Barbara Boxer

The Protectionator

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California's new head of state couldn't participate in the recent national governor's conference, but he did get on the phone for a conference call. One of the first things he said:

[Y]ou've got to promise me while you're at it, do not take any more movies into your states. Let's keep the movies in California, because this is the state of Hollywood. You've got to have the movies here, so don't take anymore movie production away from me.

The state of Hollywood is crossing its fingers that Sacramento's resident Friedmanite will help allocate taxpayer money to protect Southern California entertainment jobs from competition. Already he has appointed a senior adviser with the task of retaining Hollywood jobs, and his first gubernatorial trip to Washington, D.C. included some arm-twisting for federal subsidies:

In a recent meeting with Sen. Barbara Boxer, D-Calif., Schwarzenegger offered his help in lobbying Congress on behalf of the industry.

Included in the Hollywood wish list is a bill now in a congressional conference committee that could provide about $250 million over five years in incentives for keeping small- and medium-budget productions in the United States.

Schwarzenegger has made several films across the border, in both Mexico and Canada, and as recently as July 2000 was seen on CNN defending runaway production, and the work ethic of our Canadian friends:

When we make noise, or when we kind of block off streets, … they're understanding. They don't get negative. They don't have negative stories in the papers the next day like you have sometimes in Los Angeles when you block off streets.

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  1. I am confused. Is he really for protetionism or just against other states/countries protectionism? Or is it another “cutting taxes is corporate welfare” from the Reason crew?

  2. At last, a substantive attack on Arnold. Where are you, joe, to defend the desired subsidies?

    I don’t object to the Oak’s emotional appeals to keep filmmaking in Hollywood, but I object to paying for the production of The Redistributionator. If there’s a better popular climate (and bigger subsidies) in Canada, pack your camera and head to Toronto.

  3. Anonymous — As far as I can tell (Arnold’s people are tight-lipped on this so far), the governor has actively lobbied for Washington to pass some legislation to protect jobs in Hollywood, and offered to testify on Capitol Hill if necessary. Whether this means he specifically supports the $250 million deal mentioned, I don’t know, but it’s very hard for me to imagine such a federal bill that won’t amount to taxpayer-financed protectionism.

    Locally, we will know more in December, when Democratic State Senator Sheila Kuehl (a former actress herself) is scheduled to introduce her latest protectionist bill.

    Speaking personally and generally, if his solution is to use only the bully pulpit of persuasion coupled with a broad set of regulation-easing policies, he won’t likely get much of a beef from me. But if he supports any diversion of tax monies (or targeted easing of tax burdens) to Hollywood productions, I will be miffied, not to mention embarrassed for my city & state. Somehow the porn industry manages to flourish nearby without a single bit of government protectionism; methinks our weather, skills, and century worth of momentum will win out in the end, and we can spend tax money on stuff that really matters.

  4. Matt: Nice. The porn industry flourishes even against state hostility. They’ve got a product people are eager to pay for. Imagine porn with subsidies…

  5. Actually, film subsidies and non-tariff barriers are among the few allowed under the WTO regime. The only way to fight against them is to match them.

    Arnold had a “come-to-Jesus” moment on this issue a few years back and decided to film T3 in L.A.–taking a salary reduction equivalent to the subsidy that the Canadian government would have offered. For me, he has cred on this issue.

  6. Mark Fox,

    I imagine that the Scandinavian (Danish or Swedish) sex-ed tape that found it’s way into the hands of members of my generally geeky-innocent-“good kids” high school clique in the early 90’s might be what subsidized porn would look like. I dunno if it was a subsidize product, but I assume so. Explicit, straightforward and a little clinical, and no money shots.

    Total market: geeky-innocent-“good kids” who are too bashful to acquire the california kind.

  7. Mr. Welch: I am confused on why you equate targeted easing of tax burdens with subsidization. Do you also consider the Bush tax cuts for individuals as welfare?

  8. BoiFromTroy — That Come-to-Jesus moment was portrayed, at that time, as directly related to his future political ambitions in the state of California.

  9. So much for reducing input from vested interests!

    Aside: Keith notes: ‘I imagine that the Scandinavian (Danish or Swedish) sex-ed tape that found it’s way into the hands of members of my generally geeky-innocent-“good kids” high school clique in the early 90’s might be what subsidized porn would look like. I dunno if it was a subsidize product, but I assume so. Explicit, straightforward and a little clinical, and no money shots.’

    I can only imagine the results if a generation of kids _did_ grow up thinking that money shots were how sex is supposed to work… (BTW it almost definitely was state-subsidized I’d reckon.)

  10. anon#1: I share Welch’s concern about targeted easing of taxes. It’s basically the government picking and choosing among various industries and products. To the extent that taxes exist at all, they should be simple taxes (flat income taxes, or uniform sales taxes).

    It’s bad enough that they take your money. It’s worse when they say “We’ll go easy on this industry out while saddling another industry with even bigger taxes (e.g. various excise taxes). And we’ll soak this individual on April 15 while giving this other guy a tax credit for doing something that politicians like.” The result is a much greater amount of government micromanagement in the marketplace.

    I know, I know, the taxes shouldn’t be there in the first place. I’m not denying that. I’m just saying that a tax is bad, and a tax used to micromanage the economy is worse. It encourages decisions that the market would not support otherwise, leading to a less efficient allocation of resources.

    Somebody will no doubt call me a liberal Democrat for saying that.

  11. Justin Mason says: “I can only imagine the results if a generation of kids _did_ grow up thinking that money shots were how sex is supposed to work… (BTW it almost definitely was state-subsidized I’d reckon.)”

    Take a look on Kazaa sometime. An entire generation of kids (especially geeky ones) as access to stuff I could barely imagine when I was in HS.

  12. Mark, I think these subsidies are a terrible idea. Even if they were committed to using the money to prop up the industry, they’d be better off funding drama programs in schools and fixing the roads in high-movie-industry-areas. It’s stupid to try to use tax dollars to bribe an industry to stay where it doesn’t want to be. Better to use them to improve or maintain an area so that it’t where the industry does want to be.

    “I am confused on why you equate targeted easing of tax burdens with subsidization.” Because the government still collects the same amount of money; they just raise “our” taxes to make up for the amount they forego to pay off “them.”

  13. The fact is that its cheaper to make movies outside the US; the money still comes from the US, but making a movie in Prague or Toronto or New Zealand or the French countryside is simply cheaper. Crews cost much less; you get interesting locales; material is cheaper; etc. This is why the industry is slowly migrating away; and no subsidy will keep it in California.

  14. Merovingian: Good point. It is a labor-intensive business, so production will shift to less costly locales. It will take time for non-US talent and studio capital to aggregate in other places, so Hollywood need not panic.

    joe: I like your idea (in a sense). Spending that way has a broader direct benefit. It is similar to enticing an auto factory into a town?

  15. Another reason Hollywood remains so popular is that it’s where the actors are. Unless you have a huge budget, the cost of relocating actors (or, God forbid, hiring local Canadians or whatever) is higher than the savings from cheaper locations and crews. Until the actors decide to up and go to Canada or Mexico or the French countryside, LA will remain the filmaking mecca.

  16. Andy D.,

    Well, it certainly still makes a lot of pornography. 🙂

    I think you’d surprised at how many TV shows, movies, etc., are made outside the US. Or even in the US outside Hollywood & NYC.

  17. Mark Fox,

    It would be very ironic if Hollywood liberals drove off their own industry by pushing for legislation that kills their competitiveness.

  18. Hmm, begging as public policy.

  19. “The fact is that its cheaper to make movies outside the US; the money still comes from the US, but making a movie in Prague or Toronto or New Zealand or the French countryside is simply cheaper. Crews cost much less; you get interesting locales; material is cheaper; etc.’

    On the other hand, we have the best actors, directors, special effects houses, script writers, etc etc etc (from a commercial perspective – we’re talking industry, not artistry here, so don’t get your croissants in a twist.) That is what is going to keep the Hollywood film industry strong, not attempts to drive down prices.

    Sort of like why high tech industry, finance, medicine, and biotech has so spectacularly refused to migrate from Taxachusetts to anti-union, anti-regulation, low tax Mississippi.

  20. “resident Friedmanite”?

    I am sick and tired of you cynical jouralists questioning the sincerity of public servants’ convictions, and mocking their superficial commitment to proclaimed philosophical influences. My own favorite philosopher is Jesus, because he changed my life. And I’ve looked into Arnold’s eyes and seen his heart, and I know that Milton Friedman and Adam Smith changed his.

    Praise the Lord and pass the no-bid contracts! Hallelujah!

  21. And when they can’t agree on who gets what, they start playing “beggar thy neighbor,” meaning targetted tax breaks to poach the industrial bases of other states, meaning offering these incentives becomes standard practice. Stupied arms race mentality, leaves everyone poorer. Happens among municipalities, too.

  22. I work in Los Angeles in film production. In a word, the reason film production if fleeing L.A. is waste. There is SO much inefficiency and waste on film sets. You’ve got teamsters getting paid $40 an hour to sit in their trucks ALL DAY even though those trucks are going nowhere. You’ve got arcane union rules that make it hard for an able, well-intentioned worker to do all they can to contribute to the effort without stepping on someone else’s union-protected sinecure. You’ve also got a lot of market savvy in the sense that when you go to film on location here in LA people know what the market will bear and charge 4 or 5 times what the same location will cost elsewhere. Through in permits, hiring cops and fire marshalls (which I don’t consider waste but does add to the bottom line) and it’s damn expensive to work here.

    The only reason there’s production work left here at all is because the talent pool is so incredible and the weather and geography so well suited to making movies.

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