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Eye on the News

Jared Meyer
Who Should Pay for the Arts?
Private support beats public subsidies.
30 January 2014

Should the federal government subsidize the arts? Dancer Nora Younkin thinks so. In the Huffington Post recently, she argued that the societal benefits of arts such as dance are not only cultural and educational, but economic as well. “It is well documented that dance and the arts generate revenue for local economies,” she wrote. “The performing arts also create jobs. And I don’t mean just the jobs of dancemakers and performers. The technical crew, the artistic collaborators, the venues, the technical equipment rentals or purchases, the restaurant down the street from the venue, even the taxi driver that got you to a performance. Those are all real jobs from which people take home a paycheck and go on to spend buying groceries or clothes.” But assuming that all federal funding reaches struggling artists—and that art subsidies indeed “trickle down” to a local economy—is a mistake.

Government cannot create economic value out of thin air. Federal funding for the arts is not an economic gain, but rather a forced reallocation of economic productivity—from private spending to public spending. Subsidies add nothing to economic output on the whole—on the contrary, they detract from it, through transaction costs and inefficiencies. So when Younkin claims that the arts benefit local economies by generating tax revenue and creating jobs, she’s only looking at the immediate, obvious effects of subsidies: money in the artists’ pockets that can be spent buying, say, groceries and clothes. She fails to account for where the money comes from in the first place: namely, taxes. She cites a recent Arts & Economic Prosperity report that claims the arts created $135 billion in economic activity, $22.3 billion in tax revenue, and 4 million jobs in the United States in 2010. She attributes this “damn good return on investment” to the $168 million appropriated to the National Endowment for the Arts that year. But in addition to federal government funding, private sources donated more than $4.5 billion to the arts in 2010. It’s absurd to credit all those economic gains to the less than 5 percent of financial arts support from federal subsidies.

Furthermore, research by Americans for the Arts has shown that increased public funding does not mean greater public participation in the arts. Even the Arts & Economic Prosperity report states, “As people lost their jobs and houses, arts attendance—like tourism, attendance to sporting events, and leisure travel—declined as well.” To increase consumer participation in the arts, the government must first address the tepid economic recovery. Otherwise, there will be no audience even for well-funded artists.

Federal funding for the arts rose an inflation-adjusted 24 percent from 2005 to 2010. Yet, the immediate economic effects associated with the arts fell by an inflation-adjusted 10 percent over that period, due to the financial crisis and ensuing recession. A growing, prosperous private sector is the lifeblood of artistic expression. The arts cannot hope to be stimulated in long-lasting, meaningful ways without donations from private individuals. Many successful businesspeople are passionate supporters of the arts. With donations totaling $50 million, private equity financer David Rubenstein is the main supporter of the Kennedy Center’s expansion project. Last year, billionaire David Koch gave $65 million to the Metropolitan Museum of Art. He also donated $100 million to the American Ballet Theater in 2008.

While these are undoubtedly large gifts, in 2011, donors like Rubinstein and Koch—among the top 5 percent of income earners—paid an average effective federal income tax rate of over 20 percent. If that rate were lower, imagine how much more these generous individuals could afford to donate to the arts. Instead of penalizing the productivity of those most likely to support the arts by taxing their income and redistributing it, the federal government should spur economic growth so that more people can afford to donate to arts organizations.

Younkin’s other concern is that poor people, especially the young, won’t be able to afford admission to dance productions, plays, exhibits, and concerts. But the private foundations and individuals that sponsor museums, galleries, and theaters make many efforts to engage the whole community. The clothing outlet Uniqlo sponsors free admission Friday nights at New York’s Museum of Modern Art. Broadway theaters have discounted ticket prices for students and those under age 35. The Washington Opera gives free performances at Nationals Park. And so on.

Younkin somehow fails to see that opposing federal funding for an industry isn’t the same thing as opposing that industry. Many critics of federal arts funding have high regard for art and artists, but they understand the economics of subsidies and believe artistic patronage should be voluntary. Just because art isn’t subsidized doesn’t mean that it lacks support.

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