The Economics Of The Iowa Caucuses

This story was written by Rashah McChesney, Iowa State Daily

Shawn Roland, public information officer with the Iowa Department of Economic Development, said the caucuses are significant for the state because they give Iowans the chance to "showcase the state's strength on the world stage."

In a sense, he said, it's a way to showcase the state's "brand."

David Swenson, Iowa State University associate scientist in economics, said the fact that thousands of people were talking about Iowa was one of the only benefits the race brings.

Iowa losing the caucuses, he said, wouldn't have much tangible economic loss, but would be a hit to the state's public relations.

Swenson said although there might be a "great sense" of something taking place because of the high visibility of the candidates, the overall economic impact is negligible.

"Say you've got 12 viable candidates," he said. "Give each of them 20 members, let's give them all 40,000 a year -- and that's $9.6 million just for payroll."

Swenson said that the nearly $10 million is simply not a lot of money in the grand scheme of campaign spending -- even doubling the amount to account for office space and equipment barely makes a dent.

Also, Swenson said, the bulk of the money that is being spent is not going to small towns in Iowa; it's going to the bigger cities, such as Des Moines.

"So they're going to be renting cars and buying airfare," he said. "Well, sales that are made in Iowa are all good, but is any of that money making it to Main Street?"

Although a large amount of money is being funneled into the media, Swenson said, media companies are not hiring additional staff in Iowa, making the financial boost temporary.

Swenson said most of the money comes from the high number of media personnel that descends on the state. Swenson referred to these media workers as mostly "tourists with expense accounts."

He called this temporary phenomenon the "coverage effect."

"This makes Iowa a destination place -- a place to go to witness a spectacle," Swenson said.

It just doesn't generate permanent economic growth.

Swenson said the caucuses may actually be interfering with the economic activity that takes place around the Christmas season.

"But we've got a conundrum, a wonderful conundrum," he said. "The time at which the newspapers would normally already get the premium dollars overlaps with the caucuses."

He said that the overlap was bad news for businesses who couldn't get their ads on the air.

"A lot of the advertising can't get a lot of the prime-time spots and they're forced to go to the smaller media outlets," Swenson said.

He said although there may be some initial spending in the early caucus states after Jan. 3, there isn't going to be any more money coming in.

Swenson said the spending will move to the national media markets, then the candidates will spend a lot of their money on the states where the race is close.

Roland said campaigning in Iowa is a unique situation.

"A campaign can't come to Iowa, drop millions of dollars on television and win automatically. That candidate has to create a grassroots campaign," Roland said.

"Go out, meet people, shake hands, talk to people about their vision for the future. That's one of the things that makes Iowa different and better positioned for other states to hold the first-in-the-nation caucus."

Roland said one of the benefits of the attention that Iowa received was that it attracted some new business.
© 2007 Iowa State Daily via U-WIRE