GDP-to-Debt ratio by government locale
I post a bit about government film subsidies. It’s a major reason VFX work goes to places like New Mexico, Canada, UK, and other locations. I’ve also written that US trade law experts question the legality of international subsidies for US studios.
Supporters often point out that these subsidies lead to greater tax revenue and jobs for the people but if that is so true then why are governors in Michigan and New Mexico trying to get rid of them? Even other states like Georgia and Pennsylvania are starting to face the music. Michael Kinsley of the LA Times thinks the idea behind them is totally absurd:
The appeal of the movie industry to beleaguered state treasurers, in addition to its glamour, is its mobility. There are no huge factories. Regardless of where the movie is supposedly set, it can be shot almost anywhere. And it will employ locals and spend money.
But mobility giveth and mobility taketh away. Pit the states against one another and the subsidies will inevitably become more generous and less effective at the same time.
I’ve said so often that the danger for vfx markets to rely on subsidies is that they are the first to get cut and that’s exactly what is happening. For New Mexico and Michigan, the choice is either to cut education and healthcare for the poor or cut the subsidy so compromises are being made.
the European Union wants to clamp down on the local 20% tax break designed to tempt Hollywood to UK shores. It’s all part of the EU’s drive to stamp out competition between European countries in favour of the single market.
Funny, I get labelled a racist for calling international subsidies unfair and illegal, yet neighboring European countries are also having issues with them. The last time a group of Brits were boasting how great the UK film industry was doing it was the UK Film Council and they got the axe the very next month.
Many point out that California is in too much deep shit to provide subsidies but lets look at some numbers.
California’s Problems Are As Bad As Everyone Else
In 2009, California had a budget deficit of a whopping $135 Billion! California might as well commit suicide right?
Well if you had $135,000 in credit card debt you would probably do the same. However, what if you had an income of $1.9 Million? Not so bad right?
The debt-to-GDP ratio is usually the best way to measure a country or state’s fiscal health. While California has a budget deficit of $135 billion, it’s GDP was $1.9 Trillion:
Now the deficit is nothing to sneeze at. It needs to be taken care of because it grows every year. So there has to be a tightening of the waste.
New Mexico Problems
This is the reason why New Mexico is discussing cuts to it’s film subsidy. In 2009, New Mexico had a deficit of $8 billion and a GDP of $76 billion.
That’s a debt-to-GDP ratio of 11%: That’s higher than California’s.
What about the UK?
It offers lucrative film subsidies to lure vfx work from US studios. They have a comparable GDP with California of £1.4 Trillion. Their deficit is £950 Billion!
What about British Columbia?
Of course no discussion about film subsidies is complete without the city of Vancouver and it’s province of British Columbia which boasts one of the largest film subsidies in the world. It’s 2009 GDP was $188 billion. It’s deficit? $42 billion.
Just to give you a comparison of how hefty the debt burden is on a per person basis, California has the highest in the country with $1805 debt per person. British Columbia’s is $9401 per person!!
It’s no surprise that current projections of a $53 billion deficit are an alarming cause of concern.
The Subsidies Will Not Last
I’ve said that in the VFX industry, if you live by the subsidy, you die by the subsidy. New Mexico’s film subsidy program was THE model for how it should work and it’s under attack. Now Louisiana seems to be the place to go. What will they do differently? With all the millions spent to lure production from California studios none of it has stayed without continued subsidization. Yet California still had gravitational pull. It still continues to do a lot of VFX work. At the end of the day it’s about quality and talent. Much of that talent resides here.
[Add on: A commenter pointer out that some of the number I’m using confuses annual deficit with total debt. I apologize and will edit it post and update the numbers to get this right.]