Dave Swenson
It’s obvious to everyone, and no one can argue with what’s literally right in front of our eyes and unarguably true: when it comes to presidential campaign spending, the vast majority of candidate effort is concentrated in Iowa, the first caucus state, and in New Hampshire, the first primary state. It stands to reason, then, that Iowa spending amounts must be huge, especially in a year when both parties have an active slate of candidates. Yet when we analyze campaign spending, that is, when we follow the money, precious little finds its way to Iowa. As I’d pondered before in my own research, what gives?

Here’s the money quote from a recent investigation by Brianne Pfannenstiel of the Des Moines Register where she looked at campaign spending in Iowa through the third quarter of 2015:

Despite Iowa’s outsize influence in the nation’s presidential nominating process, political spending is still funneled primarily to coastal states, which house major political consulting and advertising firms. Iowa accounts for just 3 percent of the $153.3 million that presidential campaigns have spent so far this cycle, filings with the Federal Election Commission show.

I took a good look at this during the last wide open Iowa Caucus.

In 2007, not unlike the Register, I analyzed caucus spending by analyzing Federal Election Commission filings, though I then only looked at the top four major candidates from each party. It was a fishing expedition to see whether further analysis might be fruitful. Analyzing only the first two quarters of spending, I found a disappointingly low fraction of spending in Iowa. As, at the time, the races had yet to really hit their strides, I decided to wait until after the 2008 Iowa Caucus for the third and fourth quarter filings by all of the candidates, not just the leaders, to discern what I thought then would be the true measure of campaign spending in Iowa (those data weren’t available until 1 April, 2008, long after both the Iowa and New Hampshire events). Quarters three and four were surely when the campaign rubber had met the road, I reasoned: field offices were open and staffed, ads were running non-stop, events were ubiquitous, and most of the aspirants had become something akin to candidates-in-residence running up to the big event. Quarters three and four would tell me the real story.

My study, to my surprise, determined that actual direct spending in Iowa was nothing short of paltry. In quarters three and four of 2007, just $15.55 million of $352.5 million in spending by both parties accumulated to some Iowa vendor or person – only 4.4 percent of campaign spending was made in Iowa. Given the direct spending, I then compiled the expected economic impact of it all. After all multiplied through effects were considered, I found that the Iowa Caucuses contributed, on an annualized basis, the equivalent of 229 total jobs receiving $7.34 million in income. Measured another way, it amounted to less than 1/100ths of a percent of the state’s GDP. My conclusion: the common assumption that the Iowa Caucuses are an important driver of the Iowa economy is, well, hooey.

As Ms. Pfannenstiel correctly notes, huge fractions of major spending by candidates are made outside of Iowa on behalf of their Iowa effort. Money for the non-stop ad buys by both candidates and their supportive PACs go to consultants or marketing specialists in other states who then purchase air-time from Iowa broadcasters. There is, however, no way to accurately track these indirect money routes and apportion spending to Iowa. Similarly, large fractions of campaign spending go to generate more campaign funds, which, again, flow to non-Iowa firms. Finally, all of the candidates have their main headquarters and the bulk of their employees outside of Iowa. Iowa and New Hampshire are the first acts, but there is a lot of activity going on elsewhere at the same time.

Aha, you say! The economic impact is truly much greater than you assumed because those ads did in fact run in Iowa and that certainly benefited the Iowa economy. Hardly. Radio and TV stations do not hire more people to run more ads, they just pocket the change. Besides, a flurry of ads during the holiday season (the 2008 Caucuses were on January 3) crowded out non-political ads that would have otherwise run. And by way of ownership and market share, the vast majority of that pocked money goes to out-of-state owners. No meaningful impact.

It’s a fool’s errand to try to impute impacts. Same goes for estimating the spending by the media covering the candidates. Their spending, while perhaps meaningful to a degree, is primarily concentrated in Iowa’s major cities where the airports, rental cars, and base motels are located. And a huge gaggle of media for, in the whole scheme of things, a few critical days is just no big economic deal.

But, you say, the amount of money spent by the candidates and by Iowa supporters who engage actively in this quadrennial and uniquely Iowa spectacle has to be substantial. Yes it is. We simply cannot measure it very well, and we never will.

But as I concluded in my 2008 paper,

For free, and for a time, the word “Iowa” is used continuously in national and international mass media, and that continuous, and often sensational, coverage of the political campaign and the communities of Iowa has to be, as the ad says, priceless.