Where did all the money go?

I thought I'd be done with politically related blogging, but one of the big topics post-election is how much money the ultra-rich Republicans spent and how little they had to show for it. The recurring image is flushing it down the drain, but obviously that isn't precisely right--after all, it was spent somewhere. I even thought it was probably helpful to the economy in terms of creating  jobs and purchasing a few things. Subsequent research has shown that I am fairly off on that, and I thought I would post a bit about what I learned.

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First, there's the question of where the money actually did go. According to this CNN article, campaign spending is at 4.2 billion dollars and may rise as high as six by the time it's all accounted for. Although in those all important swing states there were profits to be made for the local media and print shops and caterers and anyone else who gets paid to help a campaign when it's in town, it is really the large companies tied to the campaign who will benefit the most. CNN quotes former FEC chair David M. Mason in saying that though there's a lot of talk about how it's all going on the web, "the biggest industry beneficiary of campaign spending is any business that works with broadcast media". At least in part, this means the big ad firms that fashion the ad campaigns. In other words, Mad Men, 2012 style. The head of the chief firm for Obama's ad campaign was GMMB, headed by Jim Margolis. He said that the campaign has spent over 400 million dollars on advertising during the course of the race. The ad companies get paid to create the ads and then disperse them. They usually keep some portion of the funds for their services. Margolis declined to say what GMMB's portion was.

Now, on to what this all means in terms of stimulus. I'm sorry to say that those who know much more than I do on this stuff are pretty much in agreement--it's a pretty poor form of stimulus. Matthew Yglesias of Slate actually goes so far as to say that "Heavy spending on campaign television advertisements is like a textbook example of things that don't boost the economy."

First of all, it's just a shifting of wealth from someone like Sheldon Adelson  to the owners of the local television stations. A closely contested race leads to more ads and more profits, but it doesn't induce a station to invest in their physical plant or higher new long term staff. It's simply a boost in short term profits. Secondly the flow of advertising is basically fixed, Yglesias says. All the increased demand for air time does is inflate the prices. " Every ad that Romney or Obama ran in Ohio was an extra 15 or 30 seconds that wasn't used to air some other advertisement."

New York City ad men, 1960

On whether campaign spending has a good effect, I read a nice piece by Paul Solmon, familiar to many of us as the explainer of all things financial over at the PBS Newshour. In answer to a question from a reader over at Making Sen$e , he says that scholars like Tom Ferguson have long pointed out that "campaign spending represents something substantially more problematic than a "lousy priority." He might use the term "pernicious priority." "

Solmon goes on to quote Lawrence Lessig on why the large campaign spending is bad for the Republic in the long term.

"These few don't exercise their power directly," notes Lessig. "None can simply buy a congressman, or dictate the results they want. But because they are the source of the funds that fuel elections, their influence operates as a filter on which policies are likely to survive. It is as if America ran two elections every cycle, one a money election and one a voting election. To get to the second, you need to win the first. But to win the first, you must keep that tiniest fraction of the one percent happy. Just a couple thousand of them banding together is enough to assure that any reform gets stopped."

Finally, I came across this mocking of an MSNBC correspondent on her suggestion that all this campaign spending might have have had a mini-effect on the economy, and added a bit of stimulus at the right time for Obama. Noah Rothman of Mediaite says:

"this belief betrays a stunning lack of understanding about the size and complexity of the American economy, let alone the global economy. If one held the belief that a grand total of approximately $2 billion in spending over the course of 18 months (funds raised exclusively from donations rather than yields from commerce and investment, no less) into consultancy firms and advertising can stimulate the economy, than that individual can also convince themselves that the economy is small enough to be competently managed from the top down."

Commenters have pointed out that Joy-Ann Reid was being a bit facetious, but Noah, I will own the error of scale and take the drubbing on her behalf.

Although I suspect that many Americans are under the erroneous impression that two billion dollars is a lot of money...

This is one billion...