Surprise: Obama Campaign Running a Deficit

The Obama campaign has four paid staffers in South Carolina, a state which last voted Democrat for President in 1976, when neighboring Governor Jimmy Carter edged President Gerald Ford. This is all the evidence you need to know the campaign believed its own hype that it would enjoy a "billion-dollar campaign." It also goes far in understanding how the Obama campaign got upside-down, spending 20% more money than it raised over the past two months.  

On Friday, the FEC made available the latest campaign finance disclosures. Obama reported raising $46 million in June, but spending over $58 million. Part of the reason for Obama's high "burn rate" is that he has built a massive campaign infrastructure that is very expensive to maintain. While Obama has almost 800 paid staffers, Romney's campaign is getting by with just under 300. Obama spent far more than Romney on payroll, advertising and polling. 

As a result of Obama's heavy spending, Romney and the GOP now have more "cash-on-hand" than Obama and the Democrats; $170 million to $143 million. Obama significantly outspent John McCain in 2008. It doesn't look like he'll be able to do so again. 

The Obama campaign's deficit spending mirrors why governments at all levels get lured into spending more cash then they bring in--a belief that the future will somehow burn brighter and sort everything out. This does indeed happen at times, but it can be very risky for a political campaign, where perceptions can become self-fulfilling prophecies. Worries that a campaign is "wasting" its money can dampen fundraising, putting off forever that brighter future. 

Aside from its expensive fixed operating costs, the Obama campaign spent boatloads of money on advertising, most of it negative about Romney, in a clear attempt to overwhelm the opposition early. It isn't a bad strategy if you can get an early kill-shot. Unfortunately for Obama, their kill-shot seems to have missed. Obama's overwhelming advertising advantage hasn't moved the needle in the race. Obama and Romney's approval ratings and head-to-head match up numbers are largely unchanged. 

One could argue that, but for Obama's spending, Romney would be showing a lead in the polls, but that is hardly a reassuring argument for Obama supporters. Especially since his fundraising advantage has been reversed. When the campaign gets under way in earnest later next month, its unlikely he'll be able to outspend Romney by such a commanding margin. At that point, having a staff of 800 and spending millions every month on polling will look like unaffordable luxuries. 

I don't think those four paid staffers will be in South Carolina for long.     


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