By William Neikirk,Chicago Tribune

WASHINGTON – While considering slashes in Medicaid and student loan programs, Congress is about to set aside up to $3 billion to help millions of Americans with old non-digital television sets buy converter boxes.

Each converter box is expected to cost the government $40 to $60, but supporters of the legislation don’t want to take any chances of being accused of denying Americans their right to a TV picture when broadcasting goes all digital.

Depending on how much money is allocated, the funding would go to purchase as many as 60 million “set-top” electronic boxes to make it possible for old, broadcast-only TV sets to continue receiving a picture when the broadcasting industry converts to all-digital transmission. Conservative groups have criticized the proposed expenditure as a giveaway, but it has received less attention because it is included in deficit-reduction legislation that has generated an uproar in the House for its spending reductions in programs affecting the poor, such as Medicaid and food stamps.

The GOP leadership yanked the budget bill from the floor on Thursday because it had failed to gather enough votes to pass it, and its outlook is now uncertain. Some of the House’s spending cuts could be killed to make the bill more palatable, but there is no indication that the television provision is in jeopardy. The Senate has already passed its budget measure.

James Gatusso, a technology expert at the Heritage Foundation, called it “a subsidy for old TV sets,” and not the wisest use of federal money at a time of large deficits.

Robert Bixby, executive director of the Concord Coalition, a budget-watchdog group, said that helping poor people buy converter boxes appears justified, but he added: “When the government subsidizes anything, it usually goes to people who don’t need it. I suspect that will be the case here.”

The money would be doled out without regard to income, though families that have broadcast-only sets tend to be poorer, industry officials said.

Both the House and Senate bills would require the industry to convert to all-digital broadcasting by a specific date – on Dec. 31, 2008, in the House bill and April 7, 2009, in the Senate measure. Old “analog” or non-digital sets could not receive a picture unless they are hooked to a cable or satellite system.

These provisions created some controversy, but nowhere near the uproar over proposed cuts in Medicaid, food stamps and student loan programs as well as tax cuts. One reason is that the government would take over the broadcasting spectrum and auction it off to private companies, raising $10 billion to $28 billion.

Rather than risk an uproar by millions of Americans, including an estimated 21 million households that have only non-digital sets, lawmakers decided to pre-empt the complaints with a purchase plan similar to one tried in Berlin when it recently switched to all-digital.

“The potential for consumer outrage over one day waking up and finding out that you are simply incapable of receiving local news, information about a hurricane or tornado alert, or entertainment programs, is enormous,” said Dennis Wharton, a spokesman for the National Association of Broadcasters.

Some conservative groups have criticized the proposed expenditure as excessive and unnecessary, complaining that it subsidizes old technology and amounts to little more than a government giveaway.

“I think it’s way too much,” said Gatusso, the Heritage Foundation analyst. He said neither bill requires people to reveal whether they have a cable or satellite hookup, and that subsidies would go to people who have extra broadcast-only TVs in bedrooms or dens.

“It certainly has elements of paying a bribe, but oftentimes paying a bribe is the better part of deficit reduction,” countered Barry Bosworth, a Brookings Institution economist. “By making this payment, they (Congress) will free up a spectrum that can be sold for money.”

There is big money to be made in the transition from analog to digital television, Gatusso said, adding that many companies have their eye on buying some of the spectrum so they can offer new wireless and broadband services. That will be the biggest corporate payoff, he said.

But two electronics firms, LG Electronics Inc. (which has Zenith as a subsidiary) and Thomson SA have been selected by the broadcasting industry to develop “high-quality, low-cost” prototype electronic boxes that can be used as prototypes for manufacturers. How much the companies would receive for developing such blueprints was not disclosed.

Congress has been debating the conversion to all-digital broadcasting for years, and now the industry offers both digital and analog signals. But GOP leaders decided this year that it was time to set a hard date for the conversion, and then soften the financial impact by buying the converters for those who still have analog sets.

The House plan authorizes spending $990 million so the government can issue $40 coupons (a $10 co-pay would be required) to buy converter boxes, while the Senate proposal authorizes $3 billion for a purchasing program with unspecified details as to how the money would be distributed. The House bill would limit the number of coupons per household to two.

Wharton said there are 73 million non-digital TV sets in the United States not hooked to cable or satellite. About 45 million of these are in 21 million households with no digital or satellite connections, he said, and many of those are low-income people. But Congress rejected limiting the subsidy to low-income families on grounds that it would be too difficult to administer.

Gatusso said the cost estimate has grown dramatically in the past year. When such legislation was considered a year ago, the estimate for buying converter boxes was as low as $100 million to $200 million, only to jump as high as $3 billion in the Senate bill. “It is just astonishing,” he said. “It really is a classic example of foot-in-the-door spending.”

But Bosworth wasn’t as upset at the spending. “I would argue that it is a small price to pay,” he said, adding that one of the hallmarks of American government is that it “tries to protect the losers instead of picking winners.”

Rep. Mark Kirk, R-Ill., one of the GOP moderates who protested provisions in the deficit-reduction act, had high praise for the television subsidy. “The economic development aspects of this bill are vastly understated,” he said.

The spectrum now in the hands of broadcasters will help launch a new wave of wireless and broadband businesses that enable the United States to better compete with Asia, he said.

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