How does election spending impact the economy?
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Listener Jennie Inglis from Cleveland, Georgia, asks:
I’ve wondered for quite some time now how the gross — and I mean that in all of its definitions — spending on U.S. elections impacts our economy. To me it is a misdirection of talent and resources. How are they being sucked up “out” of the regular economy to fuel the campaign economy?
The 2020 election cycle cost $14.4 billion, making it the most expensive ever.
We’ll have to wait to find out how much this cycle cost, but spending from outside groups is already on track to break records, said Sheila Krumholz, the former executive director of political money tracker OpenSecrets, in a 2023 interview with Marketplace.
Election spending lifts some parts of the economy, keeping local newsrooms afloat and creating temporary jobs that support a politician’s campaign. But all those billions don’t add up to a noticeable impact on the U.S. economy overall, experts told us.
Campaigns will buy up advertising on television and radio, because that’s where they can reach most committed voters, said Robin Kolodny, a political science professor at Temple University.
Kolodny said older voters reliably watch the 5:30 news, the 6 o’clock news and the 11 o’clock news, all of which air with wall-to-wall campaign ads.
“When you are doing political advertising, what you really want to be matched with is the appropriate audience,” Kolodny said. “There’s a reason you don’t see a lot of political ads on ‘American Idol’ or ‘Dancing with the Stars.’ A whole lot of nonvoters are likely consumers of that.”
Vice President Kamala Harris and former President Donald Trump, along with various allies and super PACs supporting them, are planning to spend a combined $500 million on radio and TV during the final two months of the campaign, the New York Times reported.
A decent chunk of change also goes toward digital advertising. For the 2020 election cycle, President Joe Biden spent a total of about $192 million in online ads, while Trump spent more than $268 million.
On the campaign trail, presidential hopefuls visit local shops, restaurants and hotels, giving them a sales boost, said Peter Brusoe, assistant professor of political science and economics at the State University of New York at Delhi. Some businesses that host politicians get entangled in minor controversies that can lead to greater publicity and profits. (See: The Four Seasons Total Landscaping debacle of 2020.)
Local print shops also benefit by whipping up campaign materials, Brusoe said.
But all those diner visits, TV ads and yard signs only add up to about 0.06% of U.S. economic output. While campaigns and their donors spent more than $14 billion during the last presidential election, 2020’s fourth quarter GDP stood at $22 trillion.
“They don’t really move the needle when it comes down to GDP growth or job creation in the country,” said Reilly White, an associate professor of finance at the University of New Mexico.
Are there more productive ways we could be spending all that money? Let’s say small donors couldn’t contribute to campaigns anymore. A big portion of their money would go toward consumer spending, and some would go to nonprofits and charities, White said.
But it still wouldn’t make a big difference for the economy in the grand scheme of things. “Getting rid of small donations to political candidates likely won’t result in a flow of money to a struggling local business or provide a sudden massive injection of capital to the nonprofit industry,” White said.
Now let’s look at corporations. Big business contributed $3.5 billion during the 2022 midterm election cycle. They could use their money to hire more employees instead, White said.
Corporate self-interest can prevent consumers from making their own choices, and stop the growth in other industries, White said. For example, car dealerships delayed electrification of the auto industry when they gave $60,000 to former New Jersey Governor Chris Christie, whose administration helped block Tesla’s ability to sell directly to consumers back in 2014.
Companies want policies that will make it easier to conduct business, and increase value for their shareholders, White said. Crypto companies have poured $119 million into federal elections this cycle, hoping to ease regulation on their industry, reported Vox. One bill they’re supporting would place cryptocurrency under the purview of the Commodity Futures Trading Commission instead of the Securities and Exchange Commission.
“An investment in an election can produce outsized returns for these corporations,” White added.
Campaign spending doesn’t have a big direct impact on the economy, but states that allow more political spending adopt more pro-growth policies, according to a 2023 working paper from the National Bureau of Economic Research. That can translate to higher wages, more hiring and increased business income.
Elections also create a lot of jobs themselves, albeit temporary ones. “Campaigns hire tons of staff, strategists, analysts, field organizers, volunteers, all of whom have this temporary boost in employment,” White said.
But because this work is temporary, you could make the argument that it would be better for the economy if people had permanent jobs, Brusoe said.
U.S. campaigns typically rely on part-timers in the last quarter of the election cycle, and then lay them off afterwards, Kolodny said.
The U.S. could take a cue from other countries. Political parties will hire full-time employees and treat them as civil servants with a salary, pension and health benefits, Kolodny said.
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