3rd Draft 12/7
Yakima Rotary
December 8, 2005
Publisher
The Seattle Times
the liberty of a nation must
begin by subduing the
freeness of speech”
U.S. Statesman, 1722
OVERVIEW
American democracy is at risk.
Most, if not all, democracies have failed by 300 years.
We are at 200 plus and counting.
The root cause is the consolidation of economic power by huge corporations and Wall Street money managers.
Of which the most serious and frightening part is the takeover of our nation’s newspapers and media by a handful of major corporations and financial investors.
· Democracy’s foundation equals a four-legged stool.
Our democracy is only secure as long as its foundation is stable. That foundation is a four-legged stool, the four legs representing:
- The executive leg
- The legislative leg
- The judiciary
and
- The Fourth Estate
This latter leg being the nation’s free and independent press.
Free of government control and interference.
Independent of the powerful.
Watchdog for, and voice of, the public.
Today, there are problems with each leg, but the most wobbly [unstable?] is that of the Fourth Estate. Where a handful of financially driven absentee corporations have, for the most part, taken control of our press and our media, turning the independent watchdog press into a compliant corporate lapdog and a tool of the powerful.
NEWSPAPER AND MEDIA CONCENTRATION
When I began my career 37 years ago, there were approximately 1,700 daily newspapers in the United States, almost all of them were independently owned by people in the communities or regions they served. This was certainly the case throughout Washington State and in Yakima with the Robertson family.
Today there are only about 200 independent daily newspapers left in the entire country.
85% of America’s Sunday circulation is now controlled by absentee corporations.
Today, in our state, absentee conglomerates now control the Tri-Cities, Bellingham, Bremerton, Everett, Seattle PI, Tacoma, Olympia, Centralia and Aberdeen papers.
Prior to 1992 this list would have included the Yakima Herald-Republic. My family bought the Herald-Republic then because we believe that communities in the state of Washington should be served by owners who live in the state and who care about our local communities.
Owners who know they must make a profit to survive but survive to practice independent journalism and community service – as opposed to milking the newspapers for short-term profits sent to the East Coast or Texas.
During my career, Yakima has had four different owners, as it passed from a local family into the hands of two different Texas corporations.
We were thrilled to get the opportunity to bring the Herald-Republic back to in-state ownership. We are very proud to have invested more than $20 million in plant and infrastructure, and to make significant investments in staffing and in news content.
The H-R has become one of the most respected small newspapers in the country.
We care very much about our state and especially the three communities we serve with our newspapers: Seattle, Yakima and Walla-Walla. I served as publisher of the Walla Walla Union-Bulletin in the late ‘70s. One of my sons worked at the Herald-Republic as a reporter. Currently Cal Blethen, my nephew, lives and works there.
But, back to media control.
As bad as concentration is in the newspaper business, let me address the bigger picture of all media in the United States.
This is an inclusive description including everything from newspapers, radio, TV, movies, records, etc.
Majority of media ownership in the United States.
1993 – 50 companies
1998 – 19 companies
2000 – 6 companies
2004 – 5
(Time/Warner, News media, Disney, Gannett, Rupert Murdoch)
If this trend continues unabated, imagine what it is going to be like in five to ten years.
Already we have seen massive disinvestment in journalism and the emasculation of the watchdog press in this country.
Good journalism, especially investigative and contextual journalism is expensive. Financially driven conglomerates do not want to incur the expense of good newspapers and good journalism.
Even worse, they don’t want any scrutiny on their activities. That’s why you don’t read much about newspapers and media concentration.
I have always believed that the major danger to the public is the stories that don’t get told. Whether it’s as local as Main Street America or as national as Washington D.C.
CONCENTRATION OF ECONOMIC POWER
To be sure the concentration of newspaper and media power in this country is a subset of a larger trend we are witnessing, which is the unprecedented concentration of economic power with giant corporations and the resulting loss of local business ownership throughout the country.
This trend is driven by poor public policy, lax regulation on the growth of financial markets.
In much of the country, this loss of localism is destroying the sense of community, which is essential if we hope to have citizens engaged in the civic process.
Our founding fathers built a framework that was intended to protect citizens from excessive power and thus ensure community. It was intended to keep the powerful in check on our behalf – be they government, labor, wealthy individuals, powerful corporations, or special interest groups.
They recognized only too well that those with power and wealth would naturally seek more, and they strove to create protections for us.
Thomas Jefferson once said that he foresaw there would be “battles between the rapacious capitalists and democracy.”
This battle has played out through the history of our democracy. Until recently it was a fair playing field. But even Jefferson did not anticipate what has happened today, that the rapacious capitalists would co-op democracy’s main weapon in this battle – a free and independent press.
As economic power continues to coalesce in giant, faceless corporations, we as citizens are feeling powerless and disconnected. We are losing our sense of community. And citizen participation through a sense of community is the fabric of our democracy.
ECONOMIC POWER – CENTER FOR PUBLIC INTEGRITY
Let me give you an example of how determined these corporations are to not just keep control of your newspapers and television stations but extend and solidify that control.
The example is the enormous amount of money they spend through lobbying and political donations just on media ownership and control.
The figures I am going to share with you were developed by the highly credible Center for Public Integrity in Washington DC and based of very extensive research and public records request.
· $1.1 Billion dollars in lobby and political donations from 1987 to 2004
· $2.1 Million – NIA and NAB – Just FCC gifts and travel in one year.
FEDERAL DEATH TAX
Next, I would like to briefly address America’s most misunderstood destructive tax of our time.
The Death Tax.
The Death Tax is not a sop to the rich. The Death Tax is a gift to powerful corporations and big business.
It is the enemy of local business and working people.
It is the Death Tax that is a key contributor to perpetuating our nation’s wealth gap by killing local businesses and the jobs they provide. Including female and minority owned businesses.
Family business rate of survival:
- 15% the second generation
- 1% the third generation
The terrible concentration that has taken place in the newspaper industry has been driven by the Death Tax.
It is the reason the Robertson family sold Yakima to out-of-staters and it is the reason most other family newspapers have sold.
While the rate today is a confiscatory 50%, when the Robertsons sold it was a mind-boggling 70%. Clearly, a public policy, which makes it impossible for a family business to survive, is not good for the country.
But, it is certainly good for the rapacious capitalists – giant corporations - who want to build up both economic and information power.
The biggest business beneficiary – and I will undoubtedly offend someone in the room with this – is the insurance industry.
The insurance industry’s fingerprints are on every attempt to keep the Death Tax in place. And why? It is simple. They are protecting a $12 billion life insurance revenue stream.
They are so powerful they got Congress to make life insurance the only asset you have that is exempt from the Death Tax.
And if it was not bad enough to have a confiscatory 50% federal death tax, now we have a brand new, very complicated State Death Tax which will add somewhere around 8% to 16% on top of that.
FEDERAL DEATH TAX
After years of work, we were poised to have a significant federal reform this past summer.
Politically, full repeal was not going to happen, even though it is the best public policy and has the best consequences for our economy.
What was possible, and likely, was that we would see a 15% rate, equal to capital gains, and an exemption in the $5 million to $10 million range.
Even a 15% rate is unfair and irrational, but at least it is a rate at which family businesses can survive, perpetuate themselves and will begin to invest in their companies.
STATE DEATH TAX
- Only state to start a death tax in years.
- Puts state at competitive disadvantage for business and job investment.
- Kills our small and locally owned businesses plus minority and female owned businesses.
- Driving retirees out of state.
- Adds 8-15% to Death Tax tab.
- Puts all locally and family owned wineries in Yakima and the state at risk.
HOPE AND CALL TO ACTION
There is hope.
But only if the public, you, speak out loud and persistently.
We need –
- FCC rules to stay in place.
- New legislation to limit newspapers and media outlet ownership.
- Repeal or significant reform of the Federal Death Tax (15% rate max.).
- Repeal as soon as possible of the State Death Tax.
CALL TO ACTION
· Media and Newspaper Consolidation
- Delegation
Hastings
McMorris
Cantwell
McGavick
FCC Rules
New legislation
enforcement
· Federal Death Tax
Washington State Delegation
McMorris Hastings
Reichert
Bill First
John Kyle
Maria Cantwell
Patty Murray
Mike McGavick
· State Death Tax
Yakima legislators
State legislative leaders
Christine Gregoire
Dino Rossi
Wine Industry
NIFB
WAB
Builders
Addendum
BAD PUBLIC POLICIES EMERGING
· Newspaper concentration
And
· Death Tax
1970s – KRI begins newspaper acquisitions using Death Tax.
1980s – KRI grows to become the second largest chain and absentee owner in country.
1990s – KRI become notorious for disinvesting in journalism, employees and local
communities in an attempt to sustain sock price through unrealistic pre-tax profit margins between 20% and 30%.
2005 – KRI forced to sell by institutional investors in spite of significant profits and margins.
- most likely buyer – the Barbarians at the Gate –
short-term financial players
5-year horizon
- Will slash and burn to keep margins and cash flow up short-term and then sell off the damaged pieces.
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
· Olympia, Bellingham and Boise
1970s – family owned – federated group
- sold out to Gannett due to Death Tax.
(Gannett becomes largest absentee, financially driven chain in country.)
2005 – Gannett “swaps” assets with KRI and KRI becomes absentee owner.
2006 – KRI forced to sell
Most likely buyer – financial players who will slash and burn.