Is the Value of Campaign Spending Overstated?

Is the Value of Campaign Spending Overstated?

By Sean Trende - November 14, 2013

Campaign spending has been at the forefront of political commentary lately. Between the Supreme Court's Citizen's United ruling, the forthcoming McCutcheon v. FEC decision, and the supposedly underfunded Ken Cuccinelli's near miss in the Virginia governor's race, the role that money plays in the political process has never been a hotter topic.

This is unfortunate, because the role of money in elections is grossly overstated. I've talked about this with respect to the 2010 elections, but it is worth revisiting with new data from 2012 House races.

In reality, the relationship between a challenger getting outspent and his margin of defeat is pretty small. If we look at the margin of victory for all incumbents who ran in 2012 with major party opposition, and compare it to the amount by which they outspent their opponent (or were outspent by their opponent), the relationship is statistically insignificant. In fact, it isn’t particularly close (p=.82, meaning we’re only 18 percent sure of the relationship).

Here’s a chart of the data. As you can see, there are quite a lot of instances where incumbents badly outspent their opponents and had tight races, as well as cases where incumbents were badly outspent but won easily.

Even adding some basic controls, such as the partisanship of the district, does very little to improve the fit. District partisanship relates strongly to the incumbent’s vote share (p is less than .01, so we're over 99 percent sure there’s a relationship), while the incumbent’s spending advantage still has no statistically significant relationship (p=.7, or 30 percent sure there’s a relationship). You can do all sort of manipulations -- dropping highs and lows, breaking the data into Republican incumbents and Democratic incumbents, but the result is still the same. 

It’s hardly the case, though, that money doesn’t matter at all. What matters, though, is challenger funding. Here’s the relationship between the amount of money that a challenger raises and the incumbent’s vote share:

Now we’re getting somewhere. As we’d expect, challengers who don’t raise much money almost always lose, while challengers who raise a lot of money are competitive. Our relationship is highly significant now (p is less than .01).

We can do even better than this. You’ll notice that our trend line doesn’t “fit” the results all that well. That’s because our scatter plot doesn’t really make a line. It’s a curve. A challenger who raises no money wins, on average, 26 percent of the vote. A challenger who raises between $1 and $10,000 does better: about 28 percent of the vote. A challenger who raises between $10,001 and $100,000 does better still: about 31 percent of the vote. A challenger who raises between $100,001 and $200,000 does even better than that: about 36 percent of the vote.

But something happens past that point. A challenger who raises between $200,001 and $300,000 once again gets about 36 percent of the vote. The next $100,000 improves the challenger’s vote share by only two points. The next $100,000 results in only a point’s worth of improvement. Getting into the $500,000 to $1 million club? That’s only another point’s improvement, on average. Beyond that, we’re talking about needing extra millions of dollars to get the types of improvements that the first $100,000 brought about.

The statistical jargon is that challenger money and incumbent vote share have a roughly logarithmic relationship, but a less fancy way to put this is that somewhere around $200,000, a challenger hits a point of diminishing returns. You can see this in the following chart, which takes the logarithm of challenger spending and charts it against incumbent vote share. (The numbers below the X axis are logarithmic functions, so 1 = $10, 2 = $100, 3 = $1,000, etc.)

In fact, if you remove the challengers who raised no money at all (on the far left axis), you are left with a pretty tight fit, and have accounted for about half of the variation in the vote shares of all of our incumbents (r-square = .44). If we also control for Cook PVI, we find that we’ve identified data that account for about 65 percent of the differences in various incumbents’ vote shares.

This relationship makes perfect sense when you stop to think about it. Someone who raises less than $1,000 probably hasn’t really raised money at all; this is probably money they’ve lent themselves or received from family members. They also can’t really afford to do much, so they may as well have raised nothing.

But once you get to $20,000, you really are raising some money, and may have even bought some yard signs. By $100,000, you’re on radio, have an office, and have attracted volunteers. By $200,000, you’ve done a decent TV buy in a mid-sized market.

You’re then faced with the question: What’s next? You can put out more yard signs, but you’re already cluttering the major intersections. You can put an office in some smaller towns in the district, but you’ve already covered the major metropolitan area. You can buy more TV time, but most people have seen your advertisements.

That’s not to say you don’t get any benefit from going further. You just don’t get as much benefit as you received from your initial investment. You get returns, but they’ve begun to diminish.

Incumbents are almost always past the point of diminishing returns. In 2012, only 12 opposed incumbents raised less than $500,000, and all of them but one represented a safe seat. It’s just easy for them to wander over to one of the campaign committees, and begin dialing from a nice, air-conditioned office. Remember too that this doesn’t account for the free media that incumbents generate just by benefit of incumbency. So their fundraising doesn’t matter much. It’s almost entirely about the challenger.

We see the same thing with open seats. The relationship between the winner’s margin and his spending advantage over the loser is stronger than it was with incumbents (p=.37), but it is still statistically insignificant. The relationship between the losing party’s fundraising and the winning party’s margin is statistically significant, and is also logarithmic. We can explain 80 percent of the variation in the winning party’s vote share in open seats just by looking at the district’s Cook PVI and the amount of money her opponent raises.

What are some practical applications of this? At the beginning of this piece, I mentioned three ongoing policy disputes over campaign finances: Supreme Court cases involving independent expenditures and contribution caps, as well as charges by conservatives that Virginia gubernatorial candidate Ken Cuccinelli lost his race because he failed to receive sufficient establishment support.

With respect to the first two, I believe this provides some solace for those aggrieved by the Citizen’s United decision, as well as an upside if contribution limits are struck down or rolled back. The truth is, the extra super PAC cash flowing to incumbents won’t help them that much, because incumbents are already at the point where an extra million dollars provides marginal benefits. But for challengers, that money would make a huge difference. In fact, if I were George Soros or the Koch Brothers, rather than beef up already-funded challengers, I’d identify long-shot challengers in marginal districts or Senate seats and begin running advertisements on their behalf.

Likewise, one of the biggest downsides of contribution limits is that they function to protect incumbents. By making under-connected challengers scramble around to collect $2,600 contributions, it makes it more difficult for them to mount the type of campaign that can put an incumbent in jeopardy. Incumbents, by contrast, have little trouble finding the 200 big donors they need to put together a successful re-election campaign. If contribution limits are struck down, an increase in competitive races is a possible upside.

Finally, this should cast some serious doubt on the notion that Cuccinelli lost because the RNC spent substantially less on his race than it spent on Bob McDonnell’s run in 2009. Republicans spent well over $10 million on that race. Yes, Cuccinelli was outspent by Terry McAuliffe and liberal-leaning groups, but he was past the point where additional money would make a difference. People knew his name, had seen his ads, had heard him on the radio and had seen him at campaign rallies. That’s not to say that an extra $5 million would have made zero difference in the outcome, but I’m skeptical it would have closed the 2.5 percent gap that he lost by.

We analysts spend an awful lot of time talking about fundraising, but the truth is that candidates who raise a few hundred thousand dollars have what it takes to mount credible congressional campaigns, and the difference between a $2 million campaign and a $3 million campaign isn’t that great. 

Sean Trende is senior elections analyst for RealClearPolitics. He is a co-author of the 2014 Almanac of American Politics and author of The Lost Majority. He can be reached at Follow him on Twitter @SeanTrende.

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