Originally published in Utah Business.
Every summer brings a boatload of economic news and events—oil prices, the summer job outlook, hurricane season, national park visits and so the list goes. This summer Utahns will also notice an abundance of media attention on the Beehive State as two prominent presidential candidates with Utah ties begin their quest for the presidency. The economic impact of these candidacies on Utah is worthy of reflection.
The media has reported that President Obama’s reelection campaign and political allies will spend about a billion dollars to secure four more years in office. To be competitive, the republican candidate will need to spend a similar or larger amount to overcome the power of incumbency. We’re talking about numbers twice as large as the 2008 presidential elections—to date the most costly in history. It’s a little hard to fathom.
This money doesn’t just appear out of thin air. So where does it come from? It is privately raised from individuals, political action committees and corporations. Said another way … elections are funded by the American economy. We all pay something—either directly or through higher prices—to finance these campaigns.
So how does this affect the Utah economy? Utahns and Utah companies both contribute to and receive payments from presidential campaigns. Some companies with a presence in Utah, like Goldman Sachs and Microsoft, are large contributors to these campaigns. With the exception of the money that comes back to the state in payments for services, donations from Utahns leak out of the state and are spent elsewhere. Utahns donated a cool $5.5 million to the Romney campaign during his 2008 presidential bid. Romney recently raised more than $10 million in a single day of fundraising. In economic terms, these donations are no different than a one-time federal tax increase. It takes money out of savings, consumption and investment in Utah and moves it elsewhere.
Of course, some of the money comes back. A handful of Utahns will be directly employed by the major campaigns. Many Utah companies will sell their wares to campaigns, starting first with the big winner, the media, which receives a boost from political advertising. The economic impact extends through the economy into legal work, graphic design and printing, even the U.S. Postal Service.
What makes 2012 different for the Utah economy is that we have close ties to not just one, but two candidates vying for the GOP nomination. Mitt Romney and Jon Huntsman, Jr. are favorite sons of Utah. Romney and Huntsman have drawn significant earned media attention to Utah and will continue to do so.
The Wall Street Journal, USA Today, The New York Times, The Washington Post, The Economist, Time, Newsweek, The Atlantic, CNN and most other large media outlets have run prominent stories on both candidates. Most of the time, the candidates’ ties to Utah are notably mentioned in these story.
Most economists would try to put a dollar value or “advertising value equivalent” to this notoriety. In the advertising world, the value of these “mentions” is calculated based on a cost per 1,000 impressions. And, since earned media is rooted in trust, many believe it has more value on a per-mention-basis than paid media. Right now it is too early for these interesting, but not overly helpful, calculations.
What is helpful is to consider what the rest of the world will see in this earned media. To most, the images will be pure politics in play, but there will be some economic takeaways. In both candidates they will see smart, attractive and articulate leaders. It is an image that will pay economic dividends to our state.
In Huntsman the image is one of a globalist, a centrist who sees wisdom in competing ideologies, and a governor who modernized Utah’s liquor laws, cut taxes (he calls it tax reform, but the economist in me sees a tax reduction) and spoke out in favor of civil unions. Some people locally will take exception to his moderate stances, but the Utah I experience is quite closely aligned with many of our former governor’s positions. We are a state with an abundance of mainstream positions even though our politics don’t always reflect it. The economic image that Huntsman portrays serves us well. Projecting Utah’s productive approach to governance is helpful to our economic development success.
In Romney the image is one of a savvy businessman, a problem solver and a man of integrity. As one who watched his leadership of the 2002 Olympic Winter Games from a front row seat, I will always be a fan of his leadership style and immense capabilities. His critics, even some in our state, will point fingers at his approach to health reform in Massachusetts. A closer look will reveal that he was a proponent of state control of health reform—something that I think most Utahns support. His understanding of the issues and his competent leadership speaks well of the state he was educated in, has lived in and receives great support from.
Economic circumstances have always held a privileged position in presidential election years. This year and next, the economics of the presidential campaign will have an even greater value to the Utah economy thanks to two great presidential candidates.