Your Money or Your Democracy

It's the most privileged industries that demand protection

“We’re more worthy of a bailout than the jokers on Wall Street,” Jason Whitlock wrote in The Kansas City Star just before the annus bailoutus of 2008 wound to a close.

The “we” in this case wasn’t Detroit’s Big 2.5 automakers, or the country’s 39 or so governors running budget deficits, or even plucky nonprofits that fund school crossing guards, though certainly all these and many more have made the same argument during the last several months of envious Wall Street bashing. No, Jason Whitlock is a sports columnist who covers collegiate athletics for a big-city newspaper. Like many members of the privileged minority that has workplace access to a large printing press, Whitlock used it this winter to fret that unless Washington or some other higher power intervenes quickly in professional journalism’s oldest medium, tyranny will be right around the corner. “You can’t have a democracy without us,” he warned. “If newspapers are dying, so is our system of government.”

Legacy-media journalists may be the most irritating special pleaders when times get rough (which, for them, has been at least every day since I got into the business), but they’re hardly alone. Our noble farmers, the breadbasket of America, need tens of billions annually to help provide “food security” against foreign hordes of dastardly sugar producers. Ever-shrinking steel plants provide the iron core of our threatened industrial base (which actually was growing like gangbusters until late 2008, but never mind) and so require tariffs from “dumping” countries such as comparatively impoverished Poland. Airlines are our first defense against murderous hijackers, so here’s $18.6 billion for your troubles and a hideously consumer-punishing regulation preventing foreign-owned airlines from offering domestic flights. And all these examples predate the financial crisis of 2008, though they foreshadowed how a feckless Republican president would respond.

And our allegedly feckful new president? Don’t get him started. “The auto industry is the backbone of American manufacturing,” Barack Obama said just days after winning the presidency. “I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel-efficient cars here in the United States of America.” When the lame-duck Congress later narrowly voted down a bailout package for Detroit automakers, and lame-duck President Bush responded that he would bail them out anyway using a different pile of cash, Obama called the move a “necessary step,” thus sending an ominous signal about how the new president views the constitutional separation of powers after eight years of an executive branch run amok.

It’s not hard to make the case that any industry, sector, or even individual company requires either the urgent expenditure of taxpayer money or the less direct money waster of federal protection to help keep the country prosperous and safe. Construction? Only U.S.-owned companies should ever be allowed to win a contract to build an interstate highway, because of, you know, terrorism. The billionaire New York Yankees organization, which has spent more than $400 million this off-season alone on just three ballplayers? Here’s nearly $1 billion in city subsidies and tax-free bonds to build a fancy new stadium that will allow the Steinbrenner family to pocket even more revenue. Even Hollywood, with all its famous excess? California and Los Angeles both need to shell out various goodies to keep crucial “below-the-line” jobs (wellpaying, unionized positions in set building and the like) in Southern California, first because of the cheap Canadian dollar, then (after the looney started gaining on the greenback) because of race-to-the-bottom competition from subsidy-spewing Louisiana, Georgia, and New Mexico.

The preceding examples also predate the current frenzy of bailouts/shakedowns in Washington, but they provide a window into the mentality that justifies them. When I debated Mark Schmitt, executive editor of the pro-labor (but strangely nonunionized) American Prospect, about the bailout in December, I pointed out that car manufacturing in the U.S. was actually a pretty healthy industry outside of Detroit. He responded that, well, the state of Alabama (where Mercedes-Benz, Honda, and Hyundai make cars) had provided a bunch of subsidies and tax breaks too.

The problem with this logic will be obvious to playground supervisors, but it is apparently obscure to most Americans with easy access to a megaphone. As dead lemmings could tell you, “He did it too!” is no substitute for a cost-benefit analysis. Furthermore, as outgoing Securities and Exchange Commissioner Paul Atkins observes in our interview this issue (“‘I Think the SEC Was Distracted,’” page 30), private capital has a tendency to make better bets than central planners. “To compare a few people in government making decisions based on limited information to millions and millions of people making decisions every second with their own hard-earned money,” Atkins says, “there’s just no comparison there.” And though the Treasury Department and Federal Reserve seem to think otherwise, there is a limit to how many tax dollars can be thrown around to prop up every noncompetitive actor with a heart-tugging story.

And by “noncompetitive” I do mean “noncompetitive,” not “unfairly crippled by unforeseeable acts of God.” When September 11 gave the airline industry a quadruple whammy of customer fear, economic recession, rising fuel costs, and security hassles, it wasn’t the super-competitive (and until recently super-profitable) lowcost airlines Southwest and JetBlue that held their hands out for Washington billions. It was the poorly run, customer-unfriendly, money-bleeding legacy carriers. Just 10 days after California Gov. Arnold Schwarzenegger signed a state budget a full 45 percent bigger than the one he had inherited five years before, he warned Treasury Secretary Henry Paulson that the Golden State might go bankrupt if it did not receive an emergency loan of at least $7 billion. And it sure isn’t the online classified advertising giant Craigslist whining about its crucial role in our democracy. It’s the companies that for more than a century held something very close to a local monopoly on classifieds: big-city newspapers.

As bailout season bled into the holiday publishing schedule, with its requisite year-in-review thumb sucking, many legacy media romantics used the opportunity to propose radical fixes for what was until recently one of the most profitable sectors in the U.S. economy. (According to industry analyst John Morton, newspaper companies to this day enjoy average profit margins of between 10 percent and 20 percent, higher than Wal-Mart has ever dreamed.)

Writing in the December 21 San Francisco Chronicle—ironically, one of the papers that has embraced Web-based competition most effectively through the mere act of putting all its stories online, for free, at static URLs—former New York Times foreign correspondent and current Stanford journalism professor Joel Brinkley made the curious argument that giving customers what they want (free content) was the biggest threat to print publications. “The newspaper industry,” Brinkley suggested, “should ask the Justice Department for an antitrust exemption that would allow publishers to collaborate on a decision to begin charging for their Web site.”

A previous antitrust exemption aimed at “saving” newspapers—the Newspaper Preservation Act of 1970—shows how such approaches tend to have the opposite of the intended effect: A majority of the newspapers being “saved” ended up closing down, while the cities they served were able for decades to scare off any new entrants to the market.

More likely in this never-ending bailout season will be proposals like the state of Connecticut’s new plan to offer tax breaks, training money, negotiating help, and other incentives to print publishers, in part to stave off the shuttering of such papers as The Bristol Press. “The media,” the legislative sponsor of this newspaper bailout told Reuters in December, “is a vitally important part of America.” The question we should all ask going forward: What isn’t?

Matt Welch is editor in chief of reason. This column first appeared at Reason.com.

Matt Welch is Editor in Chief, Reason





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