How to subsidize news without feeling dirty

September 24, 2009

The U.S. Congress’s Joint Economic Committee hit one of my favorite topics on Thursday: What the government could, should, must (or must not) do to help the struggling news media survive, with the spotlight on newspapers in particular.

I had a look at the testimony and found some fascinating thoughts in the testimony from Paul Starr, a professor at the Woodrow Wilson School at Princeton University. Starr has some ideas for how the government might preserve a free press by extending a hand to the news business — all without using that word that no one wants to use: bailout.

First, the background: Newspapers are in trouble as the Internet destroys their advertising revenue. More people than ever read the news online, and news websites are trying to figure out a way to make money off that because letting people in for free just kills the circulation of their printed products. Some folks have raised the idea of federal, state or local subsidies to help papers — usually in the form of tax breaks — but the Newspaper Association and others say it’s a bad idea because the press shouldn’t be beholden to the government that it’s supposed to be monitoring for abuse, fraud, etc.

Meanwhile, the Obama White House, Justice Department and other federal offices are examining the situation. In Congress, one bill would let some newspapers become nonprofit companies, and another bill that would let businesses book their recent losses over the past five years – something that would get them some extra cash from the taxman.

The association was one of the groups that testified at the hearing. We know how they feel. What I’m INCREDIBLY eager to get your thoughts on is what Starr wrote:

Increasingly, the production of news will require subsidy, and the question is really from where and under what conditions that subsidy will come. The problems that this challenge raises are difficult because of the legitimate concern that any subsidy, whether from government or private philanthropy, may induce subservience and dependency in the press. But we should take encouragement from three experiences.

(He points out that we’ve done it before with eased postal rates for U.S. papers and public broadcasting subsidies, and it’s worked well in other countries, notably Scandinavian ones — take that how you will.)

First, any subsidies must be viewpoint-neutral; they cannot favor one viewpoint over another. Second, they should be platform-neutral-they should not favor print media over online media, for example. And, third, they should be neutral or at least reasonably balanced as to organizational form. Taken as a whole, they should not favor for-profit over nonprofit organizations, or vice versa. To be sure, some policies by their nature may benefit one type of organization, but the sum total of policy should be indifferent as to whether news is provided via a for-profit or nonprofit enterprise.

Nonprofit support of journalism is already increasing, and many Americans would be more comfortable seeing support for journalism come from a great variety of private philanthropic sources than from the government. To facilitate that development, Congress should seek to remove any legal obstacles that may stand in the way of newspapers receiving tax-exempt support or becoming nonprofit, tax-exempt organizations themselves.

But here we face a new question. From the founding of the republic, newspapers have played a central role in politics–endorsing political candidates, for example. It would be a real loss to freedom of the press if, in becoming nonprofit, newspapers had to restrict their political expression. I believe, therefore, Congress should consider creating a new category of nonprofit journalistic organizations that are freed from traditional limitations on 501 (c) 3 organizations.

Financial support for journalism could take a number of different forms. Direct grants might allow for political manipulation of the flow of funds, unless there was some intervening, professionally run organization strongly insulated from political control.

Indirect forms of subsidy through the tax system also ought to receive consideration. As I mentioned, many other countries exempt the press from the value-added tax; the equivalent in the United States would be an exemption from the payroll tax, or at least the employers’ share (with the idea of replacing those contributions to the Social Security trust funds with general revenue). To be platform-neutral, this tax exemption would have to apply not just to newspapers, but to journalistic organizations more generally. Defining eligible organizations and individuals would be difficult, but the same problem arises in many other areas, such as state “shield” laws that provide journalists with an exemption from some demands to testify under subpoena.

(Reuters Photo: This was not someone who testified at Thursday’s newspaper hearing, but you get the drift of what a newspaper hearing might look like.)

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