They proved it: Newspapers make everything brighter, and less expensive

Sunday, July 22, 2018 10:28 PM
Courtesy of Andrew Gulliford

Ads and typefaces set in lead type line a wall at the back of the newspaper building where the publisher can find them and insert them in page layouts prior to running his vintage printing press.

We were struck by a beam of sunshine breaking through the clouds the other day, at least in a manner of speaking. It was when we happened across one of those oddball studies that seems to say 2 + 2 = 4, but in a new way.

It comes from a paper that was presented last week at the annual Municipal Finance Conference, put on in D.C. by the Brookings Institution and other think tanks.

We know what you’re thinking: An annual municipal finance conference? How fun is that?

Doubtlessly, you’ll be even more sorry to have missed it when you hear that there were plenary sessions with topics such as “The evolving municipal advisor market in the post Dodd-Frank era” and “The pricing and ownership of U.S. green bonds.”

We told you there was a ray of light ... those weren’t it.

It was “Financing dies in darkness: The impact of newspaper closures on public finance,” a presentation by Pengile Gao from the Mendoza College of Business at the University of Notre Dame, and Chang Lee and Dermot Murphy of the College of Business at the University of Illinois at Chicago.

Gao, Lee and Murphy found that local newspaper closures increase local government’s borrowing costs. After eliminating economic trends and other variables through comparisons, what they surmised was that the closures of the papers in the study drove up borrowing costs because that made less information about government available, reducing confidence, and because when local officials were no longer monitored as closely, the quality and efficiency of government dwindled.

Newspaper closures also were associated with a rise in government wage rates, the number of government employees per capita and tax dollars per capita.

That was the 2 + 2 = 4 part. Now, allow us to express it as the ray of light. What Gao, Lee and Murphy are saying is that in communities with local newspapers, which are still numerous, the papers aren’t just keeping borrowing costs down for those who borrow, but they are making their local governments better and less expensive than they’d otherwise be.

This is when we should all recall the parable of Bell, California. Bell is a city of about 35,000 people, 2.6 square miles, in Los Angeles County, about 10 miles from downtown L.A. – a bedroom community. Crucially, it does not have a newspaper.

One day in 2010, a couple of reporters from the Los Angeles Times, nosing around, discovered Bell city officials were paying themselves extravagantly. The city manager was earning $787,637 a year, plus another $700,000 worth of benefits. His assistant was making $375,288 a year. The police chief was paid $457,000 a year. Not surprisingly, Bell property taxes were high, too. But no one who lived in Bell, who could vote in Bell, who wasn’t being paid off, had a clue about any of this.

After the LA Times reports, the guilty officials resigned and most were convicted of misappropriation of public funds. Sadly, Bell still doesn’t have its own newspaper. It’s still in the dark.

Sometimes we’re a spotlight, sometimes we’re a night light. Local government might not love us around the clock, but we’re keeping taxes and the cost of government down just by doing our thing.

Really. It’s elementary. And now we have a study that proves it.