Tuesday, March 24, 2009

The Cardin Bill, A Bill to Save Ailing Papers

Congress is now turning its attention to faltering newspapers. In an attempt to save faltering papers from going under, a proposal has been made to allow a troubled paper to reorganise as a non-profit. Reuter's News reports on the proposed legislation as follows.

With many U.S. newspapers struggling to survive, a Democratic senator on Tuesday introduced a bill to help them by allowing newspaper companies to restructure as nonprofits with a variety of tax breaks.

"This may not be the optimal choice for some major newspapers or corporate media chains but it should be an option for many newspapers that are struggling to stay afloat," said Senator Benjamin Cardin.

A Cardin spokesman said the bill had yet to attract any co-sponsors, but had sparked plenty of interest within the media, which has seen plunging revenues and many journalist layoffs.

Cardin's Newspaper Revitalization Act would allow newspapers to operate as nonprofits for educational purposes under the U.S. tax code, giving them a similar status to public broadcasting companies.

Under this arrangement, newspapers would still be free to report on all issues, including political campaigns. But they would be prohibited from making political endorsements.

Advertising and subscription revenue would be tax exempt, and contributions to support news coverage or operations could be tax deductible.

The bill is aimed at local newspapers,not news conglomerates. It does allow non profit organisations to buy failing papers from conglomerates.

What is interesting about the bill is that it does not involve a government bailout. It simply utilises the tax code to be used to create a viable climate for a paper to survive. Direct subsidies would of course create a paper that is beholden to political sponsors. It would likely be influenced in its editorial policies.

The blueprint for a bailout of newspapers should be used for helping other ailing corporations. The best remedy for a business is creating a favorable tax and regulatory climate. Taking away obstacles from people helping themselves is a lot better than throwing money at the problems that brought them to bankruptcy.

The internet has created a new environment for newspapers and magazines. No one knows exactly how the industry will restructure to save itself. The Cardin proposal is a wise one that might well save jobs in a troubled industry. The danger of it creating a biased breed of reporting is minimal. We already have a news media that is as biased as any paper ever was in Moscow or Pyongyang, where the role of the press as party cheerleader was never in question. I do not think that we should sit back and let the ailing press die out. We also should not give them a dime in direct subsidies.

The Cardin bill shows a caution that should apply to all corporate bailouts. Reduced regulation and tax relief are potentially effective tools for helping a business discover what it must change to survive in a changed world. Its underlying philosophy is sound and more applicable to other businesses than its proponents realise.

It is not only the internet that has contributed to the demise of newspapers. It is the insidious and at times blatant bias that has caused many to walk from them in disgust. This problem will not be remedied by subsidies or tax holidays. Hopefully, the ailing news industry will come to realise this. The sooner it does so, the better off the country will be


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