"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."

— Alexis de Tocqueville(Democracy in America)

In the past two weeks, Americans have lost approximately $2.8 trillion in wealth, by my rough calculation. The impact of the rapid decline of the stock market far exceeds the contemplated tax increases that were included in the $4 trillion package that was being negotiated by President Obama and House Speaker Boehner. (Ironically, this loss of investment wealth impact may be more concentrated on the wealthy than the tax increases would have been. And the tax increases would have been paid over years, not weeks. But I digress…)

Precipitating this dramatic loss of wealth is paralysis in Washington D.C. Last month, the Congress battled over the best way to guide America toward a balanced budget while increasing our debt ceiling to allow the government to continue operating. After decades of deficit spending (through growth times as well as recessions), the time has come for us to begin to live within our means as a nation. To do so, we must either raise taxes, cut spending, or (most likely), both. We no longer have the luxury to decide whether to do these things; the financial markets are forcing the decision on us by calling out the decreasing creditworthiness of our nation.

A divided Congress failed to find a solution. The Republican Party, led by the sentiment of Tea Party reformers, has drawn a line in the sand stating it will not support any plan that includes new taxes. The Democrats are refusing to reduce spending on entitlements, ruling out means testing or other methods to reduce entitlement expense. Representatives from both parties fear that they will be driven from office if they forsake these core tenets of their party faithful. And because of this impasse, our nation and the world stand on the cusp of yet another financial meltdown.

In short, the right is taxing too little or the left is spending too much or both. The net effect is that we are spending a lot more as a nation than we receive in taxes, and we have been for quite some time. And while solutions exist, a deeply divided Washington has become dysfunctional as our elected representatives prioritize their own job preservation above the passage of a plan to bring our nation’s finances in order.

What do they need to create such a plan? They need air cover. The challenge for Congress is that the left must decide to cut entitlements to create a sustainable long term plan. The right must agree to tax increases. But because each begins with a base that is unwilling to accept those conditions, they can’t find middle ground. At least they can’t and still have hope of staying in office.

I propose that we must change that dynamic to return to firm financial footing. I suggest that we establish a system that creates a balanced, citizen-driven budget that starts in the middle of the road. We then allow Congress to adjust that budget, raising or lowering taxes, terminating some programs, while fully funding others, so long as they maintain the balance.

Here’s how it might work:

• Congress passes a law accepting a citizen-created plan to balance the budget by 2015 (or 2017 or some other date to be agreed upon by Congress), unless Congress should agree on an alternate plan by the start of that fiscal year.
• Citizens are directed to a budget-balancing tool like the ones offered by a few national newspapers. This one will be created by the non-partisan CBO explaining the likely impacts of spending and tax cuts or increases. Each citizen builds a balanced budget, adjusting taxes and allocating funds to programs.
• We average the tax and spending plans created by our citizens to create the “People’s Budget.”
• Congress may, after the People’s Budget has been set, amend it in any way, so long as their new plan is net-expense neutral when compared to The People’s Budget. That is, for any extra dollar they spend, they must specify how they are raising that capital (likely through specific taxes) or reallocating it from other programs.
• Based on this agreement to balance the budget, we approve debt limit increases required to fund the government between now and the implementation of the balanced budget year.
• This model will continue, with citizen budgets being set each year, one year in advance of the start of the fiscal year, giving time for Congressional adjustment/replacement with alternative plans.
• Recognizing the benefits of deficit spending during downturns to act as an economic cushion, we create an escape valve for Congress, permitting 3/5ths of both chambers to approve deficit spending.
• Acknowledging the harm that ongoing debt overhang does to the nation, debt repayment for new deficit spending must be completed within some set time (e.g. 7 years) of that deficit spending occurring. This prevents us from accumulating greater debt during surplus years.

I propose this alternative because am convinced that Alexis de Tocqueville was correct. Congress has used, and will continue to use, the Treasury to bribe the electorate to keep themselves in office. They will offer tax cuts we cannot afford. They will offer entitlements, services, and government contracts that we cannot fund. And they will do so because they want our vote.

Let’s not blame Congress. We have created personal incentive structures for them that drive this behavior. We pay them well for the time they serve in office and there are meaningful additional benefits that often come to them from the private sector in the years after they serve. All they need to do is get re-elected, so they have an incentive to please the electorate in the short term to accomplish that goal.

Let’s fix the situation. A People’s Budget, with balanced budget constraints, would change Congressional behavior. If we start with a moderate balanced budget, Congress can apply their deeper knowledge of the needs of the nation and the inner-workings of government to craft a budget that balances services and taxes appropriately, while perhaps serving us better than a People’s Budget might (since we would probably underfund certain programs while overfunding others because we do not study these things every day). With the People’s Budget as a starting place (providing air cover for their constituents), Congress would have an easier time crafting a reasonable budget that serves the nation well. 

When I close my eyes, I envision a bunch of dinosaurs standing around the old tar pit complaining that the mammals are ruining the place.  “All their scurrying and darting around, consuming food sources so quickly...it’s just got to stop!" "Yes," answers another, “they don’t understand the proper way of doing things.”

Just two decades ago, most of our news came from the newspaper delivered to our home, public radio on the commute to work, and television in the evening.  Weekly and monthly magazines provided commentary, offering “the big picture” on the most important issues of the day. Essentially, we received news from three or four editorial groups who told us what they thought we needed to know.

Today, our news consumption habits have changed. More than half of all traffic, even to the largest news sites, comes from search. There are 16.7 billion searches each month run in America (according to Comscore).  Search drives most of the traffic to news and information sites around the country and around the world. A recent survey that Gather conducted shows a new trend - a majority (68%) of young adults (18-24) search just for the information they want, meaning that they only read stories on topics that interest them. Long gone are the days when we were told what we should read – we now have easy access to whatever it is that we want to read.

Everyone knows that the media industry is struggling to keep up with the change in consumption habits. As more media outlets cease publication and traditional reporters lose their jobs, there is an angry mob of traditional media executives forming around the new media companies that are replacing them, like Gather, Demand Media, Associated Content, AOL Seed, branding us with derogatory terms like “content farms.” Many consider these sites to be the root of traditional media’s problems. The main complaint seems to be that these firms take content produced by other media outlets, add perspective and redistribute it.  This is classic misdirection.  There is a 200-year history of republishing news stories in media.  After all, only one source actually breaks the news, even though hundreds report it. The AP rips off local newspapers, the evening news rips off that day’s paper, local news outlets pull national stories from the wire and report them -- they have all historically fed off of each other. But now that new media companies are outperforming them, they’re complaining.  The real challenge is that traditional media companies have not adapted to compete in a search-driven environment.

In an interconnected world, where information travels instantly, we need to change how we think about news media.  We need to differentiate between the breaking news stories (a tiny fraction of the content shared by any news organization) and what happens in the secondary news cycle, where reporters analyze and pundits talk about those stories to help people digest the news.  We need to recognize and properly value breaking news (I suggest a method of doing so in a recent post on the Hot News Doctrine).  And we also need to understand that the secondary news cycle provides most of the information and perspective that drives millions of conversations across the country. It is this secondary news cycle where people form and share their take on the news - where moms talk about how they view the H1N1 vaccine, where parents talk about how they should tell their kids about Tiger Woods’ affairs, or where Americans decide whether oil spills should affect public policy around drilling access and methods, renewable fuel incentives, and resulting consumer energy prices.

Demand-driven media sites are designed for this new world, where more people seek news and information online instead of on the newsstand, and where they want to benefit from a diverse set of perspectives before forming their own.  Today, we adapt our content creation based on what consumers want. In the old world, media companies paid writers a salary to create content that was editorially selected.  At sites like Gather.com, we allow authors to select their topics and compensate them based on the readership they achieve with the content they create.  This method allows us to operate much more efficiently than traditional media companies, tying the cost of content creation with the value created.

Traditional media seeks to compete in the old ways, with stories published under big brands and big names. They complain about content “theft,” without identifying how much of the news in their own publications did not break there.  And they point fingers toward those new media mammals that scurry around and, increasingly, eat their lunch. Against today’s new media landscape, they would be better served if they focused that energy on adapting to compete in a search-driven world.  And for those that don’t, the good news is that there will always be room in the new world for gators and lizards.

Since mid-summer, there has been buzz surrounding a staff discussion draft published by the FTC on the state of news media. In the report, the FTC states that the intent of this discussion was, in part, to gain information for “potential policy recommendations to address the issues raised during this proceeding” which centered on the revenue model of the news media industry, how the internet has changed the profitability of news media and changes that might be made to help struggling media outlets to become more profitable.

The document introduces the concept of a “hot news doctrine”, which in essence is an extension of the Copyright Act that would “provide express statutory federal protection of short duration and limited scope to the facts reported in news articles.” The net/net of it is that the hot news doctrine would suggest that when a story breaks, the facts in the story be considered copyrighted for a specified amount of time. In essence, it would set a time stamp on exclusivity for breaking news, so that the media property that breaks a news story would be the only property that could share ANY information on this news story for a to-be-defined period of time.

Free speech has been a critical component to our democracy in the 234 years since our forefathers founded this country. It remains just as important today. The hot news doctrine is not just a bad idea, it is a dangerous one. It would create an environment where only one perspective on any given news story would be the only one that is “out there.”

Consider the Shirley Sherrod story. It provides a fantastic case study for the potential, negative impact associated with limiting short news coverage. (A quick summation is available at Wikipedia for those not familiar with this story: http://en.wikipedia.org/wiki/Resignation_of_Shirley_Sherrod)  What if Andrew Breitbart’s had been the only voice reporting on this story for a required amount of time? What if Glenn Beck’s take on this story had been the only news source for hours at a time, and no one had been able to report the balance of the facts? How long should we protect a wrong interpretation of the facts and allow it to propagate? The legislation being proposed has the potential to protect inaccurate initial reporting and rob us all of the perspective that the secondary news cycle generates.

The acceleration of information sharing that takes place today makes that even more critical. At Gather, we recently completed a study of people’s news consumption habits online – that study shows that while 42% of adults over age 24 share news online via social networks like Facebook and Twitter, greater than 90% of the 18-24 year-olds surveyed do so. As the population ages and social networks become America’s primary news sharing resource, the speed with which news is shared will continue to accelerate. The wrong information that would be protected if the hot new doctrine becomes law would have enough time to become fact in the eyes of millions of American consumers.

The way you combat with “wrong” speech is with more speech – and traditional media has apparently forgotten this with its latest lobbying effort. A better way to reward the value created by those who break news (i.e. report meaningful information not previously published) would be to leverage the secondary news cycle to the benefit of the original news reporter. If the hundreds of stories that follow and create perspective in the secondary news cycle each linked back to the original piece, this would drive traffic and improve PageRank and SocialRank for the original news source. The first source to report the news would benefit from immediate traffic and better search placement over time.

Instead of restricting free speech, the FTC should consider making those citations mandatory, so that media outlets and bloggers reporting breaking news see a tangible benefit from their investment in investigative journalism. In this model, that benefit comes from increasing the reporting, speech, and conversation that follows their original news report, not limiting it. Let’s start a conversation about ways to solve the media crisis that honor the core value that established the Fourth Pillar, rather than undermining it: free speech and its critical role in informing the public.