There’s no doubt that local communities benefit from the cash flowing into the election contest. What’s uncertain is how much the economy benefits and how long that benefit lasts.
Economic development experts say every economic activity has an impact, but figuring out the exact effects of the lengthy campaign season isn’t always easy.
Economists say that measuring concentrated, recurrent or permanent economic impact is fairly simple — at least when compared to the difficulty of determining diffused, irregular and infrequent economic occurrences. It’s even more difficult when no private economic interests are directly involved.
And while Colorado didn’t attract very much presidential attention this year, the big money doesn’t come solely from national races — at least not in 2016. This is a year that features an important contest for the U.S. Senate, two highly competitive congressional races and several controversial statewide initiatives. There’s a lot at stake, the bets are down — so how much money is on the table?
The Colorado secretary of state’s campaign finance disclosure website tracks contributions and loans to Democratic and Republican candidates for local offices, to issue committees and to all others. Total so far: $124 million, not including candidates for national office.
According to the Federal Election Commission, Colorado congressional candidates have raised $16.3 million and our two leading U.S. senatorial candidates have raised a combined total of $22.8 million. In addition, independent expenditure committees have spent $4.2 million on the Senate races and $15.1 million on the House.
Grand total: more than $180 million.
By comparison, Las Vegas booked $130 million in Super Bowl bets in 2016 — and if you’d taken the Broncos straight up, you would have gotten your money back and then some.
A significant slice of campaign money is spent in states for campaign staff, polling, travel and lodging, and event venue rental. Media, media buyers and political consultants are even larger expenses, and may disproportionately benefit out-of-state organizations and individuals.
Tatiana Bailey, executive director of the UCCS Economic Forum, thinks the impact of campaign spending is relatively slight, especially when compared to the effects of large national trends that affect consumer confidence and spending.
“The [University of Michigan] consumer sentiment index is around 90 — it was below 60 at the bottom of the recession,” she noted. “Consumer spending is high, the percentage of people who say they want to buy a home has increased recently from 4.9 percent to 6.5 percent, and those trends are likely to continue — regardless of who wins the election.”
But Republican political consultant Daniel Cole believes that campaign money doesn’t just trickle down to the worker bees; it floods down.
“For example, the money that campaigns pay for TV ads strengthens all the stations that run them, pays reporters’ salaries and keeps the businesses healthy,” Cole said. “As a battleground state we really benefit. People get paid and money gets spent. It’s easy to say that we should spend that money feeding the poor, not on political campaigns, but those campaign dollars do help feed the poor. It’s called capitalism.”
And don’t count out the national races — but there’s little information about how much money the presidential races bring to Colorado Springs.
Donald Trump’s rally at UCCS might have brought tens of thousands into the regional economy — or tens of hundreds. Trump flew into Colorado Springs, spent the night at the Mining Exchange Hotel, got famously stuck in the elevator, spoke to the faithful and left town. The Trump campaign paid UCCS $5,200 for costs associated with renting the Gallogly Events Center, and Colorado Springs got some free publicity (not all of it good!). Did out-of-area visitors come to see the Donald, rent hotel rooms and eat at local restaurants? Aside from national media, there’s no way to tell.
For example, the owner/promoters of the USA Pro Challenge prepared an exhaustive economic analysis of the cycling event’s impact. That analysis, although perhaps somewhat skewed and self-serving, convinced the Colorado Springs City Council to twice allocate $125,000 in tax revenue to support the enterprise.
Unlike world-class cycling events, the quadrennial presidential elections won’t suddenly shut down — but candidate spending varies. As a swing state, we’ve attracted a lot of attention in 2016, but perhaps not as much as we might have.
That’s because without binding party primaries, no presidential candidates bothered to mount extensive ground games in Colorado, although Donald Trump and his surrogates visited the state several times, as did Hillary Clinton.
But according to a forthcoming paper in the Economic Journal by Rebecca Lessem, a professor at Carnegie Mellon, and Carly Urban at Montana State University, a lot of money stays in-state — particularly during a presidential primary.
“Our new study,” Lessem and Urban wrote, “finds that the increased spending in a state around a primary increases total per capita earnings in that quarter by 2.5 percent — and by more in accommodation and the retail sector. What’s more, a multiplier effect means that one more dollar in campaign spending results in between 1.2 and 1.4 more dollars in the state economy.”
While these effects aren’t confined to presidential primaries, the two authors believe that primaries are well worth the expense.
“Our results,” the authors continue, “suggest that when people in a state are greeted with a political campaign, they should relish the local stimulus that this provides — and the campaign contributions transferred from people in other states who allow this to occur. Similarly, policymakers, who continually discuss the re-ordering of state primaries, should consider the local economic growth benefits when making these decisions.”
If Colorado voters approve Proposition 107 on the state ballot, we’ll have an opportunity to test the Lessem/Urban hypothesis in 2020. The measure would establish a March presidential primary in Colorado that will allow participation of unaffiliated voters.
What is certain: Whatever its impact, campaign spending will end on Nov. 8. Then what?
“Surprisingly, (the research) seems to show that presidential elections don’t have a major effect on the economy,” Bailey said. “The stock market is kind of like a temperamental little kid — it tends to overreact.
“In the longer term, it’s interesting that both Clinton and Trump favor economic stimulus in the form of increased infrastructure investment. That will help support consumer spending.”