December 16, 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 Free
Market Project 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.
The media have been
saying this since 2001, when Katie Couric and Matt Lauer fawned
over France’s 35-hour work week and weeks of vacation for
workers. On the Aug. 1, 2001, “Today” show, Couric
gushed, “The French, they’ve got it right, don’t
they?” When Lauer suggested that “you know, I think
they pay a lot higher taxes than we do, from what I understand,”
Couric scolded him: “You had to spoil it. You just had to
say something.”
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.
Journalists
have been incredulous that President Bush wouldn’t immediately
raise taxes to cover new expenses. Following Bush’s Sept.
15, 2005, address to the nation, ABC’s Ted Koppel said,
“The last thing in the world that George W. Bush wants to
do is raise taxes, but the amount of money that we’re talking
about here, we’re talking about many, many, many tens of
billions of dollars. Can that be done without raising taxes?”
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.
ABC’s Bill
Weir summed up that network’s take on the 2005 hurricane
season after his September 16 “Good Morning America”
piece about Hurricane Ophelia: “Scientists have long warned
that global warming could make hurricanes increasingly destructive.
They couldn’t prove it until now.” “CBS Evening
News” reporter Jim Acosta ominously introduced his November
29 report: “The experts have spoken, this hurricane season
will go down as the biggest, baddest, deadliest, and costliest
of all time.”
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.
The year 2005 saw
a huge fundraising push from the series of concerts known as Live
8. Rock stars and other celebrities drew crowds and put pressure
on the U.S. government to increase the amount of its aid to Africa.
Media coverage was based on the premise that the United States
was stingy. On the July 6, 2005, “NBC Nightly News,”
Kelly O’Donnell admitted U.S. donations were the highest
in the world, but stressed criticism of those numbers: “The
president can rightly claim the U.S. gives the most money in actual
dollars. But more revealing, critics say, is the U.S. gives the
smallest percentage of its wealth than any of the countries here.”
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.”
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.
Don’t even
get the media started on corporate America. Ever since the Enron
scandal, media skepticism of all things business has increased.
But journalists have been turning that skepticism toward the free
market and chiding businesses for making a profit – the
very thing they exist to do. NBC’s Brian Williams opened
an October 28 “Nightly News” report with “the
outrage across this country today everywhere people were ponying
up to pay more for gas” – even though drivers that
day were actually paying 51 cents less per gallon than they had
during post-Katrina highs.
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.”
Free
Market Project
