Not-So-Great Depression Coverage: All of the Hype, but None of the Bread Lines

     As the economy has slowed and indicators have started showing signs of fatigue, historically negative media coverage has taken a turn for the worst, shifting from reporting on “recession” to all-out “depression.”

     On “60 Minutes” January 27, Andy Rooney complained, “I get five or six newspapers every day, and I’ve been reading a lot of stories about what they’re calling the recession we’re having. They don’t want to scare us, so they don’t call it a ‘depression,’ they call it a ‘recession.’”

     Rooney had noticed the trend of media exaggeration. But he’s wrong on one count – the media are indeed calling it a depression, or at least they’re comparing current conditions to the Great Depression. Already in 2008, the media have made the comparison seven times, building on a theme that dates back at least into 2006.

     “Like nearly 9 million other U.S. homeowners, [Vince] Costanza is struggling to pay off a mortgage that is worth more than his actual home,” ABC’s Bianna Golodryga said on “Good Morning America” February 23. Golodryga called it “a phenomenon that hasn’t been seen since the Great Depression.”

     “And the median price of a home dropped nearly 2 percent” in 2007, Charles Gibson said on the January 24 “World News.” “It’s the first time prices have gone down over a whole year since the Great Depression.”

     Anthony Mason made the same comparison on the January 24 “CBS Evening News,” noting that “new figures show the median price of a single family home actually fell last year for the first time since the Great Depression.”

     On the January 17 “Early Show,” Mason referred to Citigroup’s $18 billion in mortgage-related losses as “the bank’s most painful period since the Depression.” Two nights earlier, on January 15, Mason declared, “For America’s financial giants, it’s the worst period since the Great Depression.”

     But in his “60 Minutes” segment, Rooney, who was a teenager during much of the Great Depression, criticized characterizations of economic turmoil. “I don’t know anything about economics, but I don’t think what we’re in is a depression, or even a recession, whatever the difference is.” He pointed to the differences between the Great Depression and today’s economic environment.

    “Big bakeries gave away their bread when it was three or four days old, and people who were out of work and hungry lined up to get it,” Rooney said. “We don’t have anything like that now.”

     Rooney was right, even if he said he didn’t know anything about economics. Current economic conditions are nothing like they were in the Great Depression with bread lines, hundreds of banks failing every year, production falling 20 percent annually and unemployment near 24 percent.

     Dr. Donald Boudreaux, chairman of the economics department at George Mason University and a member of the Business & Media Institute Advisory Board, said there are “a few big differences between today’s situation and that of the 1929-1940 period.”

     “First and foremost is the fact that nationalization of industry and socialism aren’t in the air as they were back then,” he said. “Although the U.S. never went very far down that road, the threats of doing so in the 1930s were real. That threat really scared away investors.”

     “Second, there has been no foolish and foolishly large monetary contraction of the sort that there was during the early 1930s,” Boudreaux said, “and there’s unlikely to be such a contraction.”

     He added that the U.S. economy is “hardly in terrible shape. Unemployment is only 4.9 percent – not super-duper, but pretty darn respectable. No other economic indicator reveals that we face anything remotely like a replay of the 1930s.”

     [For more on the differences between the Great Depression and today, check out Dr. Gary Wolfram’s column, “Econ 101: The Great Depression.”]

     Yet the absurdity of the comparison hasn’t stopped others in the media from trying to make it. The media have tried to compare current conditions to the Great Depression seven times already in 2008, building on a foundation that reaches back at least into 2006.

A History of Depressing Coverage

     Depression stories were spread out on all the networks, but the biggest single offender has been CBS reporter Anthony Mason, who has tried to tie modern economic conditions to the Depression six times since the beginning of 2007.

     Mason’s negativity even prompted “Evening News” host Katie Couric to call him the “grim reaper” on the Jan. 30, 2008, broadcast.     

     Attempts to tie current economic conditions to the Great Depression haven’t been limited to CBS’s Mason or 2008, however. In 2007, the broadcast networks aired 18 stories relating the Depression to everything from home prices to savings rates to the income “gap.”

     “Two days ago the National Association of Realtors reported sales of existing homes are down nearly 13 percent in August, with prices for the year expected to go negative for the first time since the Great Depression,” Diana Olick reported on the September 27 “NBC Nightly News.”

     On the ABC “World News” August 27, Kate Snow introduced a segment on home prices calling the news “a double dose of new housing trouble, a downslide that hasn’t been seen since the Great Depression.”

     CNN anchor Lou Dobbs told the CBS “Early Show” on July 24 that “the top 10 percent of Americans are receiving the largest share of national income since before the Great Depression.”

     Scott Cohn reported a similar comparison on the “Today” show April 26, noting that “not only are the rich getting richer, they’re leaving everyone else behind. In fact, the last time the rich were this much richer than everyone else was the Great Depression.”

     Cohn glossed over the socialist undertones of the complaint, and failed to note that economists say income inequality is natural and healthy part of a working economy. “[T]he broader philosophical question is why we should worry about inequality – of any kind – much at all,” George Mason University economist Tyler Cowen wrote in January 2007.

     The earliest media mention in 2007 came January 19 when John Stossel reported on ABC’s “20/20” that “personal savings rates are at the lowest point since the Great Depression.”

     None of the reports mentioned that home sales had until recently been at record highs, putting the decline into perspective. Nor did they mention that personal savings rates have been negative before, and that economists don’t necessarily think that’s a sign of coming tragedy.

     But depression-obsessed reporting didn’t start in 2007, either. The broadcast networks compared 2006 conditions to the Great Depression 17 times that year, according to previous Business & Media Institute reports. The media are on track to make the comparison 24 times in 2008.

Wanting the worst

      Some in the media have gone so far as hoping for economic turmoil so business, free enterprise, etc., can “learn a lesson.” On February 20 a former Washington Post business reporter who now writes a column for the paper wished for an economic “burn.”

     Steven Pearlstein wrote that “the best thing that could happen to our economy is for a dozen high-profile hedge funds to collapse; for investment banking to enter a long, deep freeze; for a major bank to fail; and for the price of a typical Park Avenue duplex to fall by 30 percent.”

     “For only then,” Pearlstein wrote, “might we finally stop genuflecting before the altar of unregulated financial markets and insist that Wall Street serve the interest of Main Street, rather than the other way around.”

     But depending on the government to fix the problems – whatever the problems may be – could make matters worse, according to Mark Thornton, an economist and senior fellow at the Ludwig von Mises Institute.

     “You can try to bail out things and prop up things but that only increases the amount of pain and spreads it out over a long time,” Thornton said. “But once bad debts are taken … those bad debts have to be paid for somehow. These lenders, the people who are holding these mortgages … that’s an economic problem for them and I just don’t see that going away.”

     Thornton said recessions and depressions are part of the normal “business cycle,” but that “it’s just a matter of how we want it to play out.”

      “Do we want to cover over and mask the effects of the depression like the Japanese did [in the 1980s] or are we just going to allow the economic crisis to hit and for all the bad debts to be relinquished?” Thornton said. “And if we take that second out where we allow the markets to work, the result is going to be a sharp, severe, but short economic crisis.”