I tweeted yesterday about Robert Niles’ argument in Online Journalism Review that the way to save the dying mainstream media is to “raise taxes on the rich — a lot.” But some ideas are so dumb that they merit further attention.
Niles penned his essay in response to a piece by Geoffrey Cowan and David Westphal that seeks to debunk the “mythology” that the U.S. government has never subsidized the media. Both pieces resist calls for a direct media bailout of the media industry, and that’s a good thing. But Niles’ plan to soak the rich as a way to indirectly prop up the media industry is arguably even more dangerous than a media bailout because it would undercut the entire U.S. economy — and it wouldn’t accomplish his goal, either.
His thesis is wrong on numerous levels. First, Niles contends that the Internet is not the old-media killer that many people think and that journalists haven’t been as clueless as critics like me have been saying for years, starting at Beltway Blogroll for National Journal. In other words, Niles is a denier. He doesn’t want to admit that the leaders in his industry were caught flat-footed by a monumental and rapid transformation of news delivery in the information age.
That wrong-headed assumption naturally leads to the second, and central, flaw in Niles’ argument: Media companies aren’t struggling because they have been or want to be backward and resistant to change but because the tax code forces them to be, so tax reform is the answer.
There may be some truth to his belief that stockholders in media firms want a return on their investment in the short term and that their understandable financial self-interest influences company strategy. But Niles leaps from that theory to the conclusion that the government should tax the rich to encourage forward-thinking investments:
Punitive tax rates change the calculus of investing and income management. Why maximize short-term gains if the government’s just gonna take it all in taxes? So people don’t.
Instead, they start looking for investments that will provide stable (though lower) income over a longer term. Throw in a transaction tax on every stock trade, as well as restoring a punitive tax bracket for earners netting more than a million a year, and the government could sharply reduce the pump-‘n-dump speculation that cripples managers’ attempts to build anything for the long haul.
Notice the phrase in bold, and you will realize where Niles has gone wrong. The solution isn’t for the government to take more money — from the media or any other industry — but to take less. Give them more money to invest in both the short and long terms, and that is exactly what they will do. And if they don’t, then the free market rightly will seal their fate.
Niles also errs in correlating the decline from “the so-called glory days of U.S. journalism, with Watergate and full-funded newsrooms,” to the decline of tax rates in the 1980s.
First of all, the 1970s he seems to cherish for their high tax rates were not an economically good time for America. Inflation soared, and people waited in line for gas. Those realities drove Ronald Reagan to slash tax, and the economy gradually rebounded and then thrived.
But more importantly, the glory days of journalism began to wane not for economic reasons but for political ones. Journalists started reporting the news with an agenda and abandoning longheld ethical standards like objectivity and fairness. It is no coincidence that Accuracy In Media, the nation’s oldest watchdog of the Fourth Estate, was founded in 1969.
The “tipping point in the industry” came not in the 1980s, as Niles believes, but in the 1990s, when Fox News launched and started reporting the news that liberal journalists had ignored, suppressed or spun for years. The mainstream media’s decline was hastened in the first decade of the 21st century, as news consumers realized they could get more unreported information online from “amateur” bloggers. They no longer had to accept the liberal news diet being force-fed to them by “professional” journalists.
In short, the frequent layoffs and cutbacks in journalism are the result of two things: 1) the failure, often willful, of established media outlets to adapt to a changing world; and 2) the increasing failure of journalists to live by the own rules of their profession.
Soaking the rich for more tax revenue won’t improve the outlook on either front because the mainstream media are not victims of anything except their own shortcomings.