Economic media coverage has been heavily focused on advocating for deficit reduction, even as deficits decline and the federal government posts a surplus.
A Media Matters analysis on economic news coverage in the month of April found that media continued their long-established focus on deficit reduction. In 45 of 123 total segments discussing policy impacts on the economy, guests or hosts on network and cable news advocated for deficit reduction as a priority.
Calls for deficit reduction beat out mentions of other economic issues, most notably the need for economic growth and job creation, and economic inequality.
The continued focus on deficit reduction is particularly interesting given the fact that, in the month of April, the federal government posted the largest budget surplus in five years. Furthermore, according to the Congressional Budget Office, current and projected deficits are expected to decline in coming years.
Even conservatives have recently acknowledged that deficit reduction is not the country's most pressing economic issue. House Speaker John Boehner (R-OH) and House Budget Committee Chairman Paul Ryan (R-WI), agreeing with President Obama, stated that the country is not facing an immediate debt crisis, a notion shared by prominent Democrats. And John Makin, a scholar at the conservative American Enterprise Institute, remarked that Congress has already enacted enough deficit reduction.
Meanwhile, economists have expressed concerns over media's focus on deficits, instead calling attention to resolving the very real immediate crisis of unemployment. Economist Jared Bernstein recently began a series on the path to full employment, and numerous other economists have advocated increased short-term spending to bolster economic growth and job creation.
Furthermore, former Labor Secretary Robert Reich has even pointed out that focusing on jobs and growth -- not spending cuts -- provides an effective avenue for deficit reduction.
Media outlets largely ignored economic inequality in discussions about the overall economy, despite mounting evidence suggesting that the problem has increased in recent years.
While media have been quick to highlight ostensibly positive gains for the economy -- notably that the Dow Jones Industrial reached 15,000 for the first time in its history, GDP grew by 2.5 percent in the first quarter of 2013, and unemployment for April edged down to 7.5 percent -- signs of rising income inequality have gone largely unmentioned.
According to a recent Media Matters analysis, economic coverage for the month of April barely mentioned issues of inequality. In 123 total segments discussing policy effects on the macroeconomy, only 12 touched upon the growing disparity in economic gains for the rich and the poor.
The discrepancy in covering economic inequality stretched across all major outlets. ABC, CBS, and NBC provided no mentions of the problem. MSNBC devoted the most coverage, with roughly 25 percent of segments on the economy discussing rising inequality.
While the media have pushed inequality out of the spotlight, mounting evidence suggests that the problem is getting worse.
As for the rising stock market, while any gains should be viewed as a positive for the economy as a whole, the distribution of those gains paints a less than perfect picture. According to a Gallup poll, 52 percent of Americans currently hold stocks, a number that has been consistently declining in recent years.
Other indicators highlight the deep-seated nature of economic inequality. According to Congressional Budget Office data, from 1979 to 2007 the top one percent of income earners have seen their after-tax share of total income rise by more than 120 percent, while the bottom 20 percent of earners have seen that share decline by almost 30 percent.
And according to an analysis by journalist David Cay Johnston, economic gains in recent history show an even darker reality - from 2009 to 2011, 149 percent of increased income was reaped by the top 10 percent of earners.
Meanwhile, the economy is currently suffering from an epidemic of long-term unemployed workers, which, as noted in a Bloomberg editorial, could create a permanent underclass of workers unable to reenter the labor force.
Some of the media's attention -- albeit very little -- has focused on the inequitable impact of sequestration on low-income individuals. The overwhelming majority of discussion of inequality in April, most notably on MSNBC, focused on Congress' unwillingness to mitigate the impacts of sequestration of the poor, while members were seemingly enthusiastic to correct inconveniences for those at the upper end of the income scale.
While some attention has been given to economic inequality, the broader trend in media is to ignore the issue, preferring instead to focus on the widely recognized non-issue of short-term deficit and debt reduction.
Evening news coverage throughout April touched upon several economic issues, including income inequality, deficit reduction, and entitlement cuts. A Media Matters analysis of this coverage reveals that many of these segments lacked proper context or necessary input from economists, while some networks ignored certain issues entirely.
Fox News' coverage of the April unemployment report was largely negative, despite the fact that economists largely agree that the report shows positive gains in the labor market.
Fox News claimed that federal government policy was failing to lower unemployment by citing recent decisions made by the Federal Reserve. However, economists note that Federal Reserve action alone cannot increase employment, and federal spending must be increased to improve the economy.
Reacting to the May 2 weekly jobless claims report, Fox Business anchor Stuart Varney dismissed the 18,000 drop in initial claims to the lowest level in five years, stating that "it's a better number, but it's still not a good number." Varney went on to claim that the Federal Reserve's recent decision to continue its bond buying program was not producing expected drops in unemployment, claiming "unemployment rates are not falling the way they should when you're printing all this money." From America's Newsroom:
While Varney was quick to dismiss the government's role in strengthening the labor market by citing the Federal Reserve and the effect of current monetary policy on job creation, he completely ignored the fact that decreases in government spending have negatively impacted the economy, overlooking statements made by the Federal Reserve and the warnings of experts.
In the statement released by the Federal Reserve on May 1 outlining its future decisions regarding monetary policy, the board specifically cited that "fiscal policy is restraining economic growth."
Indeed, many analysts have been claiming that actions by the Fed are not enough to bolster economic growth, and that increased government spending -- that is, expansionary fiscal policy -- is necessary to improve current conditions.
In The Washington Post's Wonkblog, Roosevelt Institute fellow Mike Konczal explained how actions taken by the Federal Reserve have failed to counteract the negative effects of decreased government spending:
But the most important lesson to draw is that fiscal policy is incredibly important at this moment. In normal times, the broader effect of government spending, or the fiscal multiplier, is low because the central bank can offset it. But these are not normal times. It's not clear why the Federal Reserve's actions haven't balanced out fiscal austerity. But since they haven't, we should be even more confident that, as the IMF put it, "fiscal multipliers are currently high in many advanced economies."
The main point here is that while the Federal Reserve is attempting to spur economic gains through monetary policy, it simply can't do enough to counteract recent contractions in government spending. Former Labor Secretary Robert Reich echoed Konczal, stating "easy money from the Fed can't get the economy out of first gear when the rest of government is in reverse."
By only focusing monetary policy as the government's way to bolster employment and economic growth, Fox is only telling half the story -- the negative effects of decreased government spending are far too damaging to be mitigated elsewhere -- and continuing its trend of downplaying positive economic news.
The Wall Street Journal reinforced its call for spending cuts, seemingly undeterred by recently discredited research and overwhelming evidence showing that fiscal tightening negatively impacts economic growth.
Reacting to recent research that has questioned austerity proponents' most cited figure -- the 90 percent debt-to-GDP threshold as identified by Camen Reinhart and Kenneth Rogoff -- an April 30 Wall Street Journal editorial claimed that the new revelations are being used to "revive the spending machine."
Instead of addressing the fact that the discrediting of Reinhart-Rogoff took, as The Washington Post's Neil Irwin puts it, a "great deal of wind out of the sails from those who argue that high government debt is, anywhere and everywhere, a bad thing," the WSJ instead used this event to attack government spending in all forms and reinforce calls for austerity. From the editorial:
The Keynesians are now using a false choice between "austerity" and growth to justify more of the government spending they think drives economic prosperity. The brawl over Reinhart-Rogoff is thus less a serious economic debate than it is a political exercise to turn more of the private economy over to government hands.
After five years of trying, we should know this doesn't work. The real way to promote a stronger economy is more austerity and reform in government, and fewer restraints on private investment and risk taking.
Arriving at such a conclusion requires not only obscuring the importance of the Reinhart-Rogoff debt threshold and its importance in pushing global austerity measures, but also ignoring a few key economic realities.
First, the editorial uncritically dismisses the impact of previous economic stimulus in order to bring into question any future government spending:
[Former White House economist Larry] Summers says governments should borrow more now at near-zero interest rates to invest in future growth. But this is what we were told in 2009-2010, when Mr. Summers was in the White House, and the $830 billion stimulus was used to finance not primarily roads or bridges but more unionized teachers, higher transfer payments, and green-energy projects that have since failed. Why will it be different this time?
The WSJ fails to note that the economic stimulus that was enacted in 2009 is widely regarded as a success. According to a WSJ forecasting survey conducted in 2010, 70 percent of economists agree that the stimulus helped the economy, and a May 2012 Congressional Budget Office report noted that it created between 900,000 and 4.7 million full-time-equivalent jobs in 2010 and between 600,000 and 3.6 million in 2011.
Second, and perhaps more notably, the editorial completely ignores the mounting evidence that too little government spending is already hurting the U.S. economy. When individual contributors to GDP growth are isolated, it becomes clear that in the majority of recent quarters, cuts in government spending have pulled down overall economic growth. In fact, the negative contribution of too little government spending has compromised growth even in the face of strong private contributions.
And while editorial board member Stephen Moore may feel that recently enacted across-the-board spending cuts have helped economic growth, economists and even Fox News personalities recognize that they have and will continue to negatively impact GDP growth.
WSJ's call for ever elusive "pro-growth" spending cuts stands in stark contrast to observations made by former pro-austerity advocates. The International Monetary Fund, which previously called for austerity measures throughout Europe, recently noted that fiscal tightening has failed to deliver a reduction in debt due to declines in output. Even John Makin of the conservative American Enterprise Institute now claims that the U.S. has cut federal spending enough to substantially reduce the debt-to-GDP ratio.
Fox News glossed over an important aspect in its reporting on lower than expected GDP growth -- the government contribution to GDP has been negative in the majority of recent reports.
Following the April 26 release of first quarter GDP growth estimates, Fox Business anchor Stuart Varney dismissed the 2.5 percent increase as "not good numbers," claiming that the increase was not indicative of a robust recovery. From Fox News' America's Newsroom:
Varney provided a laundry list of reasons why GDP growth has failed to live up to expectations, including recent federal and state tax increases and, notably, cuts from sequestration - a reversal from previous right-wing assertions that sequestration was too small to harm the economy. Varney failed to explain, however, that too little government spending has been holding back economic growth, as indicated by many of quarterly reports from the past two years.
The Bureau of Economic Analysis provides data on individual contributions to GDP, including government spending's contribution. When the government's contribution to GDP growth is separated from total growth, it becomes apparent that it has been a drag on the economy for much of the past two years.
In the previous 13 quarters, government spending has only added to GDP growth twice - once in the second quarter of 2010, and again in the third quarter of 2012.
This observation has been recognized by others, causing The Washington Post's Ezra Klein to boldly state that "government is hurting the economy - by spending too little." Of course, any recognition of this fact from Fox News would require the network to abandon its longtime stance that increased government spending can only hurt the economy.
The Wall Street Journal attempted to absolve ratings agency Standard & Poor's from allegations of fraud, ignoring the mounting evidence against the firm that indicates it contributed to the financial crisis.
On February 5, the Justice Department filed civil charges against S&P, alleging that the firm knowingly inflated ratings on investments leading up to the financial collapse. Following S&P's request on April 23 to dismiss the case, The Wall Street Journal editorial board quickly ran to the firm's defense, claiming "the judge ought to grant S&P's motion for many reasons, not least because otherwise no one will be able to sort Washington's list of victims and villains."
The editorial argues that federal action against S&P is unwarranted, because the Justice Department alleges that banks, who have previously been targets of lawsuits themselves, were defrauded by S&P's overly optimistic ratings. The Wall Street Journal's logic suggests that S&P couldn't possibly be accused of wrongdoing because the banks that used its ratings are also accused of wrongdoing:
The truth is that S&P's ratings on mortgage bonds, along with those issued by Moody's and Fitch, did inflict terrible damage. But this was not because employees at these firms are more stupid or unethical than those at other businesses. The damage occurred because the same government that's now suing S&P required financial institutions to use the ratings issued by S&P and the other raters.
Of course, in arriving at this conclusion, the editorial conveniently omits the facts behind the Justice Department's lawsuit. According to WSJ's own reporting in the wake of the financial crisis, internal emails at S&P suggested that analysts knew how risky mortgage-backed financial devices were, and that the firm adjusted ratings to satisfy their clients instead of providing objective analysis.
Furthermore, the editorial fails to mention that S&P's recent request to have the suit dismissed relies on the firm rejecting its long-standing position that its ratings are objective -- a fact that the Justice Department's complaint makes clear. Instead, S&P now alleges that its ratings "were never meant to be taken at face value by investors," as the WSJ noted in its own reporting.
WSJ's fact-free defense of S&P falls in line with previous attempts by conservative media to shield the firm from legal action. When the Justice Department's complaint was initially filed, right-wing media figures dismissed the suit as "government retribution" over S&P's previous downgrade of U.S. credit.
The research consistently cited by media figures to support cutting government spending has recently been invalidated, raising questions about how mainstream coverage of economic policy promoted incorrect data.
In January 2010, economists Carmen Reinhart and Ken Rogoff released a study that suggested when countries reach debt levels of 90 percent relative to GDP, economic growth would be compromised. Conservatives in politics and media alike repeatedly cited the figure in discussions about the economy.
A study released on April 16, however, found that the conclusions reached by Reinhart and Rogoff were based on data that was riddled with errors. Reinhart and Rogoff's response to the critique -- in which they maintain they never implied that rising debt caused lower growth, just that the two were associated -- shows that media's handling of the figure was wrong all along.
These new developments show that media consistently used an apparently incorrect figure for the past few years to call for austerity measures. Here's a look back at how major cable networks cited the figure in its coverage of the budget and economic policy:
Video by Alan Pyke.
Fox News has consistently downplayed positive weekly jobless claims reports, ignoring the standard the network set for signs of labor market improvements.
A Media Matters analysis revealed that despite consistent improvements in the number of people filing for unemployment benefits, Fox's coverage of weekly jobless claims reports was overwhelmingly negative. The network consistently used the reports to bring up unrelated negative economic news, a practice that has become common on Fox when faced with positive economic developments.