SECOND UPDATE: Hiltzik Responds Again, Takes Time to Engage in Substantive Discussion
Rather than making the previous entry on this issue even longer, I elected to put my most recent exchange with Mr. Hiltzik in a shorter post. If you have not read the earlier post and exchange, please do so as this is a continuation thereof. This has proven to be a wonderful exchange and I thank Mr. Hiltzik for taking time to respond. I think our back and forth is a much better example of how the decisions on film incentives should be framed. Granted, it may help that, ironically, that I have also been a critic of expensive film incentives who is not going to try and sell Mr. Hiltzik convoluted arguments of economic windfalls that await states because of film incentives. It seems they do cost money, perhaps lots. And if the state is fine with paying such costs, then my concern drops off. I think incentives can be sold, but the sales pitch needs to change. That said, if a new wave of economists and policy experts stepped up to make a compelling new case of economic gain from incentives, I would be willing to listen and even hope they were right. I would rather be proved wrong if it meant getting the issue right. I hope everyone can share that view.
The following is Mr. Hiltzik’s second response:
Dear Adrian:
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> The remarkable thing about your take, it seems to me, is not that there’s no evidence of an economic rationale for these programs, but that you ACKNOWLEDGE that–yet still argue that we should double down!
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> Moreover, we don’t agree–at least I don’t agree that the economic impact is “hotly debated.” It’s not debated: All the existing evidence, as you have stated, indicates that there is not a positive economic impact; there’s no evidence on the other side. In the weeks since my column appeared seeking an objective study (that is, one not produced either by the film industry, which receives the incentives, or film commissioners, whose jobs depend on handing them out), no one has come forward to point to one.
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> You are incorrect in stating that the only choices we have are “imperfect poicy or nothing.” On the contrary, we have a multitude of choices regarding how to spend $100 million a year. Indeed, one flaw in the argments for the California incentive is that its proponents always consider it in a vacuum, as though if not spent on film incentives, the money couldn’t be put to other uses.
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> Let’s examine that.
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> If we conclude that the incentive costs more than it produces in tax revenues from employment, then for California taxpayers as a whole it’s a loser–it’s just a transfer from the taxpayers to a single group of recipients, based on no economic rationale. Yet, even if it does produce more in tax revenues than it costs, we must still make a judgment as to whether the money, deployed differently, might produce even more in gains.
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> So we should ask what $100 million would buy. Many in the film industry have argued that it saves the jobs of gaffers, lighting and sound technicians, and other below the line working persons. Even if we accept that as true, that’s not the end of the question. Don’t workers in other walks of life deserve saving? How about schoolteachers, police and fire fighters, construction workers, aerospace engineers, microprocessor assemblers?
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> Or suppose we used the money to reduce the barriers to entry to the community colleges, Cal State, or UC, all of which are turning away our future nurses, pharmacists, physicians, engineers, inventors, entrepreneurs, etc., etc., for want of state funding? That would help to grow the state’s economy over the long term.
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> As long as we’re spending $100 million a year on film incentives, that’s money made unavailable to help any of those other workers or for those other purposes. Maybe there’s sound reasoning for elevating the film industry above all those others by granting it a special incentive. If so, let’s hear it, backed up with hard numbers objectively arrived at.
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> You and others who have written critiques of my column have made great efforts to overlook one of its main points. As I wrote: “None of this means that business incentives are necessarily bad or that some may not indeed promote job growth. But the budget disaster requires every program to be measured against competing priorities, and corporate welfare hasn’t gotten enough scrutiny.”
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> Not a single person who has responded to my column has questioned that point.
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> Best,
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> Michael A. Hiltzik
And the following was my response late this afternoon:
Dear Micheal,
First, let me just say thank you for taking the time to reply and engage in this discussion, which has focused squarely on substance without turning to red herrings or questions of personal bias or political considerations. Honestly, it’s been a real treat. While you and I may agree that the bulk of the economic data points to film incentives as being revenue neutral or drains on state treasuries, this does not mean the issue is not “hotly debated.” In fact it is. For example, I engaged with the Massachusetts film head on my own site here, which you may find entertaining. Currently, I am working on a post that covers the “hotly debated” issue in New Mexico, which you can read about here. Indeed, much of my recent law review working paper is spent addressing the two sides of this issue. You may think it’s no contest, because one side is so plainly correct (which I think it is, but retain the right to change my mind), but that does not mean it’s not debated. There is always two sides.
In New Mexico, you cited the information from the Arrowhead Center’s report to the legislature but not the Ernst & Young report prepared for the film commission, which you suggest is rife with bias problems. And you might be right. But incentive backers say the same thing about the Arrowhead Center, which depends on the state legislature for funding. Thus, if an incentive opponent asks Arrowhead for a study on the incentive, the same fear of bias might apply. It troubles me when film incentive backers shout down anyone who questions them; it’s wrong for them to be so dismissive and certain. Ignoring them in this debate, or denying one is taking place, makes film incentive critics guilty of the same thing. Let’s not do that.
You said, “the budget disaster requires every program to be measured against competing priorities, and corporate welfare hasn’t gotten enough scrutiny…Not a single person who has responded to my column has questioned that point.” I agree 1000% with you. The very fact we are having this discussion means we are giving it scrutiny. Not enough, but its a start. Trust me, I am not overlooking your argument, I am knee deep in it.
Let me clarify your point about the fact that I “ACKNOWLEDGE” there is “no evidence of an economic rationale” for the film incentives. If the incentive could only be rationalized if it were revenue neutral or a revenue source, then it would be very hard to defend them and I would not attempt to do so on that limited gorund. But what if the economic rationale was just for job creation, irrespective of cost? In that case, the incentives are very effective, because they do create and/or retain jobs. Again, look at any state with new incentives and you will find hundreds, if not thousands of jobs that would not exist but for the incentives. I have also said on more than one occasion that I have no problem if the incentives are rationalized on job creation grounds alone, but only if incentive backers were honest about the potential cost to the state. If Massachusetts lawmakers and voters decide they are content with spending $89,000 to create each film job, then that is their right. It might be poor public policy, but at least its informed. Take Iowa, even after major fraud and abuse in the film office was uncovered, 61% of Iowans still favored the program.
In these economic times, I think more than a few Americans support government spending, even if it adds to the deficit, if it creates jobs. Jobs, it seems to me, are worth paying for on occasion. And again, film incentives do create jobs. When I said California has a choice between an imperfect policy or doing nothing, I meant it in the context of protecting the film industry by trying to stem losses to other states and nations. If we are talking about combating runaway production specifically, which I am, then those are, in fact the two options. I was not talking about the overall economic welfare of the entire state when I offered the two choices, I was only talking about the film industry. Because of course there are a number of ways the state could use $100 million each year to improve the overall economy and I like the list you offer. Sure, it could hire teachers, firefighters, and police. I agree. I will say, however, that if the state loses a job belonging to a teacher because of budget cuts, we know (because I am optimistic) that when things pick up, such a job can be restored. If the state loses its talented film workers, however, those jobs may be forever lost to other states and/or nations who were able to justify the cost of capturing the film industry.
And yes, workers in all walks of life do deserve to be saved. But all people with cancer deserve to be cured, that doesn’t mean we can do it with the wave of a wand. I would love to move on to a discussion about how the state can add thousands of teachers, but maybe we need to save each group of workers one at a time. So when you say $100 million can be put to better use, I don’t disagree, but hiring pharmacists will not save the film industry or stop runaway production, which is what I am talking about. So again, when I ask if you had a better policy option to protect the film industry, I was looking for options focused on just that specifically and not some nebulous greater good argument that I think we all agree with…but we do not live in fantasy land, we just visit it every so often in Anaheim. To build the park, you have to plant one tree at a time.
In fact, I’ll offer up a third option for the film industry, if using incentives is so unacceptable. How about this: if voters in the state vote to legalize the sale of marijuana, then instead of using money from the general revenue to pay for the incentive, it would be paid for by dedicating a set percentage of a tax on the sale of said drug. Would that be acceptable? Or would the “we could spend it for more beneficial things” argument once again come into play?
The fundamental question is this: does California want to preserve its film industry or risk losing it to other jurisdictions? Bear in mind that Hollywood’s hegemony is not guaranteed, considering it was, to an extent, built by filmmakers running away from the east coast. If the answer is no, the state does not want (or cant or should not) to protect an industry so closely tied with its identity (Hollywood is not just a place, it’s an idea), then end the incentives–because what would be the point? Better, as you suggest, to make college more affordable or whatever else $100 million can be spent on. But if the answer is yes, and that California does want to guard against losing its treasured film industry, then it has no choice but to level the playing field (which you seemed to value in your column) with tax incentives of its own. Unlike virtually every other state, the goal of California’s incentive is to prevent runaway production (but its also great if it could reverse some too), and not cause it. I think this distinction sets it apart; incentives can be seen a tool to restore equilibrium rather than distort it.
Again, I really value this exchange and hope it serves to inform…because that is the point.
Thanks again,
Adrian
FINAL UPDATE: Below is the last email from Mr. Hiltzik and I am going to give him the final word and simply say that we can agree to disagree:
Dear Adrian:
I, too, appreciate the high level of thought and civility in this exchange—it’s rarer than you’d think.To amplfy my last point, I think you may still be missing the forest for the trees. There is no justification for spending taxpayer money on job creation unless the job creation results in an overall economic gain for the state—and more, the best economic gain that can be produced by the spending. Otherwise, you’re impoverishing the state—if you lose money on every job, you can’t make it up in volume. To put it another way, if the4 film industry can’t survive in California except by sucking up resources made available by other sectors, then it shouldn’t survive—because keeping it alive will destroy the rest of the state’s economy.
Now, I don’t think that’s true, though I do think it’s the story put across by the film industry. Why? Because they want the money. Also, they know that they have a unique cachet that blinds politicians, and voters, to reality. (Isn’t that their business?)
And yes, jobs are worth paying for on occasion—that’s why we have unemployment insurance, and any job incentive programs. But what jobs? Where will the expenditure be most productive? Who says film jobs shold be at the top of the list? Maybe they should be, but where’s the evidence? PLEASE, where’s the evidence?
And no, it doesn’t matter where the money comes from. Dedicating tax revenue from marijuana to film incentives still means that’s revenue taken out of the bucket for all other priorities. That’s just foolish, when there’s a finite pot. In ths state we’ve done that over and over again, to the point where more than half our revenues are pigeonholed for one purpose or another, with the result that we have no flexibility to apply them where they’re needed. I’ve written about this again and again, for years.
The irony of the argument that California should impoverish itself by spending money on film incentives because other states are doing so, and will eat our lunch if we don’t match them, is that many other states have discovered, belatedly, that they were sold a bill of goods. Here’s a link to a study from the Wisconsin Dept. of Commerce, which discovered the downside of its program—millions spent at a huge loss, and millions spent that would have been far more productive applied elsewhere. It’s shocking. (It alsogoes into the experience of several other states.)
<http://www.senate.michigan.gov/gop/senators/cassis/Wisconsin%20Film%20Tax%20Analysis.pdf>http://www.senate.michigan.gov/gop/senators/cassis/Wisconsin%20Film%20Tax%20Analysis.pdf
What Wisconsin has, and California doesn’t, is a STUDY. And that’s what I’m asking for.
