Was This Election Worth $6 Billion?

Many people seem to have been laboring under the assumption that last night's elections would be the be-all, end-all for economic health, with each side convinced their candidate was the only thing between us and destruction. Regardless of who won or lost, it's easy to believe that one thing destined to stay the same either way is our society's devolution into "crony capitalism," with a heavy emphasis on the "crony" part and a pretty twisted ideal of the "capitalism" component.

The worst insult to the common good may actually be how much perfectly good money was squandered -- as much as $6 billion all told, according to some estimates -- for the political theatrics and empty promises that culminated in last night's tallies. It's doubtful that the old-buddy-business setup would have changed regardless of the outcome.

Spendthrifts
We investors like to think about the productive use of money. For those of us who invest with an eye on actual business quality, our expectation isn't just to make money (although that of course is a major part of investing), but to make money because we have invested in solid entities that efficiently use our money to grow.

The reason portfolios flourish and give off returns over the very long term is that the companies we invest in create better products, expand, focus on innovation, attract customer loyalty, and so forth.

Sadly enough, though, our economy has been in the throes of a system that doesn't always use capital very efficiently. A big point in fact today is that both major presidential candidates broke records with their spending on their respective campaigns in 2012. This infographic shows the stunning comparisons to past presidential campaign expenditures for more than 100 years.

OpenSecrets.org blew the lid off the spending (and contributing) that helped make this epic event possible. As of Oct. 25, about $2 billion was spent on the combined campaigns of both Presidential candidates, and they got a little help from some moneyed friends. Add in nearly as much for Senate and House races, and you'll see just how important money has become in elections.

Although President Barack Obama's top contributor was the University of California, his second and third highest contributors were Microsoft (Nasdaq: MSFT  ) and Google (Nasdaq: GOOG  ) , respectively. Through vehicles such as their PACs, both companies kicked in more than $700,000 apiece.

Of course, opponent Mitt Romney wasn't exactly hurting himself, and apparently bankers were particularly enamored of him. The top contributor to his campaign was none other than Goldman Sachs (NYSE: GS  ) , with a total contribution of $994,139. Bank of America (NYSE: BAC  ) came in close behind, with a $921,839 contribution. Morgan Stanley (NYSE: MS  ) offered up about $792,000. (Again, these dollars filtered through PACS.)

Techno sellouts
Were these good, productive uses of shareholder money? I'd argue not. The historic flood of campaign spending helps illustrate the deteriorating state of our marketplace, where money buys influence and even regulatory favoritism.

Seeing Google figuring prominently on that list is a sad day, indeed. The Internet should have been an awe-inspiring force for grassroots efforts to allow more people access to political positions, since it's a cheap way to get the word out. Unfortunately, it looks as if the unintended consequence has simply been for candidates -- mostly career politicians -- to spend more money to win those elections and make any upstart irrelevant.

In fact, Fast Company recently covered a rather depressing development: Tech companies have finally come around to the idea of lobbying. "For years, Valley players saw Washington as anathema to innovation, a place they were dragged unwillingly ... But eventually the garage start-ups that had once worried about survival grew into multinational corporations concerned with regulation and taxes. And they grudgingly began making their way east."

The article revealed that both Google and Facebook (Nasdaq: FB  ) increased their overall lobbying expenditures this year, with Google dropping $3.9 million and Facebook spending nearly $1 million ... in the second quarter alone.

Expensive theater tickets
I've long advocated for corporate disclosure of political spending. Shareholders of publicly traded companies deserve full transparency about where shareholder money goes. It's worthwhile to note if a company is spending plenty of money on political machinations when it may be slipping in actual business quality and competitive advantage.

Speaking of votes, whenever there's a shareholder vote demanding such political spending disclosures in our proxy statements, let's vote in favor of that disclosure. However, one thing we might hope for in the next four years is for more individuals and corporations to actually start questioning what truly productive uses of capital really are; call me crazy, but such expenditures would probably be the ones that create new products, bring on job growth, and jettison our economy forward.

Spending on Washington's ongoing theater of the absurd really shouldn't make the list. Unfortunately for many politicians and their contributors, apparently the only thing that's certain is that the show must go on; too bad its run has lasted for years now.

To learn more about the most-talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.


Read/Post Comments (8) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 07, 2012, at 3:58 PM, rhealth wrote:

    I didn't get my $6 billion worth, i want a refund!

  • Report this Comment On November 07, 2012, at 5:48 PM, Darwood11 wrote:

    Think of all the advertising people and print-it shops that were employed with this campaign. I'm sure it meant a lot to them. Ditto for the postal workers who handled all of that mail, and the IT people who manned the servers and websites.

    NASA used to point out that every dollar was spent here, on earth. So too for this money.

    Of course, in absolute terms, the amount spent was obscene, and was about 5 times what was spent on the SBA. That's an interesting number to consider with all the talk about 'helping small business.' Of course, each politician is a small business in and unto herself.

  • Report this Comment On November 08, 2012, at 11:35 AM, TMFLomax wrote:

    Darwood11, I agree that it helped some people who needed the work (and possibly even helped the USPS dig itself out of trouble, whew -- the number of mailings I received was absolutely incredible), at least for the short term. But, I see most of that spending as one of those short-term bumps... and yeah, the $6 billion figure is obscene, particularly given the overall economic environment, I think, and one where we need more sustainable, productive spending I think. (Agreed on your comment that "each politician is a small business," which is really something to ponder either way!)

    Thanks as always for the thoughts!

    Alyce

  • Report this Comment On November 08, 2012, at 5:01 PM, lemoneater wrote:

    Very interesting. I was wondering how much was spent on campaigning. Thanks! Have a good evening!

  • Report this Comment On November 08, 2012, at 5:12 PM, TMFLomax wrote:

    Hi lemoneater! So good to hear from you, and I hope you are well! And I'm also glad I could give you a piece of info you were wondering about. Have a great night as well!

    Alyce

  • Report this Comment On November 08, 2012, at 6:37 PM, SuntanIronMan wrote:

    There was a time when companies like Microsoft didn't spend their money trying to influence politicians. There was a time when companies like Microsoft and CEOs like Bill Gates actually prided themselves on not spending money to influence politicians. And then the government happened; going after companies like Microsoft. And now companies like Microsoft all spend money to influence politicians. I'd argue that it is unfortunately a good use of shareholder money. I wish it wasn't so, but unfortunately we have a system where if you don't influence them, they start influencing you.

  • Report this Comment On November 09, 2012, at 1:21 AM, anuvaka wrote:

    I think the worst thing is that the $6B had almost no effect. A lot of money spent for no real purpose.

    It is possible for a PAC to swing the votes in a local election, but has had no effect on the National one.

    Here is one opinion:

    http://www.msnbc.msn.com/id/26315908/vp/49736596#49736596

    And the piece on Radio Times with Marty Moss Cowane (NPR radio)

    The only good that might have come from this is if one of the 1% was knocked down to the 2% border.

    The gainers are the broadcast TV stations, but some welcome extra income for printers.(USPS gained nothing as politicians get a steep discount)

  • Report this Comment On November 09, 2012, at 8:53 AM, Mathman6577 wrote:

    The cost benefit analysis of the money spent indicates that it probably is money NOT spent well: $6 billion for the same divided government. It would have been better spent reducing the debt.

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