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Neil Malhotra: Over the last decade, campaigns have really moved a lot more towards mobilizing the base as it’s become more difficult to persuade people. And this is despite the fact that just mechanically, if you mobilize someone, you net one vote. But if you persuade someone, you’ve actually swung two votes because you take one vote away from your opponent and then add one vote to your side.
Stephanie Kelton: Welcome to the Best New Ideas in Money, a podcast for MarketWatch. I’m Stephanie Kelton. I’m an economist and a professor of Economics and Public Policy at Stony Brook University.
Charles Passy: And I’m Charles Passy, a reporter at MarketWatch.
Stephanie Kelton: Each week, we explore innovations in economics, finance, technology, and policy that rethink the way we live, work, spend, save, and invest.
Charles Passy: You might have heard that there’s an election in the United States on Tuesday, and depending on where you live, you might have even voted already.
Stephanie Kelton: Rest assured, for those of you who feel like you’ve heard enough political news for the next decade, we aren’t covering the midterms today.
Charles Passy: So what are we up to? Well, if you live in a state where there’s a competitive race, you almost certainly have been bombarded with what may feel like an endless amount of advertising. And in fact, even if you don’t live in a state where there’s a competitive race, you might still be seeing a lot of ads.
Stephanie Kelton: You might be wondering who pays for all of these ads? Do they change anybody’s mind? Can ads actually swing a competitive race?
Charles Passy: Stephanie, I’ve got another one. Would it be possible or even legal to ban political advertising?
Stephanie Kelton: Charles, that’s a question we can definitely answer. Brendan Fischer is the deputy executive director of Documented, a watchdog group that focuses on money and politics.
Brendan Fischer: Well, the short answer is that the Supreme Court has held that money is speech protected under the First Amendment, and therefore, it is unconstitutional for the government to try and ban political spending, including political spending on advertising.
Charles Passy: Okay, fair enough. But polls do continue to find that Americans have mixed feelings about political advertising wherever it appears. Pew Research Center, a nonpartisan organization that studies opinion and demographic trends recently found that 73% of Americans believe social media companies should not allow or limit political advertising on their platforms.
And it isn’t just social media. Polling over the years has consistently found that only a small share of Americans believe what they see or hear in political ads, including ads on television, which is where the majority of ads spending occurs.
Stephanie Kelton: While the Federal Trade Commission regulates truth and advertising laws, which stipulate that commercial advertising must be truthful, not misleading, and when appropriate backed by scientific evidence, the same standards aren’t in place for political advertising.
Another body, the Federal Election Commission does mandate clear and conspicuous disclaimers on any public communication made by a political committee regardless of media, which you’ve probably seen. There are the little boxes that flash for a second just before the ad ends.
Charles Passy: Nevertheless, the vast majority of campaign spending is on advertising and elections are only getting more and more expensive. Here’s Brendan Fischer.
Brendan Fischer: Right now we are looking at the most expensive midterm elections ever with Open Secrets estimating that over $9.3 billion is going to be spent influencing our vote. In many cases, voters are not going to know where that money is coming from and who are the politicians we elect are ultimately going to be accountable to.
Stephanie Kelton: Open Secrets is a nonpartisan, independent, non-profit organization that tracks the flow of money in American politics. And for about 12 years, there’s been a lot more money to track.
Charles Passy: Back in 2008 before the Democratic primaries, a conservative nonprofit group named Citizens United had sought to promote and screen a film critical of then presidential candidate Hillary Clinton. Promoting and screening the film would’ve violated regulations prohibiting corporations or labor unions for making certain kinds of political communications or spending money for the purpose of advocating the election or defeat of a candidate.
Citizens United objected and the case ultimately wound its way to the Supreme Court where it was decided in 2010. Here’s Brendan Fischer and note that when he says Citizens United, he’s referring to the case and not the group.
Brendan Fischer: Citizens United was a Supreme Court case that held that corporations are entitled to the same free speech rights as an individual person, and that means that they can spend unlimited amounts of money on independent expenditures, financing advertisements that expressly tell voters to support or oppose a particular candidate. Before Citizens United, corporations were prohibited from making independent expenditures or from directly engaging in politics.
Charles Passy: The Supreme Court decision led to the emergence of the Super PAC or Super Political Action Committee, which you’ve probably heard all about in the news.
Brendan Fischer: Super PACs were not anticipated in the Citizens United decision, but they are an effect of a lower court applying the logic of Citizens United. Shortly after the Citizens United decision, lawyers went to a lower court and said, “Well, the Supreme Court says that independent expenditures cannot corrupt and therefore, we should be allowed to set up a PAC that accepts unlimited amounts of money from corporations or individuals and spends unlimited amounts of money influencing elections. And by the logic of Citizens United, those unlimited contributions in support of unlimited independent expenditures cannot corrupt and therefore cannot be limited.”
And the court agreed and that led to the creation of Super PACs, which are officially known as independent expenditure only committees. And Super PACs can accept unlimited amounts of money from individuals or from corporations or from unions, and they can spend unlimited amounts of money influencing elections.
Charles Passy: A Super PAC is simply a political organization, but it’s a political organization that’s allowed to raise unlimited sums of money from corporations, labor unions, other organizations like non-profits or individuals. Known as independent expenditure only committees, Super PACs are meant to act independently of campaigns, meaning not allowed to work directly or coordinate with any candidate.
Stephanie Kelton: Initially, there was concern that the Citizens United decision might favor one party over another, but according to Brendan Fischer, that hasn’t been the case.
Brendan Fischer: In the initial election cycles following Citizens United, Republicans did appear to largely benefit. More money was flowing into Republican Super PACs in the 2010 and 2012 election cycles, but the Democrats quickly caught up. And now, Democratic and Republican Super PACs are both a defining feature of our political system. Both Democrats and Republicans operate Super PACs and fundraiser Super PACs, and both Democrats and Republicans are fully taking advantage of the post Citizens United world.
Stephanie Kelton: Fischer says that if you look at the Senate, for example, enormous sums of money are directed one way or another by Democratic majority leader Chuck Schumer or Republican minority leader Mitch McConnell.
Brendan Fischer: So for the past few election cycles, the top spending Super PACs have tended to be Super PACs controlled by Mitch McConnell. That Super PACS is called the Senate Leadership Fund. And then on the Democratic side, the Senate majority PAC supports Democratic Senate candidates and is controlled by allies of Chuck Schumer.
So for House and Senate races, it’s becoming more common for Super PAC money to be concentrated in a small number of PAC controlled by party leadership and the allies of party leadership. In some cases, you’ve seen the money then filtered through other popup Super PAC with names that would appear to imply that the PAC was based in a state or had some sort of homegrown connection.
But after votes are cast and after that newly created PAC reveals who financed it, you realized that it was actually just financed by Senate majority PAC or Senate Leadership Fund, these national Super PACs controlled by national party leaders.
Charles Passy: But Super PACs aren’t the only players in the game. There’s another relatively new type of political spending called dark money, which begins with a social welfare organization called the 501(c)(4).
Brendan Fischer: Under the Supreme Court’s Citizens United decision, a 501(c)(4) corporation can spend as much as it wants influencing elections. The key difference between a Super PAC and a 501(c)(4) is that a 501(c)(4) keeps its donors secret. So both Super PACs and 501(c)(4)’s can accept unlimited amounts of money from individuals, corporations, or unions. Super PACs have to disclose their donors, 501(c)(4)’s do not.
So in addition to 501(c)(4) nonprofits spending hundreds of millions of dollars directly influencing elections, we’ve also seen 501(c)(4)’s used to funnel money to Super PACs, thereby keeping the name of the original donor a secret. So the way that it works is that a donor gives money to a 501(c)(4). The 501(c)(4) then gives that money to a Super PAC, and the Super PAC discloses the donation from the 501(c)(4) but does not disclose where the money originally came from. This form of spending is called dark money.
Stephanie Kelton: According to Fischer, the existence of Dark Money is actually contrary to the transparency that the Supreme Court originally anticipated in the Citizens United decision.
Brendan Fischer: I think the other interesting, or at least at first glance, apparently contradictory point to know about dark money is that the Supreme Court and Citizens United anticipated that the unlimited spending it had unleashed would be disclosed. And the court in Citizens United actually endorsed disclosure as a means of preventing and deterring any potential for corruption from unlimited political spending.
The problem is that the disclosure laws were written in a pre Citizens United world. Congress has narrowly failed to update those disclosure laws since Citizens United and the agency casts with enforcing our disclosure laws, the Federal Election Commission, has refused to enforce the laws that are on the books.
So the Supreme Court anticipated that we would have more transparency than we have had in post Citizens United world and even the laws that are on the books would appear to require more transparency than we’ve seen since Citizens United. But the problem is that the FEC is narrowly interpreting the laws that are on the books and then in many cases failing to enforce even those narrow interpretations.
Charles Passy: According to Open Secrets, the decade following the Citizens United decision was the most expensive in the history of American elections. In the 2010s, and this is a quote, “Election-related spending from non-party independent groups ballooned to $4.5 billion over the decade. It totaled just $750 million over the two decades prior.”
The Citizens United decision remains controversial. And while there are ongoing efforts to limit the flow of money into politics, so far, none have been successful.
Stephanie, let’s go back to one of the questions we opened with. Even if all of this money is flowing into campaigns and a great deal of it is then being spent on advertising, is it working?
Stephanie Kelton: Right? Is it influencing voters and therefore, elections?
Brendan Fischer: That is a great question and I think it touches on something broader within this post Citizens United world, and that speaks to how there’s a lot of people who are getting rich off of the amount of money in politics.
Political consultants rake in just an astonishing amount of money in consulting fees and commissions from the billions of dollars spent on elections every cycle. It’s not always clear whether donors are really getting much bang for their buck. So certainly, much of the money raised by Super PACs political parties and candidates goes towards television advertising. And I think there are real questions about the extent to which television advertising is the most effective means of persuading voters or encouraging voters to actually vote. But television advertising is often profitable for political consultants. They take a substantial commission from television advertising.
The world of digital political advertising is very, very quickly evolving. And I think there are a number of ways that digital advertising can be more effective than television advertising. Perhaps the most effective way to spend political money is on canvasing, actually having people on the ground who are knocking on doors and talking to their neighbors. That kind of program can be more cost effective, but it’s more labor intensive and it does not result in as high of commissions paid to consultants who are operating out of the Washington DC area.
Charles Passy: When we’re back, does political advertising really persuade, and why is so much money still being spent on TV advertising? Stay with us.
Stephanie Kelton: Welcome back to the Best New Ideas in Money. Before the break, we talked about some of the ways money is getting into politics and what may be the most expensive midterm election ever.
Charles Passy: And in fact, you, yes, you are probably seeing how a lot of that money is spent because a significant portion of this money is spent on advertising, but does it work? Are these ads really persuading voters? Neil Malhotra is a professor of political economy at the Stanford Graduate School of Business.
Neil Malhotra: I think there’s different views on that. I would say that advertising generally does not persuade. And that doesn’t just include political advertising, it also includes I think, product advertising.
Stephanie Kelton: And that’s partly because persuasion isn’t necessarily the only goal. For Malhotra, Democrats and Republicans are longstanding brands, kind of like Pepsi and Coke.
Neil Malhotra: So I think a lot of what product advertising is, is that, and especially for standing brands. Someone drinks Coke, it’s not like they’re going to switch from Coke to Pepsi if they’ve been drinking Coke their whole life. But they want to be reminded that when you go to the store, you should pick up some Coke or maybe pick up an extra case of Coke and gets it in your mind.
So when you have a very new product, you kind of want to use advertising to inform to say, “Hey, here’s the features of this new product. Maybe we can persuade you to buy it.” But if you have longstanding brands, it’s not like you’re going to get people to switch. What you’re really trying to do is mobilize them to get them to activate latent preferences they already have.
Stephanie Kelton: In Malhotra’s view, ads often have two major goals, persuasion and mobilization.
Neil Malhotra: I think it’s kind of important to distinguish what those two things are and what advertising and politics generally is really meant to do. So if you try to persuade someone, you’re trying, for example, to convince someone who normally votes Democratic or Republican, or convince someone who’s like right on the fence and independent, a swing voter to vote Republican. That’s opposed to mobilization, which is you have someone who’s clearly a Republican but they may not be excited to vote. And to mobilize them, you have to kind of get them out to the polls.
In some ways, you’re persuading them to leave their house or to fill out their mail ballot, but we call that mobilization.
And over the last sort of decade, campaigns have really moved a lot more towards mobilizing the base as it’s become more difficult to persuade people, as people got more polarized and the number of swing voters has declined. And this is despite the fact that just mechanically, if you mobilize someone, you net one vote because you kind of take someone who’s not in the electorate and put them in the electorate. But if you persuade someone, you’ve actually swung two votes because you take one vote away from your opponent and then add one vote to your side.
So even though persuasion has doubled the bang as mobilization, a lot of campaigns and campaign advertising are focused a lot more on mobilization.
Stephanie Kelton: But like Malhotra said earlier, there are different views on whether or not political ads effectively persuade voters.
Charles Passy: Michael Franz is a professor of Government and Legal Studies at Bowdoin College. Franz is also a co-director of the Wesleyan Media Project, which tracks and analyzes advertising by candidates in real time during elections.
Michael Franz: Well, I do think that they’re effective in close elections potentially at swinging a close election, but that is almost an axiom of close elections, which is that anything can really matter.
Charles Passy: Franz has been analyzing political ads and their impact for many years, and he believes that ads can and do make a difference.
Michael Franz: In those cases where candidates have more ads on TV or more money spent towards advertising than their opponent, the candidate who’s out advertising the opponent tends to do better when you compare it to races or environments where the advertising balance is more even. And so you definitely want to sort of outadvertise your opponent. That’s kind of what drives the ad war up in some of these crazy elections.
And what you might see in many cases in DC is that many elections end up almost balanced in the amount of ads that are on TV by both sides. And therefore, the empirical prediction would be that the advertising doesn’t make any difference because both sides essentially neutralized each other. And so there are lots of interesting dynamics in that regard. But because candidates spend so much time trying to neutralize the other side, we know that campaigns believe this and the empirics tell us this, that those advertising imbalances will work to the candidate with more ads.
And so that suggests that ads do in fact persuade voters.
Charles Passy: So wait a minute, these ads do work?
Michael Franz: They’re not going to take a Republican and turn them into a Democrat, but they might take a swing voter or an independent who’s a little uncertain and bring them over to the candidate who has more ads on TV. They might just make a more persuasive appeal because there’s more volume of messages from that candidate. And so it’s not changing minds wholesale, but it is on the margins moving those small percentages that is crucial to winning those competitive elections.
Stephanie Kelton: We ask friends whether some ads like negative and positive ads, for example, are more effective than others.
Michael Franz: Research is sort of mixed on this, but in general, we have found that ads where you mention your opponent, but you also do so in the context of a policy attack, “My opponent wants to cut social security, my opponent was in favor of invading Iraq, my opponent wants to restrict gun access.” Those policy-based mentions are far more effective than the attacks on a candidate’s personalities. Voters really don’t like those kinds of ads. Incivility is really off-putting.
Now interestingly enough, over the years, we’ve noticed that candidates, as a result of probably that general rule, have put more money into policy attacks than they do into personal attacks. That’s not true for every candidate, it’s not true for every election, but by and large, I think candidates know that the kind of personal attack they might do on a 30-second ad on TV is not going to be as effective as, or for that matter, viewed as positively by the media or by voters as an attack on a candidate’s policy positions.
Stephanie Kelton: When it comes to where the ads are appearing, we asked friends why we’re still seeing so many ads on television.
Michael Franz: Even as our media environment is evolving and voters are going in different places for entertainment and so forth, there still isn’t a massive clarity over how to reach a lot of voters with a big investment like you’ve traditionally done with television. If voters are going in five different or six different places, it’s really hard in the hustle and bustle of a campaign to be in five or six different places at once. And so the most people are still on TV, and so that makes the most sense to put most of your resources there.
Stephanie Kelton: This is not to say that digital platforms aren’t important. In fact, they’re critical. And according to Franz, the expansion into the digital space is one of the major new trends in political advertising overall.
Michael Franz: One of the things that’s come out of that is an extension of what political sciences have understood as a sort of nationalization of our congressional elections. We always, of course, elect local candidates to represent us geographically, but these elections have come to mean so much nationally. And so we care a lot now about the Senate election in Georgia or the Senate election in Pennsylvania or the Senate election in Wisconsin because what it means for who control the chamber.
And so as a result of that, candidates have come to use these digital platforms to put ads out there that are being seen by people across the country, primarily with the goal of raising a lot of money. And so that’s one of the really kind of new innovations. The campaigns have always wanted to raise money, and they’ve always had email lists since we’ve had email. But now they can send targeted campaign ads to voters in various parts of the country and specifically ask them to contribute. That is a really interesting difference from even 10, 15 years ago where those sort of nationalization appeals just didn’t exist.
Stephanie Kelton: Ultimately, the real mystery may not be whether the ads work, but what it is that persuades voters. And for Malhotra, it’s important to consider the mood.
Neil Malhotra: One of the most stable and consistent relationships in American politics is the state of the macro economy and elections. So it may not be surprising to many listeners that the better the economy is, the better incumbents perform. And kind of the image that both academics and the media have had is that voters are very rational. And the reason why they’re doing this is that they’re sitting at home reading the New York Times or the Wall Street Journal learning about the economy, connecting it to the government policies and reward and punishing based on that.
The idea of mood is something different, which is the reason why people punish or reward politicians for the state of the economy is not because they know a lot about the economy or they’re properly attributing blame and credit, but because the economy gives a sense of public mood that things are going well, they’re going poorly. I have a good future, I have a bad future, and they attribute this mood to the government. So those things are very hard to disentangle. But in my view, there are two very different stories of what’s going on.
Charles Passy: Which begs the question, how do you disentangle these different stories as Malhotra puts it?
Neil Malhotra: Let’s take the example of inflation. So a lot of, we know that a lot of things about inflation have to do with both fiscal policy and monetary policy. So when the government spends a lot of money and injects a lot of money into the economy, that can increase inflation. When the Fed is very loose with the money supply, that can increase inflation. And maybe there’s reasonable reasons to think that voters should punish the government for making prices higher.
On the other hand, consider kind very small but significant part of inflation which is gas prices. We know that presidential approval is tightly linked to gas prices, but this is sort of unclear whether we think this is a rational response from voters or not. So sure, you might be able to tell a story about foreign policy and gas prices, but a lot of what goes down with gas prices is determined by international markets, which politicians have very little control over. Yet it seems that the public does hold the president accountable for what the gas at the pump is.
So that’s kind of an example of how this is very hard to disentangle because some aspects of inflation, you would say, “Oh, it’s right for the voters to be punishing or rewarding the government,” but other seem to be more based on mood and emotion. It may not be appropriate.
Charles Passy: So is mood the decisive factor? Maybe.
Neil Malhotra: What matters in politics is the margin, which is how are the marginal voters voting and is their decision making tipped on the margin or not because of mood? So mood doesn’t actually have to be a huge portion of how people vote for it to make a difference substantively. I have no clue like if you have to, they have a pie and divide it up, how much is mood and how much is really looking at issues carefully, but you don’t really need that much mood to tip stuff in close elections on the margin.
Stephanie Kelton: If as seems likely we continue to spend more and more on elections, we’re almost certainly going to experience more political advertising regardless of the medium. Michael Franz has been analyzing political ads for more than 20 years and continues to enjoy them. So what’s his perspective on political ads?
Michael Franz: Political ads are like multivitamins. You would never live on multivitamins, you should have fruits and vegetables and you should have protein and all that kind of stuff. But multivitamins still provide sort of a net gain for you in the absence of all the nutrients you should get in other foods. And they certainly don’t hurt. If you have a multivitamin every day, it’s not going to kill you, it’s not going to hurt you, it’s not going to do anything negative.
And so I sort of see political advertising and campaign expenditures in sort of that light, which is that they provide us information, they get us excited, they get us talking, and haven’t really made us awful people and they haven’t really made … There’s evidence to suggest even that political ads have not been the source of our polarization. They haven’t been the thing that’s driven us apart. That happened outside of the political advertising space for lots of other reasons, historical, evolutionary, sort of politically, certain developmental reasons, not just because of 30-second ads. And so I tend to be more positive about their influence on our society than many people.
Charles Passy: Stephanie, I would just say you actually can have too many vitamins.
Stephanie Kelton: I get it, Charles, but think about it like this. After next week, you probably won’t be seeing a lot of ads until 2024.
Charles Passy: I can hardly wait.
Stephanie Kelton: Thanks for listening to the Best New Ideas in Money. You can subscribe to the show wherever you listen to podcasts, and if you like what you heard, please leave us a rating or review. And if you have ideas for future episodes, drop us a line at [email protected]. Thanks to Brendan Fischer, Michael Franz, and Neil Malhotra. To learn more about the business of politics, head to marketwatch.com. I’m Stephanie Kelton.
Charles Passy: And I’m Charles Passy. The Best New Ideas in Money is a podcast from MarketWatch. Melissa Haggerty is the executive producer and the producers are Katy Ferguson, Matty Lukshoff and Michael McDowell. Additional editorial oversight from Steve Kutz and Mark DeCambre. Editing and mixing by Will Stanton. Jeremy Binckes is our news editor and Tim Rostan is the executive editor for MarketWatch.
The Best New Ideas in Money theme was composed by Sam Rekser. Stephanie Kelton is an economist and a professor of Economics and Public Policy at Stony Brook University and not part of the MarketWatch newsroom. We’ll be back next week with another new idea.
