Market Monday: There's More Where That Came From

This week, stories that continued unflattering trends in unadvertised ways...
 
JUMP CUT: In a slice heard round the art world, Donald Trump cut all funding to the National Endowment for the Arts from his preliminary 2017 federal budget. The proposal sparked widespread outrage, disbelief, and depression among observers both inside and outside the industry. According to Sopan Deb, Trump is the first commander in chief to suggest zeroing out the NEA since Lyndon Johnson signed the endowment into existence in 1965, leading many observers to label the move an(other) appalling break from American values for his nascent administration.
 
But while calling for the abolition of the NEA is extreme, I would argue that it's not the sudden 180 many in the arts and media are portraying it to be. It's not even as simple as a return to the funding threats posed during the culture wars of the 1980s and 90s. Since I’m a maniac, here’s a chart I built on Saturday night from data compiled by the Congressional Budget Office, US Government Printing Office, and Open Government initiative. It tracks the annual size of the NEA as a percentage of total federal spending over the past 20 years.

The data reveal two important takeaways––one of them widely acknowledged in the coverage of Trump’s fiscal hatchet-wielding, one of them not. The well-publicized point is that the NEA comprises only a sliver of the annual federal budget. Its two-decade apex came all the way back in 1996, when it comprised a still-paltry 0.064 percent of government spending. The under-reported point, though, is that the American executive and legislative branches—and by extension, the American voting public at large—have been steadily devaluing the arts year after year for at least a generation. The NEA constituted a sub-microscopic 0.036 percent of the federal budget in 2016. If we compare that figure to the just-mentioned 0.064 percent in 1996, the drop isn't 0.028 percent. It's 44 percent.

According to the trend line, then, Trump isn’t flipping the script by proposing the end of the NEA. Assuming the long-running trend holds, he’s just jump-cutting ahead to the plot’s logical endpoint. And for Americans like myself, that fact raises far fewer difficult questions about this administration than about where our priorities as a culture have been for the past 20+ years. [The New York Times]

SHINY BUT HOLLOW: On Friday, Alexis Fournol and Victoria Stapley-Brown revealed an unexpected fact about the record-setting Jeff Koons retrospective held by the Pompidou Center in 2014-15: Despite drawing more visitors than any exhibition by a living artist in the institution's history, the show only managed to break even.

How did the writers uncover this surprise? By digging through the judicial filings in last week's preposterous copyright ruling against the artist and the Pompidou concerning the exhibition's inclusion of the 1988 Koons sculpture "Naked." Court documents noted that €1.25M of the show's €2.92M in combined gate revenue and catalog sales were devoured in advance by aloan fee paid to the Whitney, the retrospective's original venue. That's a 42-percent bite out of the bottom line. A Pompidou spokesman later verified that the exhibition was indeed revenue neutral, with the rest of the returns apparently being canceled out by the brutal overhead costs of any major international exhibition: packing/crating, shipping, insurance, installation, marketing, catalog production, and more. Put all those expenses together, and suddenly the show's 650,045 paying visitors formed the same long straight line in the Pompidou's accounting spreadsheet as in its galleries.

Much as I would have loved to parse through the public tax filings of major museums to see how many other blockbuster exhibitions reward their hosts with a piping-hot nothing burger, even I have my limits in a given week. Still, we can find an easy analogue for the Pompidou's Koons-related revenue vacuum if we look to the auction sector, where one of the dominant themes of this young century has been the shrinking profit margins on headline-making consignments. In many cases, competition-wary houses have felt it necessary to offer sellers such generous guarantees, reduced commissions, and other bonuses that even record hammer prices can't bust them out of the red. More broadly, then, it's fair to say that the price of sourcing star brands in our current era can now easily climb so high that the payoff never makes it back down the mountain. The Pompidou's results from the Jeff Koons experience simply clarify that the same principle now applies in the nonprofit sector, too. Exhibitor beware. [The Art Newspaper]

RICH COLLECTION, POOR TASTE: Finally this week: In the wake of director Thomas Campbell's recent resignation, a little more sunlight landed on the Met's ongoing fiscal debacle, and the improved visibility did the leadership no favors. By sorting through the Met's 2015 federal tax returns, Isabel Vincent and Melissa Klein revealed that the institution "doled out hefty pay raises and six-figure bonuses to top executives despite a looming deficit that threatened to reach $40M." Tallying only the select bonuses explicitly noted in their story, the Met transferred a congratulatory total of $1.6M to just four members of its brass, crowned by $624,828 to Senior VP and chief investment officer Suzanne Bremer. Had the institution put those bonuses––many of which were even meatier than their 2014 versions, by the way––toward just its $8.3M deficit for fiscal year 2015, the Met could have filled in nearly 20 percent of the hole it then faced. And the recovery would only have been more robust if decision-makers had pitched in some of the salary increases, housing allowances, and other extras given to them during the same period.

In fairness, it's not as if the Met is the only employer in the country, let alone the world, content to shovel cash out the window to its executives while the building burns below. Wall Street infamously paid millions in bonuses during the Great Recession, even in cases where the awarding banks had just been bailed out by taxpayers. The Harvard Business Review also recently made the case that golden parachutes have been getting ever bigger, more numerous, and more leniently distributed by corporate America since the 1980s.

But I would argue that the parallels are the point here. By adopting––or worse, maintaining––a similar compensation culture as too-big-to-fail banks and Fortune 500 companies, institutions like the Met create an incentive structure that attracts and rewards executives no matter their performance. I think that's bad business in the for-profit sector, too. But it's especially troubling in the NONPROFIT sector, where the entire mandate (on paper, at least) is to serve the public good, largely with public funds. So as much as I evangelize about the industry's pressing need to shape up and behave more professionally, this is one instance where it would be better for everyone if the arts stayed a permanent exception to the rule. [The New York Post]

That’s all for this edition. Til next time, remember: The more things change, the more they stay the same.