$100 Billion Election Economy is in Full Swing
The U.S. elections are the world’s main political event of 2024, as candidates and parties navigate an environment of intense polarization. Projections indicate that election spending this year is expected to exceed 2020 levels in nominal terms, though not in real terms, reaching over $15.9 billion.
On the Republican side, Donald Trump is leading the scene, while Kamala Harris has replaced Joe Biden as the Democratic candidate. The race has been defined by political fragmentation and personal attacks.
But with such unprecedented spending, critical questions are being asked, such as:
- Where is this $15.9 billion coming from?
- How is it being allocated?
- What are the broader impacts on local economies and the national landscape?
In this article, we’ll explore these questions, analyzing the scope of the election economy and its far-reaching implications. Since the election is ongoing, we’ll be working with forecasts, so final figures may still shift as the cycle progresses.
How are Candidates Raising Money?
Understanding how candidates fund their campaigns is crucial to grasping the economic forces at play during elections. The sources of campaign financing significantly shape the flow of money and economic activity throughout the election cycle.
The primary methods campaigns use to raise money include:
- Candidates' personal funds
- PACs (Political Action Committees): Organizations that raise and spend money to influence elections and public policy.
- Party funds
As illustrated below, roughly 70% of campaign funds come from PACs, with personal contributions from candidates following in second place.
These private donations reveal a complex web of interests behind election campaigns, driven by personal agendas or the influence of specific economic sectors.
Thoughts on the impact of the election on the GDP:
- Campaigning trial - US$ 3.2BN (assuming 300 events between both parties, average attendance of 30,000, and average spend of US 250 per attendee)
- Trinkets - Merchandising, Campaign materials, etc… - U$ 100M
- Campaign Ad Spend - US$ 11BN
- Increased Ad Spend as a result of the Campaign ie increased price point: 30BN
- Total: US$ 44.3BN
Beyond this, big corporations have contributed 3.5BN during the 2022 mid-term elections on corporate self-interest/lobbyists. Given that this is a presidential and Senate / House election, it is a fair assumption to assume significant growth on top of 2022.
Elections also create many jobs, especially temporary ones, as they hire staff, strategists, analysts, field organizers, and volunteers, all of whom have this temporary boost in employment - that drives the economy.
Which Groups Support Each Party?
There is a clear level of political fragmentation across different sectors, as seen in the distribution of donations.
Key sectors backing Republicans include agribusiness, finance, insurance, real estate, energy, natural resources, and construction. Democrats, in contrast, have strong support from sectors like healthcare, communication, electronics, lawyers, lobbyists, and labor organizations.
Crypto’s Role in Fundraising
The crypto industry has made a strong appearance in the 2024 elections, raising nearly $180 million. Leading the charge is the FairShare PAC, which has received major donations from companies like Coinbase and Ripple. FairShare is a bipartisan PAC focused on candidates who advocate for more flexible regulations around cryptocurrency and blockchain.
Among all corporate campaign contributors, FairShare has raised the most, highlighting the rising influence of the crypto and blockchain sectors. While the funds support both Democratic and Republican candidates, there’s a stronger alignment with Republican interests due to shared views on regulatory policies.
Interestingly, although exact numbers aren’t available, a significant portion of these funds was reportedly raised through cryptocurrencies like ETH, BTC, and XRP. This shows the growing role of the crypto ecosystem in campaign financing and opens the door to new possibilities for future elections.
How are Parties Spending Resources?
Now that we’ve seen how candidates raise money, it’s important to understand where those funds go. Campaigns incur various expenses, but the main ones can be grouped into two categories:
- National conventions and events
- Marketing / Media
Essentially, the spending is focused on boosting campaign engagement and reaching as many voters as possible.
National Conventions and Events
Rallies and events are numerous, especially in the final stretch of the campaign and in key swing states. Each party hosts hundreds of events. The estimated average cost per event ranges between $100,000 and $300,000, covering:
- Venue rental: Convention centers or stadiums can be pricey.
- Security: Additional personnel is required, especially for high-profile public figures.
- Transportation and lodging: For campaign staff, equipment, and materials.
- Advertising and promotion: Ads and outreach efforts to ensure high turnout.
Of course, these events are relatively small compared to national conventions. The Democratic convention, held in Chicago, is estimated to have cost around $95 million. Meanwhile, Republicans spent approximately $85 million on their convention in Milwaukee.
Media and Marketing
Another major area of spending is on marketing and media. The election race is long, and throughout the campaign, candidates need to consistently share information and address topics that resonate with voters.
AdImpact estimates that total media spending for this election cycle will exceed $10 billion. About 50% of the budget is expected to go toward broadcast media, as shown in the chart below.
The main topics covered in presidential campaign broadcasts include:
- Donald Trump’s focus: Inflation, the economy, housing, immigration, and crime.
- Kamala Harris’s focus: Taxes, healthcare, housing, abortion, and crime.
Where is the Money Being Spent?
Another important point is identifying where the money is being spent most heavily—and the pattern is clear. As shown in the image below, the highest spending across all races occurs either in economically significant states like New York, California, Texas, and Florida or in swing states: Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin.
When focusing specifically on the presidential race, most spending is concentrated in the swing states, generating significant economic impact. In Georgia, for example, more than 60% of total election spending comes from the presidential campaign alone.
The Emergence of Prediction Markets
Prediction markets have long been a part of the American economy, whether for economic forecasts or sports betting. In the 2024 presidential elections, these markets are moving substantial sums of money. So far, the U.S. election betting market has handled more than $2.5 billion, and that number is expected to grow.
A key aspect of decentralized prediction markets is that they provide insights into the expectations of economic agents. Unlike the biases found in traditional polling, these markets reflect participants who have skin in the game, offering more than just opinions.
The total mentioned represents the bets placed across several popular prediction platforms, including Polymarket, Betfair, PredictIt, Kalshi, and Smarkets. Polymarket currently dominates the space, with $2.3 billion in active wagers as of October 23.
This highlights the rise of Polymarket in the 2024 elections and underscores the importance of decentralized systems in shaping market dynamics.
Polymarket and Decentralized Prediction Markets
It’s important to note that, technically, betting on Polymarket is prohibited within the U.S. due to regulatory issues with the Commodity Futures Trading Commission (CFTC) in 2022. However, international bettors participate, and some users bypass the platform’s geolocation restrictions.
Polymarket is a decentralized prediction market platform built on the Polygon blockchain, a Layer 2 solution on Ethereum. The platform allows users to place bets on various topics, with odds dynamically adjusting based on bids and asks in its order book system.
Although elements like market creation and dispute resolution remain centralized, the platform has seen significant public interest during this election cycle. Activity has surged, with the total volume of predictions on Polymarket hitting $1.5 billion in October. Much of this spike is driven by election-related bets, but the platform is expected to maintain a much higher trading volume post-election compared to 2023.
On November 1st, Polymarket indicated that Donald Trump had a 63.1% chance of winning the presidential election, compared to Kamala Harris' 37%.
Impacts on Local and National Economies
The economic impact of elections can be viewed from two perspectives: the broader national economy and the local effects.
At the national level, election spending contributes between 0.6% and 0.8% to GDP. However, this boost is temporary and doesn’t create sustained economic activity, as much of the spending is diverted from other sectors. While the contribution is noticeable, it’s not particularly large in the grand scheme of the economy.
Certain industries, such as media, security, and hospitality, see significant short-term benefits. For instance, hotels and security services thrive in areas hosting political events. However, the jobs created during election season often vanish in the year that follows.
On the local level, the effects can be much more pronounced. The Democratic National Convention in Chicago, for example, generated an estimated $370 million in economic activity, bringing over 50,000 visitors and creating 3,200 temporary jobs. Though specific figures for Milwaukee are unavailable, the Republican National Convention there likely had a similar boost. Local sectors like lodging, food services, tourism, and air travel also see significant growth during these events.
In summary, while the economic effects of elections are concentrated and large in certain regions, they are temporary. The influx of money generates wealth, but it doesn’t lead to long-term economic growth. Nonetheless, the election economy still moves significant amounts of money during the cycle.