US elections are an expensive undertaking. Political parties, individual campaigns, and political action committees (PACs) raise and spend money during each election cycle. Presidential elections further increase the total expenditure every four years. An under appreciated fact is that all this spending is reflected in the aggregate consumption data. Indeed, the significant fluctuations in election spending around election years contribute meaningfully to real spending growth.

The Federal Election Commission (FEC) collects and discloses information on political donations. According to the FEC’s most recent report, candidates, party committees, and PACs collectively raised approximately $12 billion and spent about $9.5 billion during the 18-month period from January 1, 2023, through June 30, 2024. Some estimates suggest that the total cost of elections during the current cycle could reach nearly $16 billion, making it one of the most expensive elections in recent history. This money is likely spent on advertising, consulting services, campaign ads, and event management, in addition to purchasing other goods and services. However, not all election related spending is captured in these estimates. For instance, spending on many issue ads may not be reported to the FEC.

There are also potential indirect effects on spending. For instance, frequent campaign events in areas with competitive races might generate additional consumer spending for local businesses. Measuring this indirect spending is challenging. However, we believe that most of the spending by campaign committees and PACs is reported in the personal consumption expenditures (PCE) data under nonprofit institutions serving households (NPISHs). This category includes professional, labor, political, and similar organizations, as well as legal services. The Bureau of Economic Analysis accounts for NPISHs in PCE by their final consumption expenditures, defined as gross output minus sales to other sectors of the economy. Based on this measure, real spending by these institutions has been increasing over time, after fluctuating at single digits until the 2000s. More importantly, we can observe clear election cycles in the data, supporting the idea that a major source of fluctuations in this spending category is election spending. Additionally, it appears that aggregate spending for this nonprofit group peaks in the fourth quarter of every presidential election cycle since 1992, with slightly smaller surges in spending during midterm elections.

The spending data presented might appear substantial, but as of the third quarter, its share of overall real, PCE was only about 0.3%. In an economy where consumers spend more than $16 trillion, this small group of non-profits may not significantly impact the aggregate. However, due to the large fluctuations in spending around elections, it could meaningfully contribute to real consumer spending growth, particularly in presidential election years. But the results of this calculation and suggests that this specific spending category significantly contributes to real PCE growth, typically peaking in the first quarters of election years. The peak contribution during presidential election years is somewhat larger than during midterm election cycles.

Based on these estimates, approximately 0.3 percentage points of the 3.7% (saar) growth in 3Q real PCE came from increased spending by professional advocacy organizations, which ignores potential spillover effects. It is important to note that the Bureau of Economic Analysis (BEA) primarily relies on monthly establishment survey data to estimate this component in the advance release. Some might argue that, if much of the spending by these institutions late in the campaign cycle is not related to staffing, these estimates could be revised upward later when the BEA incorporates more complete data. Nevertheless, if we follow the typical election cycle since 2000, fourth-quarter real PCE is expected to receive a boost of around 0.13 to 0.16 percentage points, with a similarly sized drag in the first quarter of the following year.