The downside of outside spending: Candidates are hard to shop for

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David Rothschild, Yahoo! News
·Economist
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Mitt Romney's campaign understands that almost every reasonable scenario for victory includes winning Ohio, Virginia and Florida—a troika that, along with all the states safely in the Republican column, would award the challenger 266 electoral votes, four shy of the magic number. Campaign spending figures published by National Journal verify this in no uncertain terms. Since May 1, the Romney campaign and its allies have spent more on advertising in these three states than in all other competitive states combined. The same is true of the Obama campaign, whose clearest path to victory involves denying Romney any one of these battlegrounds.

Where the campaigns blow their overflowing fountains of cash is only half the story, of course, due to the torrents of outside spending flooding this campaign. Overall, the Republicans and their supporters have outspent the Democrats $257 million to $218 million since May. This is a little misleading, however, because of a simple economic fact: The marginal value of a campaign dollar is significantly higher if raised by the campaign than if raised by a super PAC.

Outside spending groups are not allowed to coordinate with campaigns, though they can coordinate with one another and operate in the same political reality. In an era of incredibly precise political targeting, however, outside spending that is not privy to a campaign's precise strategies and messaging is not as effective. Consider the difference between spending $100 on yourself and having a friend buy you something for $100, especially if this well-meaning friend is not legally permitted to ask you what you want. Economists call this the "deadweight loss of Christmas."

While outside groups have also concentrated money in these three crucial states, it is not to the same lopsided degree. Here are the states with the top spending by both campaigns and super PACs:

Romney ad spending since May 1

State

Odds

Campaign

Outside

Total

Florida

39.4%

18,073,795

29,251,390

47,325,185

Ohio

22.8%

23,421,718

19,614,980

43,036,698

Virginia

25.5%

19,675,093

18,431,467

38,106,560

North Carolina

64.8%

13,919,939

15,275,987

29,195,926

Colorado

27.8%

11,038,528

9,904,325

20,942,853

Iowa

26.3%

9,549,281

11,268,614

20,817,895

Nevada

10.9%

6,999,213

9,390,303

16,389,516

Pennsylvania

2.4%

0

10,485,103

10,485,103

New Hampshire

25.3%

3,036,648

7,182,288

10,218,936

Wisconsin

19.3%

1,131,267

8,575,442

9,706,709

Michigan

3.8%

0

8,184,827

8,184,827

Minnesota

2.2%

0

1,499,045

1,499,045

New Mexico

1.4%

0

713,783

713,783

Total: FL, OH and VA

61,170,606

67,297,837

128,468,443

Total: All others

45,674,876

82,479,717

128,154,593

Total

106,845,482

149,777,554

256,623,036

Obama ad spending since May 1

State

Odds

Campaign

Outside

Total

Florida

60.6%

33,447,297

7,157,191

40,604,488

Ohio

77.2%

40,676,363

7,214,180

47,890,543

Virginia

74.5%

28,982,667

5,425,166

34,407,833

North Carolina

35.2%

18,083,179

0

18,083,179

Colorado

72.2%

17,898,543

5,003,556

22,902,099

Iowa

73.7%

15,788,079

966,217

16,754,296

Nevada

89.1%

14,292,764

442,980

14,735,744

Pennsylvania

97.6%

4,946,620

3,096,742

8,043,362

New Hampshire

74.7%

12,590,422

0

12,590,422

Wisconsin

80.7%

1,080,815

480,789

1,561,604

Michigan

96.2%

0

0

0

Minnesota

97.8%

0

0

0

New Mexico

98.6%

0

0

0

Total: FL, OH and VA

103,106,327

19,796,537

122,902,864

Total: All others

84,680,422

9,990,284

94,670,706

Total

187,786,749

29,786,821

217,573,570

As you can see, the majority of Romney's spending is outside of his control. In these 13 states, which account for the bulk of all advertising, his campaign has spent $107 million, compared to $150 million spent by outside groups. He cannot control where outside groups spend money on his behalf. Even though he has never had more than a tiny likelihood of winning Michigan, outside groups have spent more than $8 million there in the past four and a half months. He also cannot control the message. Some outside groups are dinging Obama for being too cozy with Wall Street, while others are saying he is overregulating Wall Street. This is a divide that is likely to grow between now and Election Day.

Follow the state-by-state and overall presidential predictions in real time with PredictWise.com.

David Rothschild has a Ph.D. in applied economics from the Wharton School of Business at the University of Pennsylvania. Follow him on Twitter @DavMicRot.