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Subsidizing the Press

David M. Schizer

Columbia University - Law School

August 24, 2010

Columbia Law and Economics Working Paper No. 376

Information is the lifeblood of a free society, and the professional press is a crucial source of information. For many years, the positive externalities from investigative and beat reporting were cross-subsidized by robust advertising and subscription revenue. Yet the professional press is experiencing a severe economic crisis, and news organizations across the nation are on the brink of insolvency. When an activity that generates positive externalities is undersupplied, the textbook policy response is a government subsidy. Yet if the press becomes financially dependent on the government, would they be deterred from monitoring and criticizing the government? If so, the subsidy would undercut the very social benefits it is meant to preserve.

In response to this conundrum, this Article proposes a three-part analytical framework for evaluating press subsidies. The first step is to assess how effectively the subsidy safeguards press independence, including the extent to which the First Amendment helps to achieve this goal. The second criterion, which this Article calls “focus,” gauges how effectively a subsidy channels resources to externality-generating activities, as opposed to other uses. For example, a subsidy that induces press organizations to hire more reporters is superior to one that can be used, instead, to fund pay raises for the advertising staff or more attractive office space. The third criterion is political plausibility. How likely is a subsidy to attract political support? And how much political support does it need? One that can be implemented under current law, for example, requires less political support than one that depends on broad new legislation.

Based on this framework, the principal recommendation of this Article is for news organizations to make greater use of the nonprofit form. By providing a subsidy through the charitable deduction, we would not empower the government to choose how much funding to allocate to each news organization. Instead, the charitable deduction allows the government to piggyback on the judgments of private donors about which charities to support. In addition, this subsidy is feasible politically since it already can be used, to a significant extent, under current law. This Article also considers four alternative subsidy structures, highlighting their strengths and weaknesses and showing the tradeoffs they present.

Number of Pages in PDF File: 47

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Date posted: August 24, 2010  

Suggested Citation

Schizer, David M., Subsidizing the Press (August 24, 2010). Columbia Law and Economics Working Paper No. 376. Available at SSRN: https://ssrn.com/abstract=1664676 or http://dx.doi.org/10.2139/ssrn.1664676

Contact Information

David M. Schizer (Contact Author)
Columbia University - Law School ( email )
435 West 116th Street
New York, NY 10027
United States
212 854 2599 (Phone)
212 854 9740 (Fax)

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