The Economics of the Iowa Caucuses

The electoral landscape was changed forever with the Supreme Court decision known as Citizens United.  The finding opened the political landscape for unlimited amounts of money, effectively striking down previous campaign finance legislation. This means the 2012 election will be bigger than any before it. With the Iowa Caucuses today, it’s interesting to take a look at how election spending effects the early primary states like Iowa, New Hampshire and South Carolina.

Economic Impact of Early Primaries

When you have every candidate rushing into your state trying to shake hands and kiss babies, that means a massive influx of cash. The service industry booms in Iowa during the lead up to the caucuses. Candidates flood into the state with their supporters, making the rounds and hosting fundraisers with a high ticket price. Keep in mind that while the country started paying attention to Iowa around November of 2011, the candidates and the insiders started sniffing around over a year earlier. The economic impact of the early primary is far more sustained than the national attention span.

Centro, one of the posher restaurants in Des Moines provides an excellent example of what the primaries do for states. American Public Media reported that the restaurant enjoys a ten percent bump in revenues during certain caucus years. Perhaps unsurprisingly, the first year with totally unfettered campaign finance in recent history has the restaurant posting record numbers. Still, the same article cited an Iowa State University study finding that the net effect of the Iowa Caucuses are negligible — on the order of about 230 jobs.

Still, there are things about the caucuses that are hard to quantify. The Hawkeye State gets a lot of attention that it wouldn’t otherwise get because of its “first in the nation” caucus. Every four years the attention of the entire nation turns to this unassuming state, with its mere six electoral votes which get the first say.

Big Money In Iowa

Still, the economic impact of the Iowa Caucuses cannot be solely judged by spending at the local diner. As mentioned above, campaign spending was big business before Citizens United. It’s even bigger business now that the money is allowed to flow in unfettered. According to the Washington Post, the candidates spent a total of $1 million in a single week in Iowa, trying to outfox the competition. Going into the final week of campaigning, a single group spent $3.3 million dollars just opposing Newt Gingrich, for example.

Another consequence of Citizens United is that it’s hard to definitively say who is spending how much (and for what purpose). Candidates often have no formal ties with the SuperPAC organization supporting their campaign. Such is the way of political life after Citizens United.

To what extent the money “trickles down” is hard to pin down. There is no guarantee that the organizations and consulting companies involved in making ads for Iowa have anything to do with the state. On the other hand, the media outlets they make buys on do have some tie to the state. However, in an economy where the media is increasingly centralized — national and non-local — it’s hard to find any kind of silver lining for the state.

On To New Hampshire

The next step after Iowa is New Hampshire. The lay of the land is quite different in this sleepy New England state. It’s geographically much smaller, with less than half the population of Iowa. Still, this is a densely populated state, with much of the population centered along the sea coast and within the Boston media market. However, New Hampshire maintains a reputation where merely winning the “air war” doesn’t count for a lot — people in the Granite State want to shake your hand, look in your eyes and get to know you. It remains to be seen whether leading candidates’ war chests will pay off in a state where aggressive personal campaigning is more prized.