A Ho-Hum Christmas Already?
Christmas is still nearly seven weeks away, and already the media are offering a “Bah, Humbug” for retail sales and the U.S. economy.
CNN shoveled coal at the positive economic news on November 2 and immediately moved into full Grinch mode.
“You know, just earlier this week the broadest measure of the economy, Kyra, the GDP, came in at 3.9 percent, stronger than expected. What’s working against it, though, the financials, concerns that we’re going to have a lot more carnage coming from that very important sector, consumer spending …” said “Newsroom” correspondent Susan Lisovicz.
Gloomy reporting about holiday sales is nothing new for the media. In 2005 the Los Angeles Times declared that shopping season was off to a “lukewarm” start, and CBS “Sunday Morning” declared Black Friday sales “were a bit flat.”
But all of that negativity didn’t keep Christmas from coming – in fact, retailers saw 6.3-percent growth of holiday sales in 2005. The National Retail Federation actually had to revise its sales forecast from 5 percent to 6 percent thanks to Thanksgiving weekend sales.
The media were similarly downbeat in 2006, using the terms “mixed performance,” “not so merry” and “lackluster” to describe seasonal sales – which ended up growing by 4.6 percent.
This year, the National Retail Federation (NRF) has forecasted that “spending will be a bit restrained this holiday season” but “shoppers still plan to spend more” this year than in 2006.
Even “restrained” spending may be bigger than people realize. According to NRF, “U.S. consumers plan to spend an average of $816.69 on holiday-related shopping.” NRF’s overall forecast is that holiday sales will be up 4 percent over last year to $474.5 billion, or $19 billion more spent this season.
This year the housing “crisis,” “credit crunch” and high oil and gas prices have the media fearful that slower spending will result in economic cataclysm.
ABC “World News with Charles Gibson” even played Scrooge for Halloween. On October 31, Barbara Pinto declared, “economists warn all of this good news has a limited lifespan. That the flurry of foreclosures and credit troubles have yet to fully hit consumers in the wallet.”
But that “flurry” has been over-reported, as CNN’s senior business correspondent Ali Velshi pointed out on “American Morning” November 1.
“You can chart out exactly how many more foreclosures there’s going to be,” he said. “It’s not a new bunch of people, it’s the same bunch of people who are having their mortgages adjusted.”
Media Echo Elvis: “I’ll have a blue, blue, blue Christmas.”
Journalists have warned of “lackluster” sales and poor holiday spending and have been wrong for the past few years.
On September 24 of this year, Alexis Christoforous of “CBS Morning News” warned, “It could be a blue Christmas for many of the nation’s retailers.”
Back in 2005, a year with 6.3-percent holiday sales growth, CNN ran a downbeat segment called “Dreaming of a Blue Christmas” in August. Four full months before the holiday, CNN was asking how higher fuel prices were going to negatively impact America’s Christmas cheer: “Consumers are pinched. Retailers are squeezed. Who’ll get bruised first by higher fuel prices as the countdown to the holiday shopping season gets underway?”
On CNN, the pessimism continued on Oct. 17, 2005. Ali Velshi said, “Investors are saying that this may not be a great season. We’re already seeing weakness. And right now, we’re already hearing some people say, some of these doomsayers say that for the first time since 1996, we may actually sell less this season, this holiday season, than we did the previous years. That’s unheard of.”
This year the NRF is forecasting 4-percent growth, which is lower than previous years, but it is still growth.
If Christmas Doesn’t Come, Recession Will
When it comes to holiday shopping, the media have said continuously that slower spending could cause a recession. Just listen to these recent warnings:
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· “And all of that economic pain could cause consumers to stop spending, which could drive the U.S. economy into a recession,” worried ABC’s Dan Harris on “World News with Charles Gibson” October 24.
· “… the recession, whether we have one or not, is going to depend on the U.S. consumer,” said Erin Burnett on NBC’s “Today” October 23.
· “…these headlines did surprise many people today because most market experts still believe that we can avoid a full-blown recession, but the truth, Brian, will depend on whether American consumers keep spending. And there may be some bad news on that front as well to be aware of,” cautioned Erin Burnett on “NBC Nightly News” October 19.
· “The slumping housing market and credit crunch are taking much of the blame [for lower consumer confidence]. Now some experts fear it will cause consumers to cut back on spending, leading to an even deeper economic downturn,” said Chris Cuomo on ABC’s “Good Morning America” September 14.
But the media were complaining about this long before the 2007 holiday shopping season. On Dec. 14, 2006, CBS’s Anthony Mason included pessimistic remarks from University of Maryland economist Peter Morici.
Morici said if consumers were too concerned about other economic factors like housing and “turned the spigot off on spending all at once, we would slide into a recession quite easily.”
Recession is a consistent theme in the media. The Business & Media Institute (BMI) found that the three broadcast networks mentioned “recession” in more than 100 stories since August 2003, predicting a downturn from high oil and gasoline prices, interest rates, global warming, housing and terrorism.
Just in 2006, ABC, CBS and NBC referenced the Great Depression or warned of a coming recession 49 times. That was almost one story per week that referenced an economic collapse. But the recession didn’t come.
Economists Respond
You can often hear the media say that consumer spending “is critical to economic growth.”
As Maria Bartiromo explained on NBC’s “Today” October 31, this is a “ … very , very important part of the year, which, of course, is the holiday season where two-thirds of consumer spending is allocated to economic growth.”
But some economists disagree about how important excessive spending really is to the economy.
Economist and author Arnold Kling wrote in January 2006, “The idea that the economy needs consumer profligacy is not nearly as entrenched among scholars as it is among journalists, politicians, and other citizens. In fact, there is a strong case to be made that we would be better off if we had less consumer spending and more saving.”
“But none of those scholarly arguments matters. In President Nixon's phrase, ‘we are all Keynesians now.’ That means that folk Keynesianism, which exalts consumer spending, permeates discussions of the economic outlook,” Kling continued.
Kling was referring to economist John Maynard Keynes, who heavily influenced economic theory in the 20th century and beyond. Keynesian theory advocated government intervention and promoted spending rather than saving.
Economist, Hillsdale College professor and BMI adviser Gary Wolfram explained the problem with Keynesian economics this way: “It is true that at any point in time, consumption makes up a large portion of the total GDP [70-75 percent], but that doesn’t mean that if we stop consuming it will reduce GDP.”
What actually happens when people stop spending? They deposit money in banks, which in turn loan money to businesses that use it to produce capital goods [buildings, inventory, etc] and become more productive, improving our economy in the long run, said Wolfram.
Media pessimism about the economy tends to overwhelm the good news. In October, the U.S. doubled expectations by adding 166,000 new jobs and unemployment stayed at the “historically low” 4.7 percent.
Despite housing, oil and credit concerns, in the summer of 2007 the U.S. saw enormous GDP growth – 3.9 percent – fueled by consumer spending. The Associated Press reported it was “the fastest in 1 1/2 years and an impressive performance.”
“[T]he economy grew by nearly 4 percent between July and September, the biggest jump in a year and a half. Driving those gains – consumers, whose spending grew at more than twice what it did in previous months,” said ABC correspondent Barbara Pinto on October 31.
