US election campaigns raise millions of dollars to get their candidates elected. Where does all the money go? Romina Spina finds out about the main beneficiaries of campaign spending.
In the final stretch of this year's general election, candidates are spending money fast and in large amounts. Over seven short days, from October 11th to October 18th, Hillary Clinton's campaign poured no less than $12.5 million (11.2 million euros) into television advertising to get the Democratic nominee elected to the White House. During the same period of time, her opponent on the Republican side, Donald Trump, similarly stepped up his game by spending $11.7 million (10.5 million euros) to run commercials on television stations.
"If you live in a [battleground] state like Florida, Ohio or Pennsylvania, you cannot go more than a couple of minutes without seeing or hearing an ad," said David Brady, a political economy professor at Stanford University.
The race is still underway, but some, like the political consulting or broadcast media industries, already look like winners in this election cycle. They profit not only from presidential campaigns, but also from gubernatorial and congressional contests, with candidates spending a staggering amount of money on advertising. To ensure their message reaches their target electorate, they rely on media buying agencies that deploy a myriad of consultants, strategists, analysts and pollsters.
Media agency tops list
There are between 100 and 200 firms at the core of the political consulting industry, according to Adam Sheingate, a professor at Johns Hopkins University and author of a book on the subject. He estimated that there were probably several thousand consultants at work. The firms, some of which are part of bigger global conglomerates, were the recipients of most of the money spent during election season.
Within the industry, media is the most lucrative out of several specialties. "Media consultants get a big contract so they are responsible for designing and placing the ad. They make money by charging fees and getting commissions," the political scientist said in an interview with DW.
GMMB, the main media company handling advertising for Clinton and other Democrats, is the single largest recipient overall. As Election Day approaches, the firm's political team at its main office in Washington, D.C., is working around the clock. So far, it has received over $121 million (108 million euros) in this election cycle, according to data from the Federal Election Commission reported by the Center for Responsive Politics, an organization that tracks campaign spending. Four years ago, when the firm worked on President Obama's reelection, it received over $411 million (369 million euros).
GMMB declined to provide details for this article, as companies and media buyers typically do not comment on what they charge their clients. Because it is a market, Sheingate explained, fees and flat rates were negotiated between the campaigns and the firms, whereas commissions were based on the local television or cable station charge for the airtime.
In past decades, it was common for consultants to earn a commission of 15 percent from television stations for placing ads with them. Nowadays, that has changed and there does not seem to be a standard commission anymore. Public records only show the total amount a campaign sends to a firm and for what purpose. "We don't know how much of that money stays with them [for revenue], and how much is just passing through," said Sheingate.
Printing firms are also major beneficiaries of campaign money
Advertisements are the biggest part of business, but candidates also spend large amounts on polling and survey research. Fundraising, too, requires significant resources and the same goes for legal services, as campaigns must ensure compliance with federal regulations.
Digital consulting is now the fastest growing of industries. Firms specialize in digital campaign tools like email, internet advertising, fundraising or data analytics to target potential voters. Money spent on these operations is predicted to exceed $1 billion (897 million euros) for the first time this election season. That is a tenfold increase compared to 2008, when Barack Obama was elected president, said Jeff Hauser from the Center of Economic and Policy Research.
Money invested in digital outreach might be on the rise, but campaigns have not abandoned more traditional methods. Printers, for instance, continue to benefit from election spending. All across the country, voters find copious amounts of printed materials in the mail. Even in states like California, a Democratic stronghold, residents are bombarded with brochures and leaflets in the final weeks of the race.
Funds are also still channeled into merchandising. In August alone, the Trump campaign paid over $2 million (1,79 million euros) to two companies, California-based Cali-Fame and Ace Specialties in Louisiana. They both provide promotional materials such as T-shirts, mugs, stickers and the ubiquitous hats emblazoned with the campaign's slogan, "Make America Great Again."
Little impact on the economy
Spending was originally expected to top $5 billion (4,48 billion euros) in this election cycle, but recent figures show a decline compared to four years ago. Either way, the money spent is not substantial enough to impact the economy. "It's a great boom to political consultants, pollsters and local broadcast television and radio stations, but beyond that, it just isn't a large enough phenomena to make much difference economy-wide," said Jeff Milyo, an economist and professor at the University of Missouri in Columbia.
There might be some effects on the local level during primary season in places like Des Moines, Iowa, or Manchester, New Hampshire. These cities do not usually see a lot of business during the winter months. In election years, local operators such as hotels, restaurants and bars can benefit from the influx of people working on the campaigns.
Similarly, cities that host presidential conventions might see local business increase. There was some evidence for that, but according to Milyo, it is for the most part a temporary boom that does not drive the local economy over any period of time. "It's not the lasting kind of effect that might have an impact on a state or local economy," the economist told DW.
While the largest amounts go to cable systems and local televisions stations, they are not independently owned but part of larger, national corporations or conglomerates. That meant the money poured into advertising does not trickle down to the local economy, said Tobe Berkovitz, who teaches advertising at Boston University.
In the primaries, there would also be money flowing into field operations, mainly spent on rents for space and equipment rentals, car rentals, accommodation and food. But its impact, too, tended to be short-term. "When the date of the primary is over, everything closes down," Berkovitz added. "What a state or city wants is for business to come in and stay."