Iowa Finishes First, But Doesn't Win The Money Prize : Planet Money You might think with all the attention on the Iowa caucuses today that local merchants are raking in the bucks. But an Iowa economist runs the numbers and finds that the financial windfall for Iowa is surprisingly low.
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Iowa Finishes First, But Doesn't Win The Money Prize

The Republican candidates, like Newt Gingrich, spent money in Iowa. An economist calculates exactly how much. T.J. Kirkpatrick/Getty Images hide caption

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T.J. Kirkpatrick/Getty Images

At 11 o'clock tonight, the exodus from Iowa begins. Even as the winner of the Republican caucuses gives his (or her) speech, the campaign staffers and reporters are heading to the airport for midnight planes bound for Manchester, New Hampshire. Political love affairs are fickle like that. We won't hear a question about ethanol subsidies for another four years.

And as the voters of Iowa pick up the discarded lawn signs they must ask, "Was it worth it?" Did the state's insistence (enshrined in law) that it goes first reap any sort of economic benefit for the average Iowan?

Economist David Swenson says not really. He's a professor at Iowa State and ran the numbers from the last caucus in 2008. He says that judging from the breathless media coverage, you'd think that candidates shovel money into Iowa. All those bus trips and attack ads and pizza parties for volunteers have to bring some sort of benefit. But after picking through the campaign disclosures, Swenson says the spending in the state was surprisingly low.

In the run up to the Iowa caucuses four years ago, the major candidates spent $352.5 million in total. But only around 4 percent of that spending was in the state of Iowa. The state reaped about $16 million. Not bad, but not a major economic development windfall. Swenson estimated that the money works out to 229 jobs during the campaign season.

Where does all the money get spent if not in Iowa? Back at campaign headquarters in Virginia and DC. And it makes sense. That's where they raise money. Buy computers and consultants. Pay their long-term staffers. But what about all those ads on Iowa TV? Swenson says:

The candidates do buy massive amounts of media time. But they buy that time in blocks using media consultants and other media specialists who in turn make highly targeted buys from the sales managers of the companies that own radio and TV stations, nearly all of which are [outside Iowa]. Advertising, print, and multi‐media products and activities are also very likely to be produced external to our first states. In short, while large amounts of funds are spent in support of a candidate's total effort, which begins in Iowa and New Hampshire, precious little, comparatively, of the direct spending is actually in those early states.

And remember this was in 2008, when both parties had open nominations. This year, with only Republicans competing, the economic boost to Iowa is expected to be smaller. The Des Moines Register found that early spending in Iowa (through September of 2011) still hovered around 5 percent of the nationwide total. But that worked out to only $3 million. Shaking hands at coffee shops and parades just isn't that expensive.

Now, none of these calculations include the journalists who trudge from event to event. They don't have to report how much they spent on rental cars and hotels (And I can attest from experience that they are a hard-drinking, expense-account-padding lot.) But even a thousand reporters staying for a week doesn't boost the total that much. They do, however, provide what might be the most lasting economic benefit of the political circus. Even if Swenson says it's too hard to quantify.

The Iowa caucuses do provide exposure that the state, its businesses, and its boosters would find very expensive to obtain otherwise. 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.