Tech Industry

Should you be taxed to subsidize 'The New York Times'?

Newspapers are in trouble because of competition from the Internet. But is the Columbia Journalism Review's suggestion of taxpayer handouts wise?

The stiff winds of Internet competition have already swept through countless businesses, including travel agents, car dealers, wine retailers and stock brokers.

Some have adapted. Some have perished. I have a friend who, to his chagrin, became a licensed stockbroker in Pennsylvania just as E*Trade and other Internet brokerages were becoming popular. And does anyone even remember travel agents anymore?

Now newspapers are facing a hurricane-strength competitive gale, and they, understandably, don't like it one bit. A recent article in the Columbia Journalism Review titled "The Uncle Sam Solution" suggests everything from ownership tax incentives and R&D subsidies for the development of electronic paper--to a straightforward redistribution of wealth from taxpayers to newspaper owners and employees.

It concludes, "To survive, journalism and journalists need to let go of their aversion to Uncle Sam."

Now, everyone says they like competition in theory, but nobody actually likes to have competitors in practice. For the better part of a decade, Craigslist and eBay have been slowly nibbling away at newspapers' classified-ads business. A 2005 MediaPost article says that as a result, according to McKinsey, newspapers have lost as much as 75 percent of their pricing abilities in key categories such as employment and general merchandise. Google is another competitive threat, with both broad and very targeted ads, and the cost of newsprint probably isn't helping.

So the threat to newspapers' long-term existence, at least in their current form, is real. The real question is: what should the government do about it?

I believe that the answer is nothing. We didn't see taxpayer subsidies bail out stock brokers (unhappy about E*Trade) or travel agents (unhappy about Expedia). In fact, the federal government officially chose to side with disruptive technologies. Here's an article I wrote last year discussing the Justice Department's lawsuit against the National Association of Realtors, and testimony I gave to the Federal Trade Commission (PDF) when it held a workshop on barriers to e-commerce a few years earlier.

Strings attached

The main reason I say the answer should be nothing is that government money tends to come with strings attached. Sure, at first, a handout may seem free. But over time, that tends to change.

Look at the ongoing controversies over the National Endowment for the Arts. In response to controversial photographs (including a provocative retrospective of photographer Robert Mapplethorpe's work) in an NEA-funded exhibit, Congress did two things. It reduced the NEA's budget for the next fiscal year and then slapped a new restriction on the agency, saying that its grants must take "into consideration general standards of decency and respect for the diverse beliefs and values of the American public."

Mapplethorpe was, of course, a brilliant photographer, and some of his work has inspired my own modest efforts. But the U.S. Supreme Court upheld the NEA funding restrictions as constitutional, concluding that they're perfectly OK "when the government is acting as patron rather than as sovereign."

That patrons can muzzle the recipients of their largesse should be no surprise. Last decade, librarians lobbied Congress to create the E-rate program, which levied taxes on Americans' phone bills to pay for wiring schools to the Internet. It was an unalloyed, billion-dollar political win for the librarians--until Congress decided to force them filter out porn if they wanted the cash.

They howled, they complained, they sued. They lost. The Supreme Court ruled in 2003 that the law "is a valid exercise of Congress' spending power."

I'm sure that at this point, some readers might be thinking, "What about National Public Radio? It's taxpayer-supported, right?" Yes. NPR and PBS receive about 15 percent of their combined budget from the government.

Even though that's not a huge amount by percentage, it has made NPR the target of political threats by President Richard Nixon and House Speaker Newt Gingrich, both Republicans, to eliminate its funding. Conservatives say NPR itself has admitted a liberal bias while liberals accuse it of being elitist. Do newspapers really want that controversy spilling over into their pages?

One argument for tax subsidies, and the Columbia Journalism Review article invokes it at length, is that newspapers' "role of informing citizens is crucial to democracy" through aggressive reporting on government malfeasance. But supporting that kind of aggressive reporting, it seems to me, is the worst argument for government funding--it would be the first type of reporting killed, openly or covertly, when the inevitable political pressure is brought to bear. (I wonder if I'd even be permitted to write this commentary if my salary were paid by the government. And would a taxpayer-subsidized newspaper ever publish an editorial calling for lower taxes?)

But probably the biggest reason to be wary of higher taxes to help out newspapers is the broader one: Bailing out an industry that's suffering because of technological change or increased competition is not a wise choice in the long run. Afternoon newspapers are largely a defunct breed for the obvious reasons; would society really be better off if taxes were raised to subsidize such money-losing ventures for purposes of nostalgia?

I'm not sure what's going to happen to newspapers in their current form, but I am optimistic about the future of journalism. My own employer, CNET Networks, has found a way to make money by publishing news and reviews without collecting taxpayer handouts.

If readers (or viewers) continue to want original reporting, and I believe they will, news organizations will find a way to meet that market demand. Without a taxpayer bailout, newspapers may not look exactly like they do today, but journalism itself will remain alive and well.