TV Taxes; R. Keating

Over a four-day period, from March 31 to April 3, Washington gave away the proverbial store to the nation's overthe-air television broadcasters. A major step by the Federal Communications Commission (FCC)-taken per a Democratic White House and Repub lican Congress-and a decision by the U.S. Supreme Court will both prove quite costly for taxpayers, consumers, and the U.S. Con stitution. It is corporate welfare run amok. Broadcasters were handed tens of billions of dollars worth of broadcast spectrum, free of charge. Earlier this century, the government as serted the right to manage the spectrum, the airwaves over which television, radio, and other forms of communication are transmit ted. This year the federal government flexed its industrial-policy muscles, decreeing that American consumers should watch digital quality television (with its purported better picture and sound) whether they want to or not. Broadcast television stations will use Mr. Keating serves as chief economist for the Small Business Survival Foundation and is the author of New York by the Numbers: State and City in Perpetual Crisis (Madison Books).

TV TAXES 671 interest groups desiring to benefit from that expansion of political power. The Labor De partment is an example of a government bureaucracy that should not exist: a wasteful amalgam of special-interest subsidies and officious government interference. This would be a good place for Congress to begin paring government back to its essentials. 0 their new, free-of-charge channels to send out digital signals of their commercial TV service, currently delivered through less efficient an alog signals; some frequencies will be left for subscriber-paid services. Broadcasters will si multaneously send out their analog and dig ital signals for about the next decade, after which the old signal will end, with that section of the spectrum supposedly returned to the government for auction. In effect then, over the coming decade the broadcasters, backed by the federal govern ment, will push consumers to buy new digital TV sets or set-top converters for their old TVs. This amounts to a TV tax on consumers, potentially running into hundreds of dollars for converters and thousands of dollars for digital televisions. At the same time, were the spectrum auctioned off, rather than given away, billions of dollars in revenues could be collected and used to retire a bit of the federal government's outstanding debt. Indeed, at this point Washington's lone goal should be to extract itself from any involvement in the broadcast spectrum-but for safeguarding property rights-and the best means to do so would be to auction off the entire spectrum, allowing the marketplace, not government, to decide the future of overthe-air telecommu nications.

672 THE FREEMAN • NOVEMBER 1997 As for the promise by broadcasters to eventually return their old spectrum, don't hold your breath. If consumers resist paying the TV tax and stay with their old televisions, the broadcasters could keep all of their spec trum for some time. Either way, it's a lose-lose proposition for taxpayers. The Must-Carry Rule Meanwhile, also in March, the Supreme Court struck another blow for industrial pol icy and the TV broadcasters by upholding a 1992 federal law mandating that cable televi sion systems carry local broadcast stations, i.e., the must-carry rule. In the continuing, perverse "tradition" of judicial activism, the Court utilized, as Justice Sandra Day O'Connor put it in her dissent, "a highly dubious economic theory" to uphold the law. The economic viability of local broadcast stations was considered as an issue by the Court, while the First Amendment (i.e., free speech) and the Fifth Amendment (i.e., tak ings) were discounted.

In the case of must-carry, the federal gov ernment has decided that a local broadcast station must be seen by cable TV subscribers over other stations such as C-Span and ESPN. Of course, this law violates privateproperty rights, interferes with the superior workings of the free market, and overrides what consum ers may actually demand. Government should neither be guiding the development of television technologies, nor ensuring the economic viability of local broadcasters. If only we could click off gov ernment officials, who insist upon ignoring the free market and the U.S. Constitution, as easily as we turn off the often moronic tele vision shows the broadcasters offer over the airwaves. D r--------------------------------------.HThe most exc,jtingnew intellectualjournalin many years. -WILLIAMNISKANEN,Chairman,CatoInstitute ... 'Tlte INDEPENDENT REVIEW is the new, quarterly journal deI .1. voted to the political economy of liberty. Transcending the alltoo-common politicization and superficiality in public policy de bate, The INDEPENDENT REVIEW is superbly written, provoca tive, wide-ranging, and based on solid scholarship. Featuring pathbreaking studies by many of the world's finest economists and other scholars, The INDEPENDENT REVIEW boldly chal lenges the collectivization and bureaucratization of our world.

Probing the most difficult and pressing of social and economic questions, articles range across economics, political science, law, history, philosophy, sociology, and related fields. Edited by Robert Higgs, The INDEPENDENT REVIEW features in-depth examina tions of current policy issues viewed in comprehensive historical, :::::.:: : :.".:.:;! ethical, and economic perspectives. Undaunted and uncompro.. ...... l1li mising, this is the journal that will pioneer future debate! "Excellent,diverseand wide-ranging." Figures. Tables. Annual Index. 600 Pages per Volume-IRVING LOUIS HOROWITZ Professor of Sociology, Rutgers University Individual Subscription: $27.95/year • $52.95/2 year "T~~~:~~;1~f[;~;;~\~1~ft~g~~ademy Institutional Subscription: $49.95/year • $94.95/2 year "Excellentf"-JULIAN SIMON International orders add $28per subscription for shippingProfessor of Economics, Univ. of Maryland i Z~ENT· INSflTUTE The Independent Institute, Dept. 6T, 134 Ninety-Eighth Avenue, Oakland, CA 94603 ~--------------------------------------~ THEFREEMAN IDEAS ON LIBERTY How Fair Is "FairHousing"?