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.