The governor of New York, Andrew Cuomo, has offered to bail out Daily News with State funds , which announced that if would be laying off half its editorial staff just hours before. It's no surprise to hear of yet another archaic newspaper company threatened with insolvency; after all, more advanced, user-friendly, and affordable options have presented themselves to the consumer. What is surprising, however, is that the State is willing to provide assistance in the form of a bailout to a member of a dying breed.

The Nature of Bailouts

A bailout is generally presented to a company when said company finds itself unable to compete. The troubled company may be inefficient as compared to other companies within the same industry, or the entire industry may be inefficient as compared to a new and rising one. For example, the horse and buggy industry being replaced by the car industry.

Of course, in either case, offering a bailout would be nonsensical. Inefficient companies should be let to fail, so the resources they command can be put to better use. Why subsidize the horse and buggy industry so that it can compete with the car industry? Why reward an inefficient farmer so he can remain in competition with a much more efficient one?

The Proponents of Bailouts

It's clear that bailouts serve no legitimate purpose in any economy. So why are bailouts so heavily pushed for and applied to different industries? The answer is simple: special interests plead for public acceptance.

These special interests most usually manifest themselves as politicians receiving "influence" from the companies at threat of failure. They make dramatic claims as they argue that jobs will be lost, or perhaps a wider economic crisis may occur as a result of reduced production of a given good within a given industry.

In this case, the special interest appears to be a lone bureaucrat with no financial ties to the company at threat of insolvency. He makes two arguments:

Jobs will be lost!

The free press is at stake!

Jobs

Cuomo is certainly correct that jobs will be lost. After all, that is an inherent result of layoffs. The significance of this, however, is little. The Daily News is part of an industry that is suffering as a result of the rising, competing industry of digital media. In other words, the Daily News is using up resources in a less efficient way than its digital competition. So, it is within the best interest of the economy that it fail and allow its resources to be commanded by another industry in which they can be efficiently utilized.

Its current laborers will have little trouble finding new jobs, especially since the digital media industry requires workers with similar experience as their own. Matter of fact, the digital media industry will likely perform that much better, as human capital is transferred to it from where it used to be inefficiently utilized. The transition, however, may look ugly at first, as laborers find themselves unemployed. The important thing to note is that this transition is merely temporary, and a required step in freeing up human capital for better uses.

Free press

If Cuomo's plea is to be taken seriously, perhaps his latter argument is the one in which we should pay attention to. He makes a point here; journalistic integrity has been teetering on the edge of reality, as the quality of journalistic endeavors has largely degraded with the increased adoption of digital media formats. Newspaper companies remain to be one of the only sources of quality journalism, which is constantly cited and referenced by larger media companies.

What's important here is that newspapers are not the only source of quality reporting; local news channels carry a lot of the grassroots weight. They do an excellent job in keeping local governments in check.

Overall, journalistic integrity may suffer while newspaper companies disappear into obscurity. However, the vacuum left by these companies will eventually be filled by local news channels and the better practices adopted by digital media companies. This may take time, but it will surely happen. The freedom of press is not dancing on the precipice of failure with the Daily News .

Taxpayers

On top of all the previous complications mentioned is the largest of them all: the cost to the taxpayer. After all, when Cuomo assures state assistance, what he's really offering is that the taxpayer pick up the tab. His arguments that jobs and free press will be preserved are applied to his assertion that it's within the taxpayer's best interest to subsidize a failing company.

From what has been previously explained, we know that such a bailout does nothing for the taxpayer. Matter of fact, it only stands to inflict severe economic impacts. The same dollars that would be used to subsidize the Daily News can no longer be spent on products that stimulate actually productive companies that would utilize such funds to expand and create more wealth. Instead, they are used to keep a dying company afloat. When comparing these two realities—the one in which the taxpayer subsidizes a dying company and the one in which the taxpayer is free to spend the same funds how he chooses—a net loss is observed; wealth is effectively destroyed.

Bureaucratic Bias

Andrew Cuomo claims that his father bailed out the New York Post, even though their interests were opposite each other, in the name of free press:

My father, as Governor, came to the aid of the New York Post when it was facing difficult financial times. Even though the Post represented an opposing active partisan interest, my father understood the value of a robust free press. So do I.