The Special Election as an Economic Event

16 Jun

Using very basic systems and economic theory, we could model a region’s economy like this:

This model indicates four basic flows of capital: into the region, out of the region, and the churn of buying and selling within the region itself. Pre-railway and telegraph, when it was relatively difficult to move goods and funds, most of a region’s economy consisted of the churn. A few places of great trade – sea ports and stock exchanges – saw the vast majority of inter-region flow. The interstate and internet accelerated this inter-region flow, yielding today’s world, where you buy books from Amazon, music from iTunes, strawberries from Mexico, and everything else from China. The “buy local” concept would have been comical in 1800 (or even 1900, or 1950) – where else would you buy?

A region gains in wealth when it maximizes its inflow, minimizes its outflow, and has a healthy washing machine in the middle. Thriving modern cities act as magnets of capital (monetary and intellectual, but we’ll ignore the second for this article), and see little of their own trickle away. Everyone wants to build condos in Toronto – do you think all that condo money was locally procured? Likewise, Germany continues to succeed as an exporter of high value goods – capital flows into the country at an amazing rate, as rubber-dogshit making machines fly around the globe.

In Buffalo, we suffer as an attractor of capital. While in exporting we punch above our weight, we have little success in other areas. Outside of our trade with Canada and above average manufacturing sector, our region relies on a greying population for outside funds: social security, national and state pensions, and Medicare (thus our growing healthcare sector). It isn’t long before we are crowing about swimming meets, the bi-focal crowd, and other conventions and the outside dollars they bring as an engine for the future. With a small corporate presence and a generationally stalled economy, there is little to attract institutional outside dollars (note when it does happen, we flip out screaming “They like us!”). This system becomes self-reinforcing, as we then have little venture capital and development dollars for the churn, and our sluggish economy perpetuates. Meanwhile, our output stream remains steady, buying all those strawberries and books.

Which is a long way of getting to this question: is a special election a positive economic event for the region? Ignoring the politics of the candidates, do we gain or lose dollars, as a region, when the nation turns its attention towards us. Outside dollars flooded into the race, to be sure. But they also dissolved into television ads at an alarming rate. Who makes money from this political theater? Are we richer as a region for having it occur?

For my answer I looked in the mandatory Federal Election Commission (FEC) filings of candidates Hochul, Corwin and Davis (Murphy still has not completed any paperwork that I could find – he can’t has serious candidacy). Each filed a quarterly report ending March 31st, a “Pre-Special” before the election, and a number of 48 hour notices that detail last minute donations or loans by the candidates. Here are the broadest strokes, from categorizing each individual donation and expenditure line item, as best as I can discern:

Before we get to the details, let’s look at the big picture. Unitemized donations are too small to require filing of donor names, so I can make no determination from where they came. Also, note that each candidate (even Hochul) loaned themselves a lot of money. That money could have been used to invest in local IT start ups, start a local foundation, eat nothing but Pez the rest of their lives, or move to Costa Rica and live like a king or queen. Anyone is allowed to do with their own money as they see fit, but in this case, they chose to spend it on a political campaign. Second, the vast majority of the money spent goes to media purchases, which are a mixed local/outside bag. But we’ll talk more about that in a moment. Third, these large line items can obscure some major movements. Almost half ($216,300) of Hochul’s outside money came in the last couple days of the campaign, presumably as her potential victory looked more possible. In addition, even her paltry local spending is artificially puffed up, as $18,141 is payroll tax for a paid staff that largely resided in New York City and Washington, DC (I counted their $30,680 in salary as an outside expense). In addition, Davis’ local spending is skewed by a $50,000 legal bill to Jim Ostrowski. But now we’re getting into details, so let’s look at that some more.

The quirks of each line item provide curious insights into each candidate’s campaign, especially in comparison to each other. What lies behind each donation and expenditure? Who are all these retirees and homemakers that can write $2500 checks? Within a couple days of announcing her campaign, Hochul’s family (the Courtney’s) raised $46,300 from Virginia, Maryland and Florida. In contrast, Corwin only got $5000 from her family, and $1000 from her husband’s. Why did Mark Poloncarz give an extra $30 in late April after he had already given $500? Really? Thirty bucks? (Mark, you read us regularly, please do explain – there must be a story.)

Seeing who and where the support lines up can also be fascinating. Yes, the lawyers and unions are with Hochul and doctors and business world with Corwin. But would you guess Gerry Buchheit and Rocco Termini were Corwin supporters as well, while the Benderson’s sided with Hochul? Or that Corwin got donations from a wide swath of her potential district – suburbs of both Buffalo and Rochester and the towns in between – while Hochul’s donations almost exclusively came from central Erie County or completely outside the area?

There are other interesting storylines in the expenditures. Hochul and Davis used Paychex for their payroll work, but Corwin used local(er) Complete Payroll Processing of Perry. Corwin also went to the Amherst Chamber of Commerce for health insurance (Hochul and Davis claimed none), had a much larger local paid staff ($41,321 total versus $2258 for Hochul and $5650 for Davis, minus Ostrowski), bought her business furniture at Prentice Office Furniture on Franklin, used a local graphic designer in the Tri-Main building ($4844 worth), got her copier supplies at a spot on Seneca Street ($432), and used a local photographer ($1750). Meanwhile, Hochul went to chains for such supplies (Best Buy on Transit and Office Depot in Williamsville) or bought it online from California, and Davis claimed none of it at all. Why did Corwin (Albany) and Hochul (Kentucky) have to go out of the area for lawn signs, while Davis claims none? Corwin also curiously bought $2320 worth of stuff from Chris Lee’s old district office, and reimbursed her husband (and her home) for $13,798 worth of phone and internet use. I was going to praise her for using a local polling firm, the only one of the three to do so, but I can’t find much public information on JRK Consulting of Tonawanda, that got $20,000 for their services.

These expense lists are far from complete – not a drop of gasoline, for example, was claimed by anyone But peering into the campaigns from these lists, one starts to develop a sense of their personality. Corwin’s feels business-like. She bought supplies from her business contacts, relied on a larger paid staff (and paid $16,091 in “signing bonuses” to retain them), and took donations from the general business community, while largely bankrolling the investment herself. Hochul’s campaign feels like it was an outside force that happened to her – much more of the money came from wealthy donors in New York City, union and liberal PACs ($154,400, double Corwin’s total PAC money) or from the Democratic fundraising machine ActBlue from Massachusetts ($114,557). Likewise, other than a few cell phones from the AT&T store in Hamburg, and a bit on rent and utilities, she spent her money on air time, consultants and media pro’s in Washington. Her campaign office was largely a pass through for outside funds to flow to DC. Davis, meanwhile, almost paints a sympathetic picture in his expenditures. He spent the vast majority of his money on lawyers ($51,500), consultants ($154,529), polls ($150,000), mailers ($185,218) and radio air time ($1,086,234). Line item after line item is labeled “research” and “surveys.” What was he looking for? What were these people telling him? I see a tired old figure sitting by the Wireless in the last days of the campaign, paying pollers check after check until he hears some good news from the nice man at the top of the hour. 

But while those small story-lines are intriguing, the overriding effect can not be ignored. The vast majority of the money spent by campaigns goes to media buys: radio and mailers for Davis, television for Hochul and Corwin. Hochul used Buying Time Media ($534,300), and Corwin used Greener and Hook ($1,386,863), but both are large firms in Washington that not only produce the commercials, but buy the air time on local stations. This is where our FEC analysis starts to break down. Which stations benefitted? How much did they charge? Do they make a premium on political ads versus the latest local car commercial? How much of each buy actually gets eaten up in consulting fees by BTM or G&R? And what of the $650,000 influx by Karl Rove’s Crossroads PAC (among others), that worked on behalf of Corwin . . . but not really so it isn’t claimed in her records?

The unfortunate conclusion I come to is that my basic question, how much money stays local in an election, is unanswerable in the public records except in the most clumsy and basic way. While tantalizing hints are bandied about at the edges, the real money, in a magnitude to overwhelm any salary or furniture purchase, is obscured in private corporate ledgers and hazy PAC buys. But I believe this conclusion, at least, is fair: to come close to balancing the Local Donation/Outside Expense ledger, our local television and radio stations would have to make an incredible windfall profit to compensate for what appears to be a massive outflow of funds from our region.

8 Responses to “The Special Election as an Economic Event”

  1. Alan Bedenko June 14, 2011 at 9:43 am #

    I looked up JRK Consulting, LLC on the NYS Corporation database and find that its registered agent for service of process is: 

    HENRY WOJTASZEK 620 E GOUNDRY STREET N TONAWANDA, NEW YORK, 14120

    It’s the address where Wojtaszek, former Niagara Co. Republican Party Chairman, has his law office, and it’s also his home. But other disclosures reveal a 2714 Sheridan Dr address in Tonawanda for JRK. 

    The reverse address function at White Pages shows there to be a “Franco Kroese” associated with that address. A review of the NYS BOE filings for “Kroese” show a Judith Kroese in Williamsville giving a pittance to Carl Paladino last year. Franco Kroese is the owner of Franco’s pizza and the stepson of Judith.

    Here are the complete listings showing when JRK was used in state elections. Almost every time JRK was paid, it was for “consulting services” with respect to Wojtaszek’s own run for judge. 

    Those listings show that the address is unit 5, which is shared with R&M Accounting Services.

    I can’t really definitively say that JRK is associated with any of these people.

    As for the $30, probably a cheap fundraiser with that set as the entry cost. 
      

  2. Chris Sasiadek June 15, 2011 at 11:45 am #

    I had pondered extensively on this subject as well.

    I know that there was definitely an uptick in the sale of coffee, donuts and pizza in the area immediately surrounding the campaign HQ’s. A number of the Hochul campaign staff developed quite the affinity for Jim’s Steak Out.

    The difference in the impact would be huge if TV and radio stations were locally owned, instead of money funnels to wherever Clear Channel and Entercom are based. I’m curious just how much of a TV or radio buy stays in the host region.

  3. Brian Castner June 15, 2011 at 7:23 pm #

    @ Chris – I’m curious about that last part too, but purposely left off the first bit. The local campaign worker who bought extra Tim Horton’s and Jim’s Steak Out is just spending their local $$$ in a different way, they aren’t adding anything new to the pot. So the coffee shop benefits at the expense of something else, but its a wash for the region. If Hochul attracted volunteers from around the country, that would be a different story. I bet the union protests in Madison were a great money maker for hotels and restaurants.

  4. Gabe June 16, 2011 at 12:46 am #

    You’re right in the sense that a lot of interesting little (or grand) events can cause temporary up-turns in localized economic activity. I would, like some above commenters, also sway toward seeing the campaign as mostly manifesting in an increase in service business transactions. Local companies that directly benefited from the campaign likely ended up giving overtime hours to existing employees or increased hours to part-time workers to compensate for the extra work required.

    Having said all that, the “capital attractor” type of city you go on about is indeed the uber-cosmopolitan cluster of intellectual capital where all the cool kids want to move to. You kind of/sort of briefly allude to this. In such a specialized global economy there are only going to be a handful of cities that actually meet that criteria. Intellectual hubs are places where important decisions are made like New York, Toronto, London, Paris, Tokyo, Moscow, Los Angeles, ect. The big decision-makers tend to like to huddle around one another for warmth.

    Many larger cities/metros in this country see economic prosperity not necessarily because they are capital collectors in the sense you write about but because of more circumstantial realities like proximity to natural resources, cultural legacy, or large-scale government investments. By the criteria of mainstream economists a place like Houston would appear to be big and thriving. In reality, it’s merely a geographically-convenient place for big energy conglomerates to run their operations because of the proximity to resource extraction sites. When those resources eventually dry up except to see that urban area dry up as well. San Diego’s prosperity is largely a result of the federal government shoveling huge sums of taxpayer largesse to defense contractors who decided to settle down in the area during the postwar decades to be close to a number of existing significant military installations. Besides also being home to defense contractors, Phoenix can be considered a mega Buffalo (minus the obsolete/legacy infrastructure, social institutions and impoverished post-industrial population) in the desert. Much of what fuels that city are pension $$$ from retirees from the Midwest, Northeast and other older areas of the country. Las Vegas sees massive amounts of money flow in from the outside. But its success can only really be explained in cultural terms; who the hell really goes there to forge brilliant new ideas that will manifest as the next great tech start-up boom?

    In summary a lot of supposedly-successful cities in the US are really frumpy, middle-of-the-road urban areas that don’t really innovate much of anything. I think you’re definition of what constitutes a “successful” city falls into the Richard Florida trap. These days it’s quite trendy for economic commentators to focus on glitzy shit like high-tech industries and forget all the meat-and-potatoes essentials like natural resources, government administration, heavy industry, tourism and other stuff.

  5. Brian Castner June 16, 2011 at 9:04 am #

    @ Gabe: While I largely agree with you, I’ll just defend myself by saying 1) this wasn’t really the focus of the article, and mostly a long-winded intro and 2) I never defined a “successful” city. I did say thriving places attract monetary and intellectual capital, which is hardly a revolutionary thought. Perhaps I should have added the other kinds, or left off my capital adjectives all together. So while NYC, Beijing, Paris etc do attract all strains of capital, your example of Houston still fits my model – they attract reams of energy company profits. Delaware vacumms up the accumulated credit card fees of the country. There are many types and ways to do it, so I agree. And while I probably agree with Florida more than you, I was only trying to make a general statement about the basic need to attract it, so I could move on to how Buffalo’s influx is Medicare et al.

  6. Chris Sasiadek June 16, 2011 at 12:11 pm #

    @ Brian:  There were a couple dozen volunteers from out of town on the Hochul campaign in the last two weeks as well as staffers from the DCCC.  So everything they spent locally was outside money.  Also keep in mind that about half of the money raised by the Hocul campaign according to your chart was from outside the region, so paying local staff was still a net gain and not just local churn.

    That said, it takes a lot of donuts, coffee and pizza to approach a medium-sized ad buy.  So, the effects are probably not appreciable.  But, something on the scale of the Madison protests probably would be.

  7. Brian Castner June 16, 2011 at 1:14 pm #

    @ Chris – Hochul did raise the most money from outside the region. She also raised the most locally, and spent the least locally. She only had one paid local staffer, and the bulk of her local spending was payroll tax for staff in DC and NYC. That being said, yes, I’d love to see a big long study that could take into account the outside volunteer $$$, as well as peer into the local television and radio buy numbers, and let us know what they are. At the end of the day, like you note, my analysis could only go so far. And I guess I could have done the research and then threw up my hands because I couldn’t come to a conclusion, but I eventually decided the inability to track all the money is a conclusion in and of itself.

  8. Gabe June 16, 2011 at 1:17 pm #

    The reason I went off on that tangent is because we need to look at “capital” and the way it moves around in a more nuanced fashion.

    I think my attempted thread derailment (this is what makes the internet fun!) was somewhat relevant to the central point of your post in the sense that your precisely provide that nuanced perspective, albeit using a very micro example.

    A lot of people (especially our locals) are quick to parrot those reactionary “pro business” talking points, blindly believing that any attempt to regulate business will certainly lead to businesses shutting down or moving away, regardless of the nature of the respective industry and its relationship to the global economy. A lot of critical thought-deprived dullards simply believe the “lower da taxes and da biznesses will come over der dis way” mantra is some sort of axiomatic fundamental. When in fact, a region full of such mediocre dullards will very likely not be attracting any great new influx of capital any time soon. I’m tired of all those middle-aged and geriatric dull witted people using this as a cheap and easy way to shit on Buffalo; they should all just move to Phoenix or Florida or NC or any of those other places where the grass is apparently greener. Their pensions and SS benefits can do a swell job at stimulating the construction of more Cheesecake Factories and cookie cutter tract home subdivisions down in those “business friendly” locales.

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