The Irony of the Money Race

The news media is abuzz today over the Obama campaign's announcement that it was able to raise $25 million in the first quarter--all but equaling the Clinton campaign's total haul--from over 100,000 individual donors--twice the number reported by the Clinton campaign. That makes Obama the sixth candidate in this election cycle to shatter the previous record for Q1 fundraising.

What's becoming increasingly clear to me amidst all this coverage of the money race, however, is that the importance of presidential fundraising is becoming increasingly divorced from the real-world value of the money itself.

Everyone knows that it takes a lot of money to run a credible campaign. You have to pay your advisers and organizers and you have to buy television ads, etc. So we're accustomed to looking at fundraising totals as an indicator of the viability of a campaign. A campaign that is able to raise millions of dollars is, without question, going to have a much better chance of winning than a campaign that can only manage to raise a few thousand dollars.

But the relationship between money and success is not linear. In a primary race, the phenomenon of diminishing marginal utility is very real. Why? Because despite all the hoopla surrounding the decision by a number of large states to move up their primary dates, the candidate who wins Iowa is still, more likely than not, going to be the nominee. And there's only so much money you can spend in Iowa.

As we witnessed in the last election cycle, the increasingly early media focus on the presidential race serves to magnify the importance of the Iowa caucuses. With the nonstop coverage of the horserace, the hundreds of candidate debates, and endless reporting of new poll numbers, by the time the first actual contest rolled around, the anticipation level had gone through the roof. And as a result, the winner of the Iowa caucuses, John Kerry, received the kind of publicity that a billion dollars couldn't buy, and he steamrolled his way to the nomination.

Remember, Kerry had almost no money at the time. He had to mortgage his house to keep his campaign going. But following his win in Iowa, the money rolled in and he set records for fundraising for the general election.

This time around, Iowa will be even bigger and more eagerly anticipated given how early the press coverage of this race began. I think the odds are quite good that the winners of the Iowa caucuses, for both parties, will end up being the nominees. In fact, I think the condensed primary schedule actually makes such an outcome more likely because it limits the number of news cycles between the contests and, therefore, does not allow time for the winds to shift.

Which brings me back to the absurdity of the money race. Iowa is a small state where airtime can be purchased relatively cheaply. Moreover, because of the intense media focus on the contest, free media is probably more important than paid media. The only area where significant expenditures are required is in building an organization in the state, but again, at some point there's a limit to what additional money can do for you. You really don't need to spend astronomical sums of money to prevail in Iowa.

None of this is to say the money race is unimportant. Quite the contrary. It's just that its importance has little do with the utility of the money itself. And therein lies the irony. In today's political climate, you have to win the money race not because you need the money (at least in the primaries), but because you need the good publicity and aura of success that goes along with it. You need to raise the money not because you need it but because of what your ability to raise it says about your talent and popular support. It's all very bizarre.