On the day after Federal Reserve Chairman Ben Bernanke sat before Congress and said the Fed is “not forecasting a recession,” CBS’s Bianca Solorzano reported on the “Early Show” that “Bernanke confirmed recession fears.”
Brian Williams declared on the January 17 “NBC Nightly News” that “There is no shortage of evidence showing a U.S. economy either already in recession or heading there.”
Anthony Mason reported on the “CBS Evening News” that night that Bernanke “was telling Congress the economy needs a rescue package, and the sooner the better.”
On NBC’s “Nightly News,” reporter Erin Burnett summarized Bernanke’s testimony: “Guess what? It’s going to get worse before it gets better.”
But she wasn’t quoting Bernanke. None of those reporters was.
What the Fed chairman did say was that “recent indications suggest … that the economy has softened somewhat and that the growth prospects for 2008 are certainly below that of last year,” adding later that “again, we’re not forecasting recession but rather at this point slow growth.”
Yet the media selectively quoted from Bernanke’s testimony before Congress to suggest he predicted a recession and called for an immediate “stimulus package.”
Of course Bernanke said nothing of the sort. He said the Fed is “not forecasting a recession, but rather at this point slow growth” and, “We see the economy continuing to grow but at a relatively slow pace, particularly in the first half of this year … the economy should pick up a bit later in this year.”
On the topic of a stimulus package, he said such action “could be helpful in principle as fiscal and monetary stimulus together may provide broader support for the economy than monetary policy actions alone.”
When was the last time “could” and “may” amounted to a ringing endorsement?
But that didn’t stop the media from declaring that Bernanke had “confirmed recession fears,” “threw his weight behind a stimulus package” and “told a House committee the economy needs a stimulus package right away.”
Journalists’ focus on dire economic predictions glossed over of some of Bernanke’s more moderate statements cautioning against rash economic actions that might do more harm than good.
“A fiscal initiative at this juncture could prove counterproductive if, for example, it provided economic stimulus at the wrong time or compromised fiscal discipline in the longer term,” Bernanke said. “To be useful, a fiscal stimulus package should be implemented quickly and that the effects are felt in the next 12 months.”
In statements used by media to suggest Bernanke was endorsing an immediate stimulus package, he was in fact saying what a stimulus package would need to look like in order for it to be efficient and productive. “To be of value it would need to be timely and well implemented and well designed, that it would result in a near-term increase in the budget deficit and not increase in taxes,” he said.
Urgent Call for ‘Stimulus’
Some of the reports also implied Bernanke was issuing an urgent call for an economics “stimulus package” – without explaining why there would be urgent need for stimulus if the Fed isn’t expecting a recession.
Bernanke told Congress that if they wanted to act, it would be better to act sooner rather than later. While saying he would support a stimulus package, Bernanke didn’t actually request one, but the media sure made it sound that way.
“But it seems everyone there is agreeing the economy needs a boost, needs a stimulus. The White House said the president wants it. The chairman of the Federal Reserve says he wants it. The leaders of Congress, both parties, say they want it,” ABC’s Charles Gibson said on “World News” January 17. Bush and leaders of Congress do indeed support a stimulus plan, but Bernanke only said one “could” help.
Anthony Mason, on the “CBS Evening News” January 17, said “the Fed chairman was telling Congress the economy needs a rescue package and the sooner the better.”
On the CBS “Early Show” January 18, Harry Smith said Bernanke “talked to Congress yesterday and said that this economy does need a shot in the arm.”
The Purple Prose Award goes to Katie Couric, anchor of the “CBS Evening News,” who teased a January 17 segment by saying, “Dr. Bernanke made a house call today and prescribed a booster shot for the ailing economy. Ben Bernanke, chairman of the Federal Reserve, told a House committee the economy needs a stimulus package right away.” A creative metaphor, but inaccurate.
David Gregory, White House correspondent for NBC, quoted Bernanke’s statement about not forecasting a recession on the “Nightly News” January 17 and on the “Today” show January 18. But he did attempt to connect Bernanke with the stimulus package plan being pushed by President Bush.
“The Fed chief backed a short-term stimulus package that is expected to include a tax rebate for lower income Americans of up to $600,” Gregory said. But in his testimony, Bernanke declined to support a specific plan.
“I do think that you should be looking at a number of different things … a program that combines a number of elements,” the Fed chairman said. That “might in some sense address the problem from a number of different angles and be more effective than one that was only a single element.”
Stimulating Stories
The distortion of Bernanke’s comments was a perfect setup for the media’s undeniable support for government intervention in the economy.
The common question posed by the media about the stimulus package was not “will it work?” or “is it a good idea?” Instead, the media asked if $145 billion, 1 percent of GDP, would be enough.
On the “Saturday Early Show” January 19, co-host Kelly Wallace said Bush “wants to put hundreds of extra dollars in taxpayers’ wallets, but is that enough to jump-start the slowing economy?”
Wallace also echoed criticism from some Democrats that “this doesn’t go far enough, that you’re leaving out millions and millions of the poor, senior citizens, the low incomes, who would spend this money the most quickly.” Wallace’s “not-enough” criticism came before any specifics for the plan had been laid out.
Few reports bothered to point out that the stimulus package won’t come cheap. “I understand the deficit is already projected to be about $155 billion this year,” Katie Couric asked Bill Plante on the January 18 “Evening News.” “So where’s the president going to get $150 billion more?” NBC’s Savannah Guthrie also asked White House Press Secretary Dana Perino about the price tag on the January 19 “Saturday Today” show.
Broadcast outlets widely question whether it will be enough, but a Nexis search revealed no appearances by any of the numerous economists who say a stimulus package is unnecessary or unworkable regardless of its size. Among them:
n Heritage Foundation economist William Beach, who told the Joint Economic Committee January 16 that “the ones that we have tried where we have stimulated demand just haven’t delivered as much as one would have hoped for them. On the other hand, those that are targeted on the investment side, building new plant and equipment to create jobs and improve incomes and thus, through improving incomes, stimulate demand, tend to perform very, very well.” Beach made the point that putting money in the hands of producers was more effective than putting it directly in the hands of consumers. [1]
n Cato Institute senior fellow and BMI adviser Dan Mitchell, who said January 18 that the proposed stimulus “will not work. It is a disappointing re-run of the misguided policies of Jimmy Carter. Rebates are particularly disappointing because they resuscitate the discredited Keynesian notion that an economy benefits when the government borrows money from people in one sector of the economy and distributes it back to people in another sector of the economy.”
n George Mason University economics professor Russell Roberts, who wrote in an op-ed January 16 [2] that tax rebates are “like taking a bucket of water from the deep end of a pool and dumping it into the shallow end.” He added, “Usually, the only thing that gets stimulated is a politician’s approval rating.”
n Former House Ways and Means Committee Chairman Bill Thomas, who called stimulus packages “gimmicks” in a January 18 op-ed in The Wall Street Journal [3]. Thomas called for more comprehensive reforms to the tax system as a permanent economic stimulus.
Preventing a Recession He Didn’t See Coming?
Instead of explaining the nuances of Bernanke’s talk, reporters went for a simplistic – and unfortunately, misleading – characterization.
Stephanie Elam, filling in for Ali Velshi on CNN’s “American Morning” January 18, acknowledged that Bernanke “was saying it’s pretty clear the economy is not in a recession yet, but we are on our way to one and we need a quick but temporary stimulus package to get people spending.” The wording implied that Bernanke said the U.S. economy is on its way to a recession, while in reality that was only Elam’s analysis.
Print media weren’t averse to distorting Bernanke’s testimony either. The Christian Science Monitor tied Bernanke’s testimony to “the need for speed to help avert a recession.”
“It is all but inevitable, in the view of Fed leaders, that the economy will grow slowly in the first half of 2008,” The Washington Post reported January 19. “There may even be a mild recession, they say.”
The Los Angeles Times reported January 18 that “the Fed chief’s commitment to staving off recession wasn’t forceful enough” to keep stocks from falling before the January 22 rate cut.
The New York Times reported the same thing, noting January 18 that pessimism “drowned out the reassurances by Mr. Bernanke that a recession could be averted.” The article quoted some of Bernanke’s testimony, but didn’t mention that he specifically said the Fed wasn’t forecasting a recession.
USA TODAY, to its credit, put in its January 18 headline that Bernanke forecasted “sluggish economy, but no recession.”