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The Trickle-Downs of Campaign Spending

The numbers have been crunched, pundits have weighed in and there now seems to be no doubt that 2012 election spending will reach $6 billion. And although I don’t think such spending qualifies as a worthwhile investment, some of our friends, readers, and haters claim that the $6 billion spent has to amount to some economic good.

Now I did take a Macroeconomics course in college, but I spent most of my time sitting in the back rows eating Jell-O and playing Tetris, so I know that I am no economic expert. Nonetheless, I will do my best to analyze this question and present the big picture and shed light on some nuances.

So here’s the big picture: United States GDP currently stands at $15.7 trillion. So the $6 billion spent on the 2012 election amounts to a meagre 0.038% surge in growth. When you consider the fact that U.S. GDP increased by 5% in the third quarter, it suggests that campaign spending does not even inspire short term economic growth. Of course, that 0.038% does in fact mean that somewhere, some companies are indeed economically benefitting from campaign spending. Any guesses as to what sector is benefiting? You probably got it – the media, and, more specifically, television.

According to the Economist, in this election cycle campaigns will spend $3.4 billion on TV, and 83% of that money will go towards local television. Local television stations provide candidates with a cheaper (compared to national cable stations) way to reach specific audiences, especially in swing states. This surge in demand allows local television broadcasters to jack up their rates and increase their profits.

Journal Communications Inc. owns television stations in Wisconsin and Nevada – two political swing states – and is on track to generate more than $17 million in political and issue ad revenues. This represents a 39.5 increase in television advertising revenue from the (non-election) year before. Other swing state broadcasting companies will have similar jumps in profit. So media companies television broadcasters located in swing states do receive economic gains from campaign spending in the form of greater profits.

And this increase in profits probably has some trickle-down effect, right? Like job creation? Well… maybe (this is where some feel-good and fluffy considerations enter the picture). I’m sure that some of these companies have hired a few more people and took on a few interns. But these local broadcasting companies are acutely aware of the fact that their profits have soared because it is an election year. They also know that November 7 will mark a return to the days of selling airtime for dirt. It is far more likely that these broadcasting companies chose to purchase new equipment or award their employees with a bonus, rather than hire any permanent staff.

I am afraid that campaigns themselves fall into a similar category when it comes to job creation; they pay top-notch consultants, reputable pollsters and their top dogs handsomely, while relying on volunteers to do the real heavy lifting. And the consultants, pollsters and campaign staff that they do choose to pay are not recent college grads hoping to start their careers, but rather individuals who have made a living off of campaigns and/or other political activity. Obama’s political campaign director, Katherine Archeluta, press secretary, Ben LaBolt, and countless others are getting paid to work on Obama’s campaign because they have experience and connections. Yes, there are rank and file campaign workers getting paid and yes, there are rank and file members (and volunteers) who are getting very valuable experience and resume boosts, but campaigns, a reliable source of job growth? The evidence suggests not.

This brings me to one final point regarding job creation. Some of this election’s biggest donors are corporations. Corporate donations to campaigns may come at a net loss for the economy when they come at the expense of a more direct business investment. For example, in 2010, Target donated $150,000 to a pro-business group in Minnesota. As a result of, Target may have been less inclined to open a new store, which could net long-term investment and job growth.

So, to present my final take on this issue, although campaign spending does increase profits in certain sectors and create resume building experiences for some, it does not promote long-term job creation, corporate investment or economic growth. And I will continue to donate/ spend my money elsewhere.

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