TCS Daily

Class Warfare On The Airwaves

By Jerry Bowyer - August 4, 2009 12:00 AM

A friend of mine in the radio business called me recently to ask what I think about the "performance tax" issue. If you are a regular listener to talk radio, you've probably heard ads decrying a plan to impose a "tax on radio."

In essence, it is an imposed royalty; the government would force radio stations to cut a check to an entity, which would send those funds to record companies. A government board of Copyright Royalty Judges would send the check, as opposed to a negotiation between the businesses themselves. Most of the money would go to the record companies that distribute the music, not to the songwriters and singers who created the music.

The law would not cover everyone, including DJs in public venues, restaurants and bars. But large commercial radio stations would pay a lot; the Congressional Budget Office estimates that short-run costs would be around $70 million, and without knowing where the government will set the royalties, it's impossible to calculate how high that number could rise. Oddly enough, Public Radio would pay only a token amount for the use of the music.

So what do I think about this? I told my friend, "I'm for free markets and property rights."

"Yeah, but some of the Republican congressman who have signed on to this idea are saying that this is property rights," he said.

I found myself wondering if any of these men and women who have taken an oath on the United States Constitution ever read the thing. The power to create copyrights, patents and other forms of intellectual property protection is granted to the Congress in Article 1, Section 8, Clause 8 of our Constitution.

"... to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries ..."

Note that the founders' position on the question of intellectual property was quite clear: it belonged to the creator of the property, the "author" or the "inventor." Not to the distributor. This is not a casual textual oversight; it was a deliberate decision. They deliberately created a system, which would reward people for creating intellectual property and still encourage the widest possible dissemination of the intellectual property. Jefferson actually opposed the creation of patents and copyrights, arguing that intellectual property was different than physical property since it could be given to an infinite number of people, unlike a parcel of land, and still not diminish the amount held by the owner.

Jefferson lost that debate and as usual, and James Madison won the day. Madison went back to the common law foundations of intellectual property and found a right to protection for the creator or composer of a song or a poem. Under the English Common Law, if I pay you to take dictation from me and you jot down the words of a poem of mine on someone else's paper, I still own the poem. The person who furnished the paper owns the paper, and you own the wage, which I pay you for your stenographic efforts. If some other party decides to make a living traveling the world and reading my poem aloud to paying audiences. He pays me, the poet. He doesn't pay you, the stenographer, nor does he pay whoever is holding the piece of paper. That's because the system was designed to reward the creation of intellectual property, not its packaging and distribution.

Record companies are like the stenographer, stamping the sonic images of other people's words and voices onto CDs and then, like the traveler, they pay for the right to sell those CDs. Record companies own the plastic copies of the song and can sell them at will. This is their reward for laying the sound down in plastic by selling the plastic. But the Madisonian concept of copyright holds that if you want to encourage people to create new music, then you pay those people directly, for a limited time, for the right to use it and not grant a monopoly to any one distributor. That way the incentives exist for both the creation of intellectual property and for its widest possible propagation.

Some might argue that by paying the record company, the record company will pay more to the music creators. But this is a very strange argument. First of all, it goes explicitly against the text of the Constitution, but it doesn't work. The vast majority of music, which is played on the radio in any given year, was not necessarily created that year. What is the incentive effect of paying record companies money for music, which they've already purchased from the creator? None.

When oldies stations play Sinatra and cut a check to a record company, will Old Blue Eyes venture down from heaven to cash in? No, the only '"chairman of the board" who will be helped by that royalty is the chairman of the board of Sony. The same problem applies to living singers: Incentives only affect the future, not the past. The overwhelming majority of royalty payments will be used to pay for the usage of songs, which were created before the regulations were imposed. That money will simply be transferred from radio stations to record companies, increasing the value of titles in their inventory, which they purchased long before the royalty regime was even contemplated.

No, the most direct way to incentivize the creation of music is to compensate its creators. And if those conservatives who defend the "free market" diktats of the Copyright Royalty Judges board of the Library of Congress are able to argue that they can now retroactively create a "property right" and assign it to the packager of someone else's music, that still leaves a gaping logical hole. Why does NPR get it virtually for free? Public radio and TV don't get cheeseburgers at government-mandated deep discounts. If record companies say they have a fundamental property right and a Lockean, natural liberty right in the exclusive use of the music they record, than the rule applies to any broadcast entity, which impinges on that right--even broadcast entities that enjoy a cozy relationship with Democratic congressman.

Jerry Bowyer is an economist, columnist and a CNBC contributor.
This article first appeared on


Hear, hear!
Excellent article highlighting the hypocrisy of Republican politicians. They talk about free markets and rights, but vote to ensure their own power and continued corruption by redistributing money to their corporate masters.

Democrats are guilty of corruption too, just not the same level hypocrisy as the "moral" right. And this article is about Republicans, ample reason to focus on them here.

Democrats are the masters of hypocrisy.
As recently demonstrated with their exercise of 'tolerance' and their flat out lies on raising taxes and lying about promoting socialized medicine.
Since when has any democrat believed in the content of anyone's character when compared to his race?

Who need a new bureaucracy?
Recent court actions by owners of copyrighted music have exercised their rights quite vigorously with unauthorized downloads and sharing.
It should be much easier for them to sue a radio station or the owner of several stations and the issue would be resolved without Congress.

You're only feeding the Troll

democrats invented the word hypocrisy
Democrats claim to care about the poor, then they rob the poor, and the rest of the country, blind.

I also love the way bob rails against corporations continuously. As if they were inherently evil.

Anytime a politician does supports a bill that doesn't punish private companies as much as bob wants, it's because they are "controlled by their corporate masters".

"House Orders Up Three Elite Jets":
"Last year, lawmakers excoriated the CEOs of the Big Three automakers for traveling to Washington, D.C., by private jet to attend a hearing about a possible bailout of their companies.

But apparently Congress is not philosophically averse to private air travel: At the end of July, the House approved nearly $200 million for the Air Force to buy three elite Gulfstream jets for ferrying top government officials and Members of Congress. "

Can't find $100B for F-22. Can find $200B for 3 private jets for congress
Who says that congress can't get it's priorities straight?

oops, got my M's and B's mixed up again.
Then again, in these days of trillion dollar deficits, what's a few billion between friends.

[Off Topic But GREAT] Rep Senators back Tom Harkin Amendment to Clunker Bill
ABC News' Jonathan Karl reports: The effort to inject another two billion dollars into Cash for Clunkers has hit a potential road block in the Senate that could kill the bill.

Republiicans are throwing their support behind an amendment offered by Tom Harkin, D-Iowa, that would limit clunker rebates to individuals with annual incomes of 50 K or less. With Republican support the amendment stands a good chance of passing unless the majority of Democrats, who mostly favor the amendment, vote against it.

Why is that a problem?

If any amendment passes it means the House has to take up the bill again and the House, of course, has already adjourned for its August recess.

The Democratic leadership is now scrambling to get rank- and -fille Democratic senators to vote against an amendment almost all of them favor. It would be a very tough vote.

"It does seem to be out of character for Democrats to support allowing millionaires access to borrowed money to buy cars," said Don Stewart, spokesnan for Senate Republican leader Mitch McConnell, R-Ky.


And before Bob Jones jumps in screaming how this is proof of 'Republican Obstructionism', let me re-state the fact that this little poison pill amendment was introduced by none other than Tom Harkin, one of the most left-wing, totally socialist members of the Senate and definitely NOT a Republican.

In short, one of the Dems 'own' is the one who handed over both party ********* to the other side. The Reps are only taking advantage of this total action of parliamentary and political stupidity by the Dems.

Hear my voice
You have to admit, it was pretty stupid of those CEO's to play it the way they did. Its proof they haven't suffered a bit from the humiliation of their lackluster performance. They should've picked out phat Tahoes from a local dealer and had their favorite executive drive them to DC. And utilized photo ops all the way. Win win for them. Just another reason they should be replaced - unimaginative leadership.

I see where you guys are coming from. Its hypocritical of Congress to be so harsh on the auto CEO's and turn around and treat themselves just as lavishly; all at a time of severe budget deficits, and more deficits on the horizon. Peas in a pod, CEO's and Congress.

Hey that was breaking news to me, nice work z
Thats hilarious. Stupid Democrats. Good move by Republicans, and they didn't even orchestrate it. I don't think it will have any traction though. The spigot stays open.

I don't know, maybe its better the money keep flowing now, versus it stops now and reopens in a few weeks. Either way.

Tom Harkin is ok.

Pardon me while I morph into a blonde bimbo:
"He is so totally socialist. Like, you know. Right?"

"one of the most left-wing, totally socialist members of the Senate" -- you know, only a-holes give compliments like that. He gives you a reason to feel good for a minute and you give a backhand slap for it.

I think Harkin is a pretty straight shooter. He is a liberal, but he's moderate, thoughtful.

Why should I listen to ignorant whining?
It was only stupid in the eyes of those to whom perpetual greivance has become a way of life.

Executives time is valuable.
A congressman's is not.

I agree with you he's a straight shooter...
...and I actually respect the guy for that. Too many neocommie Dems mask their intentions in conservative phrases and the Dictator in Chief, Obambi.

Harkin just says what he means on principle. And it seems that his actions more or less reflect what he says too, or he'd pull that amendment that threatens the cash for clunkers program.

How many can afford a new car...
that make Another way to cut down the numbers.

Thats what I was thinking too!
Wow MarkTheBlind, you got a head made of granite.

"It was only stupid in the eyes of those to whom perpetual greivance has become a way of life."

What, you didn't notice the beating they took for it? The fact they flew with the herd upon successive hearings?

You're probably partly right though, their egos are so big it probably didn't phase them a bit. Why would it? They weren't even phased by the fact they drove their companies into failure.

"Executives time is valuable.
A congressman's is not."

That says it all. At least you're honest about it this time. Money owns you.

I'm glad we agree on how ignorant you are.
Saying that time is money proves that money owns me?

Man, are you a total douche.

I was quoting some of your brethren at a town hall
And if I weren't your douche, you'd just go find someone else. You're just a money ****.

Look in the mirror, you will see, all roads lead to green.
And douche.

Why do you find it necessary to lie?
Is it because you know you have nothing intelligent to add?

Go to the video
The only reference of fact in my post was the subject line, and I wasn't lying. The kooks at the town hall in Penn. who were not allowed in because the room was at capacity; they were chanting it.

For a person who won't dare look in the mirror, the projection you emit is grandiose.

bob looks at himself, and can't stand what he sees
bob thinks that anyone who disagrees with him is a kook.

As he has said many times.

The people in the crowd weren't let in because all of the seats were reserved for SEIU members and Democrat activists.

bob seems to think that people outside a hall, chanting, is going to interrupt a meeting inside the hall.

Like all liberals, bob doesn't think people who he disagrees with, should be allowed to voice their opinions.

depends on the car
There are low end models, when you get them without any options, that can run as low as $12K to $15K.

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