The Medias Top 10 Economic Myths of 2005
The Media’s Top 10 Economic Myths of 2005
“So people at home right now are saying, ‘Economic slowdown? How slow is it going to go?’ Are we headed for another recession?”
– Anchor John Roberts, “CBS Evening News,” April 15, 2005
The Gallup Poll reported in September that “half of Americans say they trust the mass media to report the news fully, accurately, and fairly.” Those three words – fully, accurately, fairly – each communicate different ways the media can distort the news. They can leave out pertinent information; they can report false information; and they can tilt coverage toward one side or the other. Coverage of Hurricane Katrina’s death toll on the Gulf Coast, now proven to have been exaggerated and in some cases fabricated from hearsay, was one grave example of the media’s failure in 2005.
The Media Research Center’s Business & Media Institute spent 2005 tracking news reporting on business and economic issues and compiled a list of the most common and most egregious errors. They ran the gamut from omissions to exaggerations and plain misinformation. We have visions of better coverage dancing in our heads for 2006.
10. America should follow French fashion in business
Media Myth: France’s short work week, benefits and loads of vacation time made it a workers’ paradise.
Cut to 2005, when CBS’s “60 Minutes” continued the praise for French leisure. Lara Logan described working (or not) in that country on the June 29 show: “Full-time workers in France are guaranteed at least five weeks’ vacation, guaranteed those long, lazy days in the sun and leisurely lunches in outdoor cafes. On top of the five weeks, there are another dozen public holidays and a maximum 35-hour work week, with no paid overtime allowed.”
Amidst the long and positive report on France’s relaxed work force, Logan did slip in that “the 35-hour work week, meant to create new jobs, hardly made a dent in unemployment, which still stands at over 10 percent – nearly double the U.S. rate.”
Tell the Truth: With U.S. unemployment at 5 percent, France’s was exactly double that rate. Logan mentioned in her June report that “Marchand says money isn’t the top priority here. Maybe that’s because in France, things like health care and education are virtually free.” It was easy enough to mention that without explaining how that’s paid for – as Lauer alluded – or examining any of the societal consequences.
As the Los Angeles Times reported on Oct. 17, 2005, France’s “massive national bureaucracy strains to preserve costly health and welfare programs, entrenched labor protections and generous perks.” The Wall Street Journal reported on Feb. 9, 2005, that “since the workweek was capped at 35 hours in 1999, France’s productivity per capita has decreased 4.3% … over the same period, productivity per capita has risen 5% in the United Kingdom and 6% in the U.S.”
And that’s just the tip of the iceberg. Three weeks of riots, arson and civil unrest showed that the bureaucratic socialist system is anything but paradise.
9. We must raise taxes to cope with ballooning deficits
Media Myth: Spending for hurricane recovery and Iraq is driving the U.S. deficit out of control. The only answer is to raise taxes to pay for it all.
The media’s favorite suggested tax increase was condemning the Bush tax cuts. NBC’s Tim Russert fantasized about their end on the Sept. 25, 2005, “Meet the Press”: “The president’s been very resistant to talk about tax cuts or certainly the repeal of them. Is there any possibility he would say, ‘We have these massive deficits. I believe in the war in Iraq. It’s going to bring democracy to the Middle East. I believe in rebuilding New Orleans and helping the people of Texas. But to the people in my income bracket, I have to freeze the tax cut I had planned.’?”
Tell the Truth: The media regularly distorted tax issues, treating the federal deficit as though it is inherently bad. In reality, it is a fact of federal accounting, and when viewed in context, the 2005 deficit came in at just 2.6 percent of U.S. Gross Domestic Product (GDP). By comparison, the deficit in 1985 amounted to 5.1 percent of GDP.
A repeated media call for the repeal of tax cuts ignored the economic boom America has enjoyed since the cuts took effect in 2003. GDP has grown by more than 3 percent for 10 straight quarters, the unemployment rate has fallen to 5.0 percent, and job growth has been positive for 30 consecutive months. Add to that the fact that government revenue grew and the deficit decreased by $96 billion from fiscal year 2004 to FY 2005. But the media refused to give credit to the tax cuts – in part, because they refused to acknowledge that the economy is on solid footing.
8. Global warming is causing stronger hurricanes
Media Myth: Thanks to the U.S. rejection of the Kyoto treaty, global warming is on the rise and warmer oceans are spawning deadlier hurricanes than ever.
Tell the Truth: Global warming is not causing stronger hurricanes. Scientists, including the hurricane experts at the National Oceanic and Atmospheric Administration, have said it many times, yet broadcasters continued to suggest a connection. The New York Times reported the facts in Kenneth Chang’s Aug. 30, 2005, article: “Because hurricanes form over warm ocean water, it is easy to assume that the recent rise in their number and ferocity is because of global warming. But that is not the case, scientists say. Instead, the severity of hurricane seasons changes with cycles of temperatures of several decades in the Atlantic Ocean.”
And claims that this was the “deadliest” season on record were far off base. According to NOAA, past hurricanes have killed more than 8,000 people in the United States and possibly more than 20,000 in the eastern Caribbean. Although the death toll for Hurricane Katrina stands at the tragic number of more than 1,000, it is false to say 2005 was the “deadliest” season.
7. America is cheap with its foreign aid
Media Myth: At least our good-hearted celebrities understand that compared to other nations, America doesn’t give much to help the world’s poor.
Reporter Ron Allen took the same attitude three days earlier on the same newscast: “Critics say smaller European countries still spend a higher percentage of their income helping Africa.” To emphasize that point, Allen interviewed Patrick Watt of Actionaid UK, a British development organization that later came out and criticized even the huge increase in funding that resulted from the G-8 Summit. Unsurprisingly, Watt downplayed U.S. contributions: “I don’t think it’s as major as perhaps the U.S. administration have … have spun it as being. It’s, it’s quite small money in real terms.”
Tell the Truth: The figure used to criticize U.S. giving is the amount of government aid as a share of GDP. Of course, the government can’t dictate where GDP goes, because it’s not all government revenue. In real dollars, U.S. contributions outpace the rest of the world. And that’s only taxpayer-funded foreign aid money, excluding charitable assistance and military aid.
Media reports ignored the billions given by private U.S. donors. A June 2005 report from the Hudson Institute revealed that private U.S. giving to developing countries totaled at least $62 billion in 2003. That was three-and-a-half times the total of Official Development Assistance the U.S. government handed out that year.
6. Hurricane Katrina will send the economy into a tailspin
Media Myth: With homes and businesses destroyed and the nation’s oil supply hit, the United States will surely hemorrhage jobs and head toward a huge downturn in Katrina’s wake.
Such was the solemn prediction of Nell Henderson in the Sept. 3, 2005, Washington Post: “Hurricane Katrina, by forcing an exodus of workers and families from New Orleans and surrounding areas, appears likely to rank alongside Sept. 11, 2001, and the Arab oil embargo of 1973 as one of the nation's most serious and sudden economic shocks – particularly in terms of job losses – in recent memory.”
Likewise, Joel Havemann of the Los Angeles Times reported the same day that “Hurricane Katrina will probably end the economy's 27-month streak of job gains. Katrina's effects – not only on the Gulf Coast regions where it struck but also on the national economy via higher energy prices and disrupted ports – could result in the loss of as many as 500,000 jobs in September, analysts said.”
Tell the Truth: Those analysts, and media reports, were too quick to predict economic catastrophe. As with many gloomy prophecies of 2005, Katrina’s epic job losses did not come true. The 35,000 lost jobs initially reported for September were later revised upward into positive job creation – though the media said hundreds of thousands would be lost immediately. The “streak” of positive job growth now stands at 30 straight months even as the Gulf region continues to struggle.
GDP also continued to grow, reaching the surprisingly strong rate of 4.3 percent in the third quarter. Unemployment held steady despite the displacement of thousands of workers from the storm-ravaged area. And the nation’s oil supply recovered far more quickly than expected. The price of regular gas, which spiked to an average of $3.05 per gallon following Katrina, began falling again and is down to $2.18 as of December 14.
5. The housing bubble is about to burst
Media Myth: The housing market, white-hot for so long, is about to go bust and take you and your home’s value with it.
The media have been predicting this one for four years. Since 2001, reporters have been forecasting a crash in house prices and harm to the economy. On the May 19, 2005, edition of ABC’s “World News Tonight,” Elizabeth Vargas declared: “The run up in housing prices is now beginning to look something like the boom in Internet stocks, and we know what happened there.” Betsy Stark added, “Elizabeth, housing prices do seem to be defying gravity the same way stocks did not so long ago. And the Federal Reserve is watching with an increasingly worried eye. If the housing boom goes bust, there could be risks to the entire economy.”
Tell the Truth: An investment “bubble” occurs when an asset appreciates by extraordinary percentages for a short period of time, culminating in a rapid decline that wipes away most of the gains. A perfect example was the Nasdaq stock index, which went from roughly 1,400 in October 1998 to more than 5,000 in March 2000 (a 250-percent gain in less than 18 months), only to fall back to about 1,400 by October 2001 (a 70-percent decline in about 18 months). But the housing market is less liquid and prices don’t usually change quickly like stocks do.
The bottom line is, speculators are ones most hurt if property values drop. Those who have invested in homes to live in still have their investment. And when prices go down, it’s good news for those who want to buy. Economists including Federal Reserve Chairman Alan Greenspan have assured the public that a national bubble doesn’t exist – local markets are where the ups and downs occur.
4. Americans are dying to be fat
Media Myth: America is suffering from an obesity epidemic, so we’ve got to keep everyone away from foods and beverages with calories. This has become the nation’s No. 1 health problem and we’re dying at the rate of 400,000 a year.
The media have become obsessed with America’s weight. Whether it’s children drinking too much soda and eating sugary breakfast cereals or adults eating one too many Big Macs, journalists weren’t far behind with a parade of food industry critics. On the Dec. 6, 2005, “NBC Nightly News,” Janet Shamlian reported on yet another study saying the food industry shouldn’t market toward children. Even though the mother she interviewed said she made the decisions about the food entering her household, Shamlian said, “But she's up against a $10 billion industry, concerned her pitch for broccoli and bananas is a tough sell.”
Tell the Truth: Shamlian’s focus on the food industry showed how personal responsibility was often lost in reporting on obesity. The media’s willingness to give anti-industry groups a platform led to lopsided reporting that didn’t give the free market a fair shake. The Centers for Disease Control and Prevention gave obesity scaremongers another arrow in their quiver, announcing that excess weight caused about 400,000 deaths annually. After that figure was questioned late last year, the CDC reassessed the situation and lowered its estimate to 365,000. But another study in April of this year showed that even the adjusted total was about 14 times higher than the roughly 26,000 now believed to be correct. Neither the CDC nor the major media publicized the new numbers. Instead, both continued the fight against America’s “epidemic.”
3. Consumers are choosing between food and fuel
Media Myth: Rising energy prices mean there won’t be much in little Timmy’s stocking this Christmas. Mom and dad can’t heat their home and buy food, so other business sectors are going to get Scrooged.
The media acted as though gas prices were going to be the end of the economy this year. Even before the hurricanes hit, CBS’s Trish Regan was predicting drops in consumer spending on the April 10 “Evening News”: “as costs go up, consumers, who are already getting hit themselves at the pumps, may decide to cut back on their personal spending.” Fellow reporter Mika Brzezinski answered that “consumers cutting back can't bode well for the overall economy.”
As Christmas drew nearer and the weather grew colder, the obvious switch was to hype heating prices and fewer Christmas presents. CBS’s Jim Axelrod found an unfortunate woman who he said could not afford a Christmas tree or presents for her child. On the Dec. 13 “CBS Morning News,” Axelrod declared, “’Tis the season … of cutting back.” And, on the December 10 broadcast of CNN’S “In the Money,” Christine Romans said “for the elderly in particular, it's going to be heat or eat.”
Tell the Truth: Although individuals have been getting hit with higher heating bills this winter, retail sales were far more robust than expected. Shoppers haven’t given up on Christmas despite media claims. The National Retail Federation announced that the weekend after Thanksgiving, consumers spent almost 22 percent more than they did the same time last year. And as far as the economy goes, media worries about energy prices bidding up inflation were misguided. As several economists have pointed out, one sector’s rising prices do not produce overall inflation. In fact, rising prices for a particular good can keep prices of other things down, because people have less money to spend on those other items and therefore can’t inflate other prices.
2. Big, profitable companies are up to no good
Media Myth: Big money-makers like the oil and drug industries should be sharing the wealth. Oil companies were profiting off others’ misfortunes – laughing all the way to the bank while you got squeezed at the pump. And Wal-Mart’s business practices were just as bad.
Anne Thompson’s story that followed included comments from people on the street, one of whom said, “We’re all getting cheated,” and the reporter closed by saying drivers wanted to “stop shelling out wads of money to feed the profits that tonight have America fuming.” Thompson had piled on the day before on the “Today” show: “while American consumers have suffered through months of record high gas prices, the oil companies have hit a gusher.” She later said “news of these gargantuan numbers is sure to ignite the debate over how much is too much in a time of crisis.”
Oil companies weren’t the only ones getting a tough break in the media. Wal-Mart had perpetual PR problems throughout the year, culminating in lopsided coverage of two documentary films about the retailer. During the overwhelmingly negative coverage, CNN’s Miles O’Brien called Wal-Mart’s public relations strategy like “trying to put a little lipstick on a pig” on the November 16 “American Morning.” The food and pharmaceutical industries faced similar attacks for selling products the public demanded.
Tell the Truth: Prices go up when demand goes up. That simple economic rule was lost on many reporters, who promoted attacks on oil companies for making “too much” money or profiting from oil’s price spike. Some suggested companies were “gouging” or trying to set prices higher, failing to allow that when a business makes something lots of people want to buy, it makes money.
The media also seemed to forget that publicly traded companies like Exxon Mobil have millions of stockholders. That meant it wasn’t one or two people profiting from the labors and expenditures of everyone else – it was lots of investors benefiting from their wise investments.
Whether it was the public relations challenges of Wal-Mart or the layoffs at General Motors, the media rarely addressed the negative impact of unions on businesses. Wal-Mart was often vilified for fighting against unionization, while GM’s union workers were pitied in stories about having to pay more for their subsidized health care.
1. The U.S. economy is hopeless
Media Myth: There are plenty of reasons to doubt the economy. Gas prices; housing bubble; auto workers losing jobs… the evidence is everywhere.
The theme encompassing all nine of the other myths was that the U.S. economy is perpetually in trouble and on the brink of disaster. Even when the numbers were positive, coverage remained largely negative. Whether it was gas prices, hurricanes, heating costs, or the housing market, reporters jumped to the worst conclusions imaginable. And predictions were rarely if ever followed up with reality. When the gloomy prophecies didn’t pan out, audiences weren’t likely to hear about it. When the Labor Department announced jobs numbers for October on November 4, showing job gains and a decline in the unemployment rate, the media reported the gains as “surprisingly meager,” “stalled” and “disappointing.”
CNN’s Lou Dobbs, on the April 28 “Lou Dobbs Tonight,” blamed a “huge influx of imports into this country” for “literally choking our economic growth.” With reports like that, it’s no wonder Dobbs reported a “huge concern for the White House is the rising public anxiety about the state and strength of our economy.”
Another CNN reporter, Soledad O’Brien, agreed on the December 5 “American Morning” that “how Americans are feeling, frankly … is scared. I mean, the war goes on, I look at my heating bill. It may be triple what it was last year.”
Tell the truth: Evidence of a strong economy is everywhere. Thirty straight months of positive job growth. Five percent unemployment. GDP growing at an annual rate of 4.3 percent. Gas prices nearly 90 cents lower than their post-Katrina highs. And all this in the face of devastating hurricanes and oil supply interruptions. As John Rutledge, an economist and chairman of Rutledge Capital, put it on the October 8 edition of CNN’s “In the Money”: “We have a $13 trillion GDP, we have a $155 trillion asset base in the United States and no one, not Alan Greenspan, not the Federal Reserve, not Katrina, not Rita, are going to knock that over.”