How Much Will Money Matter?

So far this week, the big presidential campaign news is Mitt Romney’s massive fundraising haul for the month of June. The Romney team raised $106 million last month, out-raising President Obama by $35 million and besting Democrats for the second month in a row. There are important asterisks to the GOP gains—in particular, a large portion of this money has been raised for the technically ongoing primary, and can't be spent until after the convention—but it’s still impressive. If the Romney team can sustain this pace—it’s possible they’re collecting low-hanging fruit, and the numbers will drop off later—then it will have a large financial advantage in the fall. But how much does that actually matter?

The Obama team wants you to believe that fundraising could be the deciding factor in the election. In an email to supporters, campaign manager Jim Messina warned, “The gap is getting wider, and if it continues at this pace, it could cost us the election.” In the same email, Obama adds that “We can win a race in which the other side spends more than we do, but not this much more.”

The problem with this picture is that the jury is out on the question of money’s effect on a presidential election. Obviously, if you don’t have the funds to air advertising or run a get-out-the-vote operation, you’re in trouble. But at a certain point—particularly in presidential elections—it’s not clear whether an advantage or disadvantage means anything for the final outcome.

I emailed political scientist Brendan Nyhan, an assistant professor of government at Dartmouth College, for this thoughts, and he offered a little skepticism. “I tend to think the effects of money in politics are overstated,” he wrote. “The reason is that campaign donors are strategic—candidates who are likely to win are more likely to attract funds, which means that the apparent correlation between funding advantages and winning can’t be interpreted as causal.

“Also," he added, "much of the money that is raised goes to TV ads that have short-lived effects and tend to cancel each other out in competitive races." In a recent post, the Monkey Cage's John Sides made a similar assessment: "The effect of ads seems to dissipate quickly, even within a week. So you may not need to think about the effects of ads for another 3+ months." Put another way, we essentially have to wait until just before the election to start thinking about the effectiveness of ads on voting, because those effects are so fleeting.

There's also what Nyhan calls the "marginal benefit of campaign funds"—the more money you spend in an election, the lower the benefit of each additional dollar. With the large amounts that will be spent in this campaign, an extra hundred million dollars on either side won't make a significant difference.

With all of that said, Nyhan offered a few important caveats. First, anything can matter in a close election. It’s unlikely, but still conceivable, that a few extra television ads in a few more states could mean the difference between victory and defeat for Obama. Moreover, we’ve never seen a situation where the incumbent president is outspent by his opponent. This is unexplored territory, and the possible effects of that difference are unknown. By virtue of being the incumbent, Obama is already well-defined in the eyes of the public. If this were an open election, spending money to “define” him would make sense. As it stands, it might be something of a waste (though not, of course, for Romney's campaign consultants).

When it comes to messaging, Obama doesn’t actually need a fundraising advantage. By virtue of being the president, he has the ability to shape the national conversation—something he’s recently used to great effect. The fact that he can shift the agenda to same-sex marriage, immigration, or health care means far more than Romney’s money advantage; regardless of how much he raises, Romney will inevitably fight some of the election on the president’s turf.

For Romney, there is one clear benefit to a money advantage: He could invest more resources into his ground game. The ability to mobilize and turn out your voters can mean the margin between victory and defeat, or the difference between a narrow win and an impressive landslide (see the 2010 midterm elections). But again, a campaign will eventually run into diminishing returns. Even with a billion dollars in the bank, there are only so many volunteers you can train, so many neighborhoods to canvas, and so many places where you can find and persuade new voters.

Given the huge amounts that will be raised on both sides, odds are good that money will have a marginal effect on the outcome of this election. The presidency will largely be determined by the fundamentals: unemployment, economic growth, the incumbent’s approval rating. At this point, as I argued yesterday, the fundamentals still favor Obama. Mitt Romney, Karl Rove, and the Republican Party can spend billions; it won’t change the fact that it’s simply unusual for an incumbent president to lose reelection when there’s positive economic growth (even if it isn’t enough to bring the economy to where it needs to be).

If you want to know where money will have its greatest effect, look to congressional elections. A few million dollars in a few states can—and likely will—mean the difference between the status quo, or an ability to direct the nation’s agenda.

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