one sixth of the total campaign spending took place there.

Furthermore, not all economic stimulus is the same. Campaign spending would only boost the economy if that money wouldn’t have been spent otherwise. Rich donors don’t have their money stored under mattresses – that money is most likely otherwise invested in productive enterprises through the stock market, or would be spent on luxury items like vacations or cars.

In fact, the effect on the economy could actually be negative because some other uses of the money may actually be more productive. As Brian Palmer wrote in 2010 in Slate:

“Corporate donations may be a net minus for the economy when they come at the expense of more direct business investment. Target, for example, could be less inclined to build a new store in Gary, Ind., after having spent $150,000 to support a candidate for Minnesota governor. Those kinds of moves are bad for the economy, because investment dollars are very good at generating economic activity.”

This is why, when governments plan stimulus programs, they spend money on projects like infrastructure which will promote general economic activity or otherwise put to work resources that would be idle by giving money to states to keep teachers and cops on the payroll. Campaign spending, on the other hand, is just the shifting of funds from one use to another — possibly less productive — one.

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Perhaps the more interesting question to ponder is whether all this campaign spending actually has much effect on the elections themselves. After all, all this money was spent and the political power structure in Washington was left basically unchanged. Earlier this year, the Freakonomics blog tackled this very question, citing the research of Jeff Milo, an economist at University of Misouri at Columbia. Milo argues that we think campaign spending is important because winning candidates often spend more money than losing candidates. But the money might be the effect of electoral success rather than the cause — that is, it may be the case that same qualities in candidates that produce electoral success (like charisma and intelligence) are those that attract money from donors, as well as the fact that donors like to give to winning campaigns. According to Freakonomics:

“Levitt finds that changes in campaign spending produce negligible changes in electoral outcomes when candidate characteristics are held constant. Now that doesn’t mean that candidates don’t need to get their message out to voters. We’re talking about marginal changes in campaign spending. Given you are already spending a million dollars running for a House seat, another hundred grand or so won’t make any appreciable difference.”

In other words, not only is all this spending not doing much for the economy, it’s actually not all that effective at producing electoral outcomes either. Maybe that means that big-time donors like Sheldon Adelson will think twice before spending small fortunes on Super PACs next time around. But I wouldn’t hold my breath.

8 comments
David Ogun
David Ogun

A whopping sum of money! Whatever happens, it must have led to some input into the US economy the result of which would show up soon, it was a great experience for folks to watch outside of the USA , great theatre if I am asked. Romney the Titan of Industry with Money written all over him V Barak Obama the poor man's choice! Real modern day David V Goliath stuff, I long for the next instalment probably at the mid terms!

mmk
mmk

Illuminating article. Beautifully explains why some types of expenditure does not stimulate the economy. I always expect and get insightful articles from Time. thanks.

Bill Butler
Bill Butler

Don't think so! Not with all the pink slips being passed out in many manufacturing companies!

Andrew 'Andy' Thomas
Andrew 'Andy' Thomas

helped corporations and the rich who are going to see a return in tax breaks and loop holes, get money out of politics through a limited constitutional convention removing corporate personhood and citizens united until then every issue is bought

bibleverse1
bibleverse1

So now some will be out of a job, will they apply for unemployment? Would that be the right thing to assume?

ScottPettit
ScottPettit

What I have witnessed in our two party system (today) is nothingshort of disgrace. And I’m certainly not saying our two-party system is evil,it’s just broken. There is “The Great Wall of China” separating both partiesand I’m not sure anymore if this is a good thing because they are sooooodivided. Legally, we have term limits; but the influence of money, the mediaand many other factors have severely changed the way our representatives try todo their jobs. Under my idea, which is simply one party, you can still haveliberal and conservative representatives, but they are gut-checked by thosethey represent, not those that influence them. Basically, my one party idea iscomposed internally of many parties if you look at the political spectrum aloneand disregard the other influences. In the end, or beginning, it is still aboutrepresentation. They just have to learn to work together and eliminatethe “wall” that separates them. That is all I would like to see: that Congressagrees to work together. I am certainly not even remotely thinking aboutCommunism because “history” has nothing to do with our current situation. If itdid, then our “founding documents” would be followed to the hilt and we would stillhave God- which we should! We all know that they are not. I love our countryand I never want any President to fail, ever. I also would like to see our VicePresident elected independently of the President, because in electing aPresident- that is what we focus on, and in so doing, we are completelydisregarding the second seat of power. I think it is very important that thatsecond seat be an elected position independently of the first seat, because,once again, it’s all about representation; serving and not being served.

lurch
lurch

Sure it gave the economy a boost. People had money to spend on things. Money that was just sitting idle got into peoples hands.

rjsigmund
rjsigmund

rural postal workers put in a lot of extra hours, but didnt get a raise...