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Critics Say Senate Bill to Rescue Newspapers May Invite Government Control of News

March 17: A newspaper vendor grabs multiple copies of the final edition of the Seattle Post-Intelligencer in downtown Seattle. The edition ended a heritage stretching back nearly 146 years, when the Seattle Gazette, the P-I's predecessor, began publishing in December 1863. (AP photo)

Call it the opening salvo of the broadsheet bailout. Castaway columnists and struggling stringers might be America's next charity case if Sen. Benjamin Cardin has his way.

The Maryland Democrat proposed a bill Tuesday that would rewrite tax law to allow newspapers to operate as tax-exempt nonprofit organizations, just as long as they don't make official endorsements of political candidates.

But some media analysts say that could create government control of the news.

Click here to see the bill.

Cardin says his bill is a needed step to make sure that small newspapers across the country stay afloat, as scores are expected to close their doors and stop their presses for good.

"We are losing our newspaper industry," said Cardin. "The economy has caused an immediate problem, but the business model for newspapers, based on circulation and advertising revenue, is broken, and that is a real tragedy for communities across the nation and for our democracy."

But critics warn that if papers become tax-exempt nonprofits, they will be ponying up more than the money's worth: they'll be giving up their independence to stay in the government's good graces.

"It would de-claw participating newspapers, which couldn't endorse candidates or freely question the party in power," said Ken McIntyre, a media and public policy fellow at the conservative Heritage Foundation.

"Reporters and editors are supposed to be wary skeptics of politicians and bureaucrats on behalf of readers -- not beholden to the government's favor."

The IRS allows 501(c)(3) nonprofits to operate freely as long as they don't violate certain rules regarding political activity. That could spell trouble for editorial pages, which Cardin does not mention in his legislation.

The IRS prohibits nonprofits from any bias that would "favor one candidate over another ... oppose a candidate in some manner; or ... have the effect of favoring a candidate or group of candidates."

Even front-page news could come under scrutiny, said James Glassman, a longtime newspaper and magazine publisher who was recently chairman of the Broadcasting Board of Governors.

"Tax rules prohibit endorsements, but there are ways to promote specific candidates outside the editorial pages," he told FOXNews.com. "You will almost certainly have government tax officials examining the content of papers for telltale signs of bias and advocacy. A bad situation."

But others say Cardin's bill is a vital first move to save a crumbling industry that employs tens of thousands and has been shedding jobs with celerity.

"It could work," said Robert Lang, CEO of the Mary Elizabeth & Gordon B. Mannweiler Foundation, who has developed a separate hybrid model for newspapers that would allow them to accept funding but also turn a profit. While the Cardin model is not perfect, he said, "the important part is that it gets the dialogue going."

The Tribune Company, which owns many of the nation's leading papers, including the Los Angeles Times and Chicago Tribune, filed for bankruptcy protection in December. Many more newspapers have closed their doors, like the Rocky Mountain News, or have ended their print editions, like the Seattle Post-Intelligencer.

"If we're not careful, there are going to be 40,000 journalists out of work and we're not going to be able to put them back to work," said Lang. "If we let the papers go, we cause a problem."

Tax relief or no, many major newspapers face debts that only a full government bailout would be able to confront. The New York Times was $1.1 billion in the red last year, and has literally been selling the floor out from under itself -- 21 floors, to be exact, in its Manhattan headquarters -- to help recoup its losses.

Cardin's office says the bill is not intended to heal the wounds of massive newspaper conglomerates, which would have a hard time becoming solvent even with the relaxed tax code. Large papers and news chains also have owners and shareholders who might be reluctant to turn the business into a nonprofit.

"This may not be the optimal choice for some major newspapers or corporate media chains," said Cardin, "but it should be an option for many newspapers that are struggling to stay afloat."

Cardin imagines newspapers working like National Public Radio and the Public Broadcasting Service, which accept federal funding but maintain a degree of independence from the government.

"It works pretty well for NPR, which is one of the top journalistic organizations in the country," said Mitchell Stevens, professor of media history at NYU Journalism School. Stevens said that as long as newspapers are not asked to censor their political coverage, the idea could help address the newspaper crisis.

So far, Cardin's move may have more friends in the media than in Congress. No other senators have come along to co-sponsor the bill -- which some longtime analysts say is a good thing.

"Since the Bill of Rights was passed, the government has never had a voice in the press. This is a very dangerous provision," said Alan Mutter, who blogs at Reflections of a Newsosaur. "It's very unhealthy."

Mutter said that Cardin's bill won't save newspapers in the short or long term, and that papers should focus instead on how to make money again by offering better products that they can charge for, instead of giving away all their content for free online.

As media doctors argue the merits of different proposals to save newspapers, it is universally acknowledged how deep the trouble runs.

Newspapers are being "cannibalized" by blogs and online news aggregators, said Lang, who doesn't want to see papers go the way of the dinosaur -- or the disc jockey.

"There's nobody left on the radio," Lang told FOXNews.com. "Even the DJs are going to be robots pretty soon."