If money is the decisive factor in the Democratic nomination struggle then Barack Obama can relax and start work on the acceptance speech that the victor will deliver to the party convention in Denver this August. Then again, if money were everything in US politics then Mr Obama would be preparing for a fight with the wealthy Mitt Romney as his Republican opponent in a battle to succeed billionaire turned President Steve Forbes — elected in 2000 — who in turn had followed billionaire turned President Ross Perot, elected eight years before. These comparisons caution against assuming that money can buy the White House, even if it cannot purchase love.

It is, nonetheless, telling that Hillary Clinton has loaned her own campaign $5,000,000 already and is contemplating making another large contribution to it. This was certainly not her original strategy. Plan A was to raise a ton of money in 2007 (achieved), spend some of it winning the Iowa caucus and New Hampshire Primary and a decent slice more killing off the opposition on Super Tuesday. That would still allow her money in the bank while she financially refuelled and spent liberally until the nominating convention, after which, she, like her Republican rival, would almost certainly accept public funds of around $80 million for the rest of the campaign.

The scheme has been shattered by the pattern of the results so far. Her problem is simple. Under American law, the maximum that can be donated to a presidential campaign before and during the primaries is a relatively modest $2300 and not a cent more. There is one vital exception to this. A candidate may spend (or loan) as much of their own money to their own effort as they wish. While Mrs Clinton has raised a lot of money, about half of her supporters have “maxed out” (hit the legal ceiling), whereas only three per cent of the Obama fan club has done so. She has to go back to a far smaller pool of existing backers to ask for more money than he does. Furthermore, he seems to be finding thousands of new contributors via a brilliant internet fundraising approach than she has done.

Many of these people are offering $10 or less, sums that under the “old technology” (mail) would have cost as much to collect. The net, on the other hand, means that Mr Obama is making money even if the money sent to him is relatively tiny. He raised $32 million last month and may will do as well in February. Even with another loan, Mrs Clinton might well find herself outspent by 2-1 or more.

What does this mean in practice? It basically means that there will be more Obama television commercials aired in the upcoming states than ones extolling the virtues of Mrs Clinton.

Will this prove politically crucial? Quite possibly not. Political advertising in the United States is a classic example of what economists call the law of diminishing returns. It is very important for a candidate to have the funds to air some commercials, “going dark” (withdrawing from the airwaves) is a sure sign that a contender is in trouble. But the advantage won by having six Obama advertisements on screen on any given evening rather than, say, three of them is much more contestable. If you don’t believe me, ask Mitt Romney, Steve Forbes and Ross Perot.

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