Campaign Finance Rent Seeking

The 2012 presidential election is shaping up to be by far the most expensive in American history.  With less than two weeks until election day, the combined spending of the Obama and Romney campaigns has surpassed $2 billion.  Before Obama first refused it in 2008, all previous candidates had accepted a government stipend, capped at $100 million, to run their campaigns--but doing so limited the fundraising they could conduct.  Due to Obama's tremendous fundraising success in the 2008 election, a new paradigm of turning down the public funds in the hopes of obtaining larger private donations has been established, as Romney has followed suit this year. 

The massive spending in which the two candidates are engaged is a form of rent seeking.  By spending billions on attack ads and other promotion, each candidate is "bidding" to recieve a single, government awarded contract.  The only difference between this and lobbying is that the "audience" to which they are appealing is the American public rather than a political committee.  The loser's spending will be entirely wasted as it will not acquire him the presidential contract.  Similarly, the winner's spending should be subtracted from the value of the presidency to him (or the value of him being president to his donors) to find his net profit from the rent seeking behavior. 

The previous system, which gave public funds for the purpose of campaigning but limited other forms of fundraising, can be seen as a check on this form of rent-seeking.  It effectively capped the amount of spending candidates could engage in, and kept this wasteful spending relatively low.  Candidates have realized, however, that they have an incentive to turn down the public funding in order to increase campaign expenditure and more effectively lobby the public.