Industry News :: Dan Walters: Perhaps we should worry about a 'Hollywood-Capitol Complex'

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By Dan Walters -- Bee Columnist

Dwight Eisenhower closed his presidency with a bluntly worded warning "against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex."

California once was an integral part of that complex, claiming a fifth of the hundreds of billions of dollars spent by the Pentagon on Cold War preparedness, but with the Soviet Union's collapse, the state saw an enormous reduction in military spending.

The post-Cold War California economy is also a postindustrial economy with many elements, none of them dominant. Film and television production is one of them, generously estimated at perhaps $35 billion a year or 2 percent of the state's $1.5 trillion economy - flashy and conspicuous, perhaps, but just not very important in the larger scheme of things.

That said, perhaps Eisenhower's warning about the insidious influence of corporate executives aligned with those in government should be modified in California. Perhaps we should worry about the "Hollywood-Capitol complex," if the subsidy measure now surfacing in the Legislature is any indication.

Republican Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Núñez are jointly pushing the late-blooming bill that would hand as much as $50 million a year to film producers in the form of refundable tax credits, which means they could be claimed even if the productions generated no taxable profits. It's a unique application of refundable credits, which are usually restricted to the poor, and is explained by the creative accounting techniques that Hollywood often uses to avoid showing any profits for investors and government taxing agencies.

Why should the taxpayers be giving tens of millions of dollars to an industry best known for its lavish lifestyles? The official rationale is that other states and nations, especially Canada, are offering inducements to lure film production to their locales, and California will lose out if we don't match them.

Film industry flacks are cranking up a highly orchestrated propaganda campaign - it's something they know well - to give Sacramento politicians cover for the giveaway. This week, the Los Angeles County Economic Development Corp. issued a 20-page bit of puffery contending that the state is losing many millions of dollars in taxes because of "runaway" film production, warning ominously that "The real threat ... is that this major economic engine could gradually leave the state, one project at a time." Núñez parroted the document's contention in remarks to reporters Tuesday, declaring that "we can't lose these middle-class jobs."

Tellingly, however, the report does not provide hard data on the supposed losses, or analyze what the net benefits, if any, of the subsidy would be to the state as a whole, and the Economic Development Corp.'s separate overview of regional business cites motion picture and TV production as one of the "positive economic forces" that "will continue to run at high levels." The California Budget Project, meanwhile, points out in its analysis of the subsidy bill that film employment has been outpacing overall state job growth.

The film industry employs about a quarter-million Californians, but why should the other 14.5 million California workers pay taxes to underwrite those in La-La Land? Why should film production workers receive a higher political priority than the North Coast loggers who have lost their jobs to Canada, or the Central Valley cannery workers who are now on welfare? Wouldn't that $50 million be better spent relieving the hardships on families of Californians who have been called to active military duty? Or beefing up security against terrorists? Or on just about anything else?

There are no rational answers to those questions. We are left, therefore, with the irrational. Hollywood has public prominence far in excess of its real importance. Countless television shows - "Entertainment Tonight" and the like - and magazines feed our insatiable hunger for gossip about the beautiful and brainless. Politicians and entertainment figures - Schwarzenegger is both - lavish attention on each other constantly.

Let's understand this for what it is: a blatant giveaway of public funds to affluent participants in one relatively insignificant sector of the economy.

About the writer:

Reach Dan Walters at (916) 321-1195 or dwalters@sacbee.com. Back columns: www.sacbee.com/w