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Why the Government Should Leave Newspapers Alone


A bailout may sound promising, but what happens to independence of the press?

President Obama, a self-proclaimed "newspaper junkie" says he'd be "happy to look at" a bill pending in Congress that would give newspapers tax breaks if they restructure as nonprofit businesses.

Senator Ben Cardin, D-Maryland, has introduced Senate Bill 673, called the Newspaper Revitalization Act that would provide tax breaks to newspapers that restructure as 501(c)(3) corporations, or non-profits. Senator Barbara Milulski, Cardin's colleague from Maryland, is a co-sponsor.

The bill would gut the independence of the press, killing its watchdog role. It also makes no business sense because reorganizing as a non-profit won't solve the basic problems of the newspaper industry: crashing ad revenue and declining circulation. Patrons support the opera, ballet, and the symphony because they love the art and each is part of our cultural heritage. Who loves newspapers? Other than the taxpayers, who will support them as non-profits?

In an interview with the Toledo Blade, Obama said: "Journalistic integrity, you know, fact-based reporting, serious investigative reporting, how to retain those ethics in all these different new media and how to make sure that it's paid for, is really a challenge. But it's something that I think is absolutely critical to the health of our democracy."

True enough. And this plays out against the recent closure of the Rocky Mountain News in Denver, Colorado and the Seattle Post-Intelligencer, which dropped its print edition and now publishes on the Internet. Major newspaper publishers, including McClatchy (MNI), Gannett (GCI), and E.W. Scripps (SSP) have been hit hard in the economic downturn.

In the current environment, this passes for good news: In May, Platinum Equity bought the San Diego Union-Tribune for an undisclosed sum. But the private-equity firm may want the real estate more than the newspaper.

Gathering the news is expensive and even The Associated Press, the world's largest wire service, is struggling, as was discussed in Can CNN Be a Better AP? But the Internet's lower production and distribution costs mean entrepreneurs can become publishers. Hyperlocal websites are one response to the withering of the newspaper industry. (See: Hyperlocal Journalism Gets Legit.)

As discussed in Copyrights, Tricycles and the AP, many observers, including Obama, have expressed concern about the blogosphere because it's often long on opinion and short on facts. But who turns to opinion blogs for the first take on the news?

It's hard to see how newspapers dependent on government tax breaks for their survival retain their independence. What happens to a non-profit newspaper's endorsements during election season? Or investigative stories about members of Congress? Or even this week's sex scandal?

Cardin's bill could easily morph into industrial policy for the mass media, enabling the government -- not the free market -- to determine winners and losers. That would value political connections over minor details like, oh, the public's need to know what's going on.

Let's hope this bill goes nowhere in Congress -- even if it means the disappearance of more newspapers.
No positions in stocks mentioned.
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