Movie math

If you want to understand why it’s so hard for governments, both federal and state, to put their accounts in order, consider the recent comments of Bill Richardson, former nearly everything including governor of New Mexico and a semi-serious candidate for president.

Richardson might well be a candidate for one of the “respected elder statesman” seats that come open every generation (sort of an American version of the British House of Lords, only chosen by the media instead of the government), bringing with them memberships of prestigious commissions, offers of ambassadorships, opportunities to express concern on “Charlie Rose” or the PBS “NewsHour” shows (if those institutions manage to survive the current Republican onslaught) and so on. All with no obligation to campaign or raise money.

Richardson probably can deplore the deficit in his sleep. Yet asked by the New York Times for one piece of advice to give his successor as governor, he used the opportunity to beg in a Sunday op-ed article for a continued subsidy of the film and television industry.

New Mexico under Richardson was a pioneer in this field. In 2002, it began offering a credit of 15% — later raised to 25% — toward the cost of making a movie in New Mexico (not counting star salaries and the mite paid to writers). Now, 42 states have followed its lead. New York has gone as high as 30%. These credits are generally transferable, savable and usable for other things, so it’s no problem if the particular movie doesn’t make money.

In less than a decade, the absurd notion of welfare for movie producers has evolved from the kind of weird thing they do in France to an unshakable American tradition. “I’m proud that New Mexico has been a leader in this effort,” Richardson says.

Richardson says that the film and TV subsidy has brought “nearly $4 billion into our economy over eight years” and has created 10,000 jobs. By “our,” he means New Mexico. He says every state should emulate this success.

But of course every state cannot do that because it essentially is a “beggar thy neighbor” strategy. Some of the movies that have been bribed to locate in New Mexico would have been made in New Mexico anyway. That part of the subsidy is a total waste. Most of the movies that have come to New Mexico for the subsidy would otherwise have been made in other states. New Mexicans may not care if the citizens of those states lose out, but inevitably those other states respond with subsidies of their own and New Mexico gets beggared along with everybody else.

In any event, Richardson’s statistical claims are suspect, to say the least. He would not win an Oscar for math. He says that 10,000 jobs and $4 billion “are huge numbers for a state with a population of only about 2.1 million.” You can say that again. If Richardson’s figures were correct — if every state had a similar program and every program achieved the same alleged success on a per capita basis — that would mean film subsidies would be adding $600 billion to the economy over eight years and would create 1.5 million jobs. Given that the entire movie production and distribution industry generates about $55 billion a year, it seems unlikely that this subsidy alone generates $75 billion a year (one-eighth of $600 billion) in new business. Similarly, it’s hard to see how the subsidy could add 1.5 million jobs to an industry that employs, according to the Bureau of Labor Statistics, about 362,000 people.

In the definitive document on this issue — a paper published in December by the Center on Budget and Policy Priorities — senior fellow Robert Tannenwald notes what he tactfully calls “flaws” in various studies the states have commissioned to justify the subsidy. Even after our recent experience with gullible or mendacious accountants in financial scandals like Enron’s, it’s actually shocking that reputable accounting firms would pull some of these stunts, such as counting the allowances film crews get paid for expenses as a benefit to the state, then counting the same money again when it is spent. Or assuming without explanation that the average film crew member makes $82,400 a year, when the Bureau of Labor Statistics sets that figure at $35,000. The most outrageous double counting, of course, is telling one state after another that it can bring in billions by enticing the same movies away from other states.

Government, in order to work, must be a monopoly. The appeal of the movie industry to beleaguered state treasurers, in addition to its glamour, is its mobility. There are no huge factories. Regardless of where the movie is supposedly set, it can be shot almost anywhere. And it will employ locals and spend money.

But mobility giveth and mobility taketh away. Pit the states against one another and the subsidies will inevitably become more generous and less effective at the same time.

The same logic applies when the competition is foreign. True, we might tire of having to watch film after film often implausibly set in Vancouver. But in any attempt to outbid Canada for the privilege of hosting a movie shoot, even a successful effort will be self-defeating.

“Governors and legislatures should call ‘cut!’ on cynical efforts to kill forward-looking incentive programs for film and TV production, in New Mexico and in all other states,” Richardson says.

“Cynical” is an odd word to describe people (and there aren’t many) who want deeply indebted state governments to stop forgoing billions in tax revenue in the futile effort to entice the movie business to make its next western in Erie, Penn., or wherever.

Did you watch the Oscars on Sunday? Did that look like a crowd in need of a government subsidy?

Michael Kinsley, a former editorial page editor of The Times, writes a column for Politico. A version of this column also runs Tuesday on that website.