Mandatory Phone Books and Filmmaker Welfare in the 'Harrison Bergeron' State
If you have an old landline telephone in Michigan, one of many outdated regulations requires the phone company to print and deliver a “white pages” directory to your house. In his 1961 short story Harrison Bergeron, novelist Kurt Vonnegut portrayed a dystopian society of enforced equality, where the strong, swift, beautiful and smart had those values degraded by a government that deliberately burdened them with handicaps. Michigan government has devolved to the point where it advances an eerily similar policy toward businesses. Ancient rules holding back phone companies on one hand and a welfare subsidy for filmmakers on the other provide just two striking examples that prove this point.
The state mandates that landline phone service providers must print those phone directories and deliver them to customers. AT&T of Michigan, one provider of landline telephone service, reports that this regulation amounts to an annual requirement to print and deliver 1.5 billion pages. Stack those pages on top of each other and you have a pile 51.5 miles high, or something greater than nine times the height of Mt. Everest. Every year this pile must be produced by just one Michigan company whether the customers want it or not, because the government says so.
In Vonnegut’s story, a ballerina was forced to dance with weights attached to her ankles. If he were writing about Michigan, his ballerina would be required to schlep mountains of phone books rather than dance. Likewise, companies like AT&T would prefer to put all that money and energy (to say nothing of all those trees and ink) to a better use and merely print and deliver the white pages to customers who really want them.
Eliminating this requirement, and sweeping away other costly telecommunications regulations from the bygone era when everyone had just one calling option, is the rationale behind House Bill 4314, introduced by state Rep. Ken Horn, R-Frankenmuth.
Testifying in favor of the bill during a recent legislative hearing, an attorney for AT&T noted that current state law “puts certain regulations on providers of landlines (and ONLY landlines) … an old technology that consumers are increasingly abandoning.” She also told the committee that 60 percent of AT&T’s Michigan customers have dumped landlines for other options over the last decade.
Looking at the regulations on the books, it is easy to see why AT&T says the state is operating with a “rotary phone mentality” in a “Wi-fi world.” The state demands price controls, mandated calling plans, government paperwork requirements and more. The overall impression is that regulators are stuck in the 1970s, where there was one monopoly phone company and everyone in the house waited in line to use one phone stuck to the kitchen wall. Instead, we live in an age when most teenagers can purchase a disposable cell phone from the corner party store, to say nothing of getting an iPhone for their birthday.
As with retaining the option to receive a directory if one is desired, the bill proposes to retain other consumer protections for customers who may legitimately find themselves outside of this wildly competitive marketplace for phone service that most of us enjoy.
Michigan did pass major regulatory reforms for telecommunications in 2005. But to understand how policies like price controls and a mandate to print the white pages could still be on the books five years later, consider what state government has been up to since then.
Michigan’s obsession with giving away money for movies takes Vonnegut a step further and gives corporate welfare to businesses that can’t or won’t compete in the harsh environment in which most of Michigan’s other businesses must exist. The film subsidy was created in 2008 and passed with just one politician in all of Lansing voting ‘No.’ It gives filmmakers a credit of up to 42 percent for film business done in Michigan.
As noted, this is not a mere tax break, but a subsidy. Spend a dollar making your movie in Michigan, and state government will give you 42 cents back from the taxpayers to help cover the cost of that dollar. You get a dollar of spending but must spend only 58 cents of your own!
This is precisely backwards from how most other businesses operate: In the real tax world, government shaves taxes off of a productive business’ dollar, and the business gets something less than a full dollar of impact from it. This is the way taxes are supposed to work, of course. The point is to get money to run government, not to operate as a charity that produces Red Dawn remakes.
There is no mathematical way that state government could offer this welfare program to even a reasonably small fraction of its other businesses. The annual GDP of the state is about $360 billion. If the state’s “Hollywood” tax policy were expanded to just one-tenth of the total business being done in this state by all businesses, then it would require the state to shell out $15 billion in subsidies each year. This is well more than enough to eat up every single dollar spent by state government on K-12 schools and much more.
If one-third of the total business being done by every Michigan business each year were eligible for this corporate welfare, then the program would eat the entire state budget, including federal revenue, and much more. We might even have to print IOUs to pay the rest — just like Hollywood's home state is doing right now.
It is hardly surprising that the governor has proposed shutting down the 42 percent welfare subsidy for filmmakers. The only shocking fact is that it was ever approved in the first place.
By contrast, from 2006 to 2010 — the years since the first pile of outdated telecom regulations were cleared away in 2005 — AT&T alone has invested an additional $2 billion into high tech upgrades to its infrastructure in this state. This includes more wireless technology access, more Internet access, video franchising to compete with cable television, and more. That’s $2 billion over five years from just one company that adds to the high-tech telecom competition in Michigan and has thus increased service quality and value for every consumer who watches television, hooks up to the Internet or uses a cell phone or other wireless device.
Without the benefit of the 42 cents on the dollar welfare subsidy, one company still pours billions into Michigan merely because outdated weights are removed from its ankles, allowing it the freedom to invest and prosper. With the 42 cents on the dollar welfare subsidy, the film industry drains hundreds of millions from the taxpayers.
If the new team of politicians running the capitol is serious about ending Michigan’s Harrison Bergeron economic policy, then they have a lot of work to do and it just starts with issues like these two. By April, they will have been in office for three months. If they get through the month and are still holding hearings about ending filmmaker welfare and abolishing ancient telephone mandates, then they should be explaining to us all why it’s still taking them so long to get the job done.
The contact information for all Michigan lawmakers is available at www.MichCapCon.com/9313.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.