Fox Defaulted To Bad Economic Policy During Debt Ceiling Debate
Research ››› ››› JUSTIN BERRIER & REMINGTON SHEPARD
During the debt ceiling debate, Fox has relentlessly pushed economic policies and positions that experts have said would be harmful to the economy, including downplaying default concerns, openly advocating for default and a credit downgrade, and actively lobbying for a balanced budget amendment.
Fox Figures Consistently Dismissed Or Downplayed Concerns Over Government Default
Hannity: Democrats' "Doomsday Rhetoric Would Have You Believe" That If The Ceiling Deadline Passes, The "Economy Would Crumble." On the July 11 edition of his Fox News show, Sean Hannity said: "As the deficit reduction talks continue in Washington, Democrats have been ramping up their efforts to scare the American people into supporting this deal. Now, the left's doomsday rhetoric would have you believe that if Congress does not vote to raise the debt limit by August the 2nd, the American economy would crumble." [Fox News, Hannity, 7/11/11, via Media Matters]
Dobbs Calls Debt Ceiling Deadline A "False Date" And "Pure Fiction." On his July 11 Fox Business show, host Lou Dobbs called the August 2 deadline for raising the debt limit a "false date" and "pure fiction." Dobbs made his comments in response to J. Dennis Hastert, former Republican speaker of the House, who said that "the federal government can decide what it's going to pay, when, and where." [Fox Business, Lou Dobbs Tonight, 7/11/11, via Media Matters]
Carlson: "Some Republicans" Are Asking Whether Debt Ceiling Deadline Is A "Democratic Ploy." On the July 12 edition of Fox News' Fox & Friends, co-host Gretchen Carlson claimed that "some Republicans are saying that August 2 deadline, as I alluded to at the top of the show -- is that a Democratic ploy, or is that a hard and fast date now? Remember, back in April that was the first deadline date, and everyone kind of pooh-poohed it, and before you knew it, in the middle of that horrible earthquake tsunami in Japan, the Treasury secretary moved it." [Fox News, Fox & Friends, 7/12/11, via Media Matters]
Moore: "The Biggest Lie In This Whole Debate ... Has Been That The United States Is Going To Default On Its Debt." On the July 18 edition of Fox News' America's Newsroom, Fox News contributor Steve Moore claimed: "The biggest lie in this whole debate for the last six months has been that the United States is going to default on its debt, and I will tell you this point blank with 100 percent certainty: There will not be a default on U.S. securities, no matter what happens." [Fox News, America's Newsroom, 7/18/11, via Media Matters]
Doocy: Obama Is Trying To "Gin ... Up" Default Crisis As If "It's The End Of The World." On the July 19 edition of Fox News' Fox & Friends, co-host Steve Doocy responded to a Pew Research Center poll which claimed that 43 percent of independents say it's "not essential to meet deadline" by claiming, "It's that last number right there, the independents, that has got to horrify the White House, because they're trying to gin this up as if it's the end of the world." [Fox News, Fox & Friends, 7/19/11, via Media Matters]
Cavuto: "I Would Welcome A [Credit] Downgrade." On the July 27 edition of Fox News' Your World, host Neil Cavuto claimed: "I would welcome a [credit] downgrade. I really would. I think it would be the pain from which we have a gain." Fox News host John Stossel responded, "Maybe that would wake people up." [Fox News, Your World, 7/27/11, via Media Matters]
Morris: Offices That Would Close Without Increase In Debt Ceiling Are "Ones We Don't Much Care About." On the July 28 edition of Fox News' On the Record, Fox News contributor Dick Morris claimed that, if the debt ceiling is not raised, "some offices are going to close, but they are ones we don't much care about. I mean, who is going to go crazy because the National Labor Relations Board closes its doors, or the Federal Communications Commission or the Federal Trade Commission?" Morris later claimed that "the country is not going to fall apart" without agencies such as those. [Fox News, On the Record, 7/28/11, via Media Matters]
While Some On Fox Have Openly Advocated Against Raising The Debt Ceiling
Napolitano: "If I Were In The Congress, I Would Encourage Everybody To Vote Against Raising The Debt Ceiling." On the April 11 edition of his Fox Business show Freedom Watch, host Andrew Napolitano interviewed Rep. David Schweikert (R-AZ). During the interview, Napolitano spoke repeatedly about the debt limit and at one point said, "If I were in the Congress, I would encourage everybody to vote against raising the debt ceiling." From the show:
NAPOLITANO: You have a couple of crucial votes coming up, Congressman Schweikert ... I suggest to you, Congressman Schweikert, is one of the more crucial votes you'll have to make this year, and that's the vote on whether or not to raise the debt ceiling.
SCHWEIKERT: The debt ceiling.
NAPOLITANO: And here is where the Republicans alone -- they don't need the Democrats, they don't need Mrs. Pelosi and they don't need the Senate -- can stop the flow of red ink. Because if every Republican in the House, or a majority of the Republicans, simply says no, then the debt ceiling does not go up, and the president is forced to cover the debt service, defense, entitlements and discretionary spending just on what he collects every month. What are the chances of that happening?
SCHWEIKERT: Judge, I've got to tell you, you're speaking like I'm thinking, except there's a lot more in the details. What happens if we stand firm, and do we what's right on the debt ceiling vote, and the bond markets go nuts on us. Every point that interest rates go up on U.S. sovereign debt is close to another 100 billion dollars in debt service. And remember, the discussion is raising the debt ceiling functionally to pay the bills that the previous Congress have already spent the money on.
NAPOLITANO: Correct. Correct, correct.
SCHWEIKERT: And so where do you find the balance of convincing the world debt markets that we're taking our debt seriously, so we don't panic them, and at the same time we bend this curve in the spending? This is walking a tightrope, because if we screw up, boom, every bit of savings we've accomplished gets eaten up by higher interest rates, and if we don't do it enough, then the left keeps buying their next election by this crazy spending.
NAPOLITANO: Last question, Congressman Schweikert. And if I were in the Congress I would encourage everybody to vote against raising the debt ceiling. But you've analyzed this in a most respectful and intelligent way. What will the Republicans get from the president and the Democrats in return for voting to raise the debt ceiling that will permanently, permanently stop this red ink and this madness? [Fox Business, Freedom Watch, 4/11/11, via Media Matters]
Napolitano Has Repeatedly Spoken Against Raising The Debt Limit. Napolitano has frequently used his Fox Business show as well as guest host positions on the Fox News Channel to speak against raising the debt limit. As a guest host on the March 10 edition of Fox News' Glenn Beck, Napolitano urged Rep. Jason Chaffetz (R-UT) and Sen. Jeff Sessions (R-AL) to vote against the debt limit. During the January 4 edition of Freedom Watch, Napolitano said, "It's an easy one for me -- the debt ceiling should not be raised." [Fox News, Glenn Beck, 3/10/11, via Media Matters; Fox Business, Freedom Watch, 1/4/11, via Media Matters]
Bolling: "I Say Let Them Default." As a guest co-host on the April 13 edition of Fox & Friends, Fox Business host Eric Bolling told Stuart Varney, "I say let them default. ... What's going to happen?" Varney replied, "Armageddon is going to happen." From Fox & Friends:
VARNEY: There's a great danger in that. As you approach this deadline, if you're even talking about default, as even a possibility, a remote possibility, you really spook the world's money people. You really spook them.
BOLLING: I say let them default.
BOLLING: Let them go. What's going to happen?
VARNEY: You're a brave guy.
BOLLING: What's going to happen?
VARNEY: Armageddon's going to happen.
BOLLING: How is it going to be Armageddon? Let's talk about that for a second.
VARNEY: OK. If we fail to allow ourselves to borrow any more money --
BOLLING: That's got to stop. That will force it to stop. That will guarantee --
VARNEY: So you've got an immediate $150 billion cut every month.
BOLLING: That will guarantee in order for it to come out of default, you have to stop spending. [Fox News, Fox & Friends, 4/13/11, via Media Matters]
Hannity: "I Would Not Vote To Raise The Debt Ceiling." During a panel discussion on the April 12 broadcast of his Fox News' show, Sean Hannity said, "If I was in Congress, I would not vote to raise the debt ceiling." From Hannity:
HANNITY: If I was in Congress, I would not vote to raise the debt ceiling.
FOX NEWS CONTRIBUTOR, DOUG SCHOEN: Right.
HANNITY: Vote for a balanced budget amendment -
SCHOEN: I would with a plan to balance the budget absolutely.
[STAN] DZIEDZIC [FMR. OLYMPIC WRESTLER]: I think it is dangerous to go down that path.
DZIEDZIC: Well, you have to remember that -
HANNITY: Wouldn't force him to cut?
DZIEDZIC: If that was the end result, but you may - you may force a risk premium for uncertainty on the bonds -
HANNITY: Isn't China, isn't Europe lecturing us now on capitalism and how if we don't get control of our debt -- wouldn't they see that as a sign that America may actually get it? [Fox News, Hannity, 4/12/11, accessed via Nexis]
Palin: "Hells No, I Would Not Vote To Increase That Debt Ceiling." On the April 29 edition of Fox News' Special Report, Fox News contributor Sarah Palin responded to a question about whether she would vote to increase the debt ceiling by claiming: "Hells no, I would not vote to increase that debt ceiling. Otherwise it just shows the American public we're not serious yet, we're still going to incur more debt." [Fox News, Speical Report, 4/29/11, via Media Matters]
Bolling: "We Should" Let The Debt Ceiling Expire "And See What Happens." On the July 28 edition of Fox News' Fox & Friends, Bolling responded to White House press secretary Jay Carney's statement that people unconcerned with raising the debt ceiling should "buy and hold [and] see what happens" by claiming, "He was right, though. We should buy and hold and see what happens." Bolling later claimed, "That downgrade and default thing that they keep throwing out there and scaring, you know, the bejesus out of people, it won't matter." [Fox News, Fox & Friends, 7/28/11, via Media Matters]
But Economic Experts Have Agreed That Failing To Raise Debt Ceiling And Defaulting Would Have Disastrous Consequences
Zandi: "In A Post-Default World, Financial Markets Would Unravel And The U.S. And Global Economy Would Enter Another Severe Recession." In a July 15 Washington Post op-ed, Moody's economist Mark Zandi stated: "The Obama administration and Congress must raise the federal debt ceiling by Aug. 2. That's all there is to it." Zandi warned that failure to do so could create "another severe recession" in "U.S. and global econom[ies]." From The Washington Post:
The Obama administration and Congress must raise the federal debt ceiling by Aug 2. That is all there is to it. In a post-default world, financial markets would unravel and the U.S. and global economy would enter another severe recession. The nation's already daunting fiscal problems would spiral out of control as tax revenue plunged and demand surged for unemployment insurance, food stamps, Medicaid and other programs supporting vulnerable Americans.
Yes, it would be wonderful if politicians could agree to rein in future budget deficits as part of a debt-limit deal. But that isn't necessary right now. Simply raising the debt ceiling enough to last through next year's elections would appease global investors and sustain the economic recovery. The 2012 vote will be a referendum on how to address our fiscal problems: The winner sets the agenda, and tough decisions can be made after the next president and Congress take office.
Defaulting on the nation's debt would be cataclysmic. The U.S. Treasury's Aaa rating is the one constant in the world's financial system. When times are bad anywhere on the planet, global investors flock to Treasury bonds because they know they will get their money back. This "flight to quality" has pushed U.S. interest rates to near-record lows and has been vital to keeping our economy afloat. Yet this benefit was earned over more than two centuries by adhering to the bedrock principle that the United States always pays its bills on time. One misstep, and the government would have to pay higher interest rates for years, perhaps for generations. [The Washington Post, 7/15/11]
Gross: "The Debt Ceiling Must Be Raised And Not Be Held Hostage By Budget Negotiations." In a Washington Post op-ed, Bill Gross, founder of the investment firm Pimco, warned that "[t]he debt ceiling must be raised and not be held hostage by budget negotiations." From The Washington Post:
To raise or not to raise the debt ceiling; that is the question: Whether 'tis nobler to suffer the slump and arrows of default today or in some distant future. Oh, bards of Washington, give us your answer.
This Shakespearean financial dilemma hangs in the balance between now and a somewhat theoretical Aug, 2, but I can tell you what an unbiased investment manager thinks: Don't mess with the debt ceiling. Raise it unencumbered if necessary. I say unbiased because my credentials have become very public over the past several months. Pimco owns very few Treasury securities, and its clients would theoretically benefit if yields rose on an under-owned asset class that was technically in default. But default would still be a huge negative for the U.S. and global financial markets, introducing fear and unnecessary volatility into the economy and global trade. The market situation might resemble what happened after Lehman Brothers collapsed in 2008.
The answer to our modern-day Hamlet's question then, is that there should be no question at all. The debt ceiling must be raised and not be held hostage by budget negotiations. Don't mess with the debt ceiling, Washington. Bond and currency vigilantes will make you pay. [The Washington Post, 7/13/11]
Politico: U.S. Going Into Default Is "An Unthinkable Idea To Many Economists And Market Participants." From Politico:
Republicans are growing increasingly concerned about the impact a bruising fight over raising the nation's $14.29 trillion debt ceiling could have on U.S. financial markets.
House Speaker John Boehner (R-Ohio) has had conversations with top Wall Street executives, asking how close Congress could push to the debt limit deadline without sending interests rates soaring and causing stock prices to go lower, people familiar with the matter said. Boehner spokesman Michael Steel said Tuesday night that he was not aware of any such conversations.
Treasury Secretary Timothy Geithner has warned Congress that without new borrowing authority, the federal government could hit the statutory debt limit by May 16.
Treasury could then implement emergency measures to continuing making interest payments on existing debut until around July 8. After that, the U.S. risks going into default, an unthinkable idea to many economists and market participants who say such an event could drive scores of large banks into failure, send interest rates skyrocketing as foreign investors abandon U.S. securities and crush the already slow-going economic recovery. [Politico, 4/13/11]
MSNBC: If Default Causes Interest Rates To "Rise Too Far, Too Fast, The U.S. Economy Could Face The Risk Of Another Recession." From an April 11 article on MSNBC.com:
Washington is gearing up for a battle over how many trillions the federal government can borrow to pay its bills, and it's shaping up to be an even bigger brawl than the one just resolved over funding the government for the next six months.
While investors viewed last week's budget brinksmanship as a minor event, they are beginning to grow concerned that many lawmakers and ordinary Americans, [sic] fail to grasp the implications of even suggesting the United States would default on its debt obligations.
What is a political football to Congress could end up flattening the economy and hurting consumers by lowering the nation's pristine credit rating and sending interest rates sharply higher.
So far, bond market investors apparently are not very worried; the United States has never defaulted on its debt and many have long thought a default unimaginable. On Monday, amid the rancorous aftermath of the budget battle that nearly shut down the government, bond prices were flat.
But some investors are betting that bond prices are headed lower. As the Federal Reserve wraps up a $600 billion round of bond buying designed to keep interest rates low, many investors are wondering what will replace that program when it expires in June. On Monday, the giant investment fund PIMCO, which recently dumped its holdings of U.S. Treasury securities, disclosed that it has gone even further and is now selling U.S. debt short -- a bet that bond prices have further to fall.
Falling bond prices hurt more than the investors who hold them. As prices fall, interest rates rise. If they rise too far, too fast, the U.S. economy could face the risk of another recession. Without borrowing authority, the government would be powerless to pay all its bills, much less assemble another stimulus package to revive the economy. [MSNBC, 4/11/11]
Ex-Treasury Official: "This Would Make The Lehman Brothers Bankruptcy Look Like A Walk In A Park ... They're Really Playing With Fire." From The Huffington Post:
If Congress doesn't raise the $14.3 trillion debt limit by mid-May, the U.S. government will have to resort to emergency measures to avoid default. One missed payment, which could happen as soon as July if the ceiling is not raised, would likely set off a widespread global panic, causing borrowing costs to skyrocket and severely crippling the nation's economy.
But Republican lawmakers have said they will use the debt limit as a means of enforcing fiscal austerity, insisting they won't raise it without winning concessions from Democrats.
Meanwhile, Jim Millstein, the former restructuring officer at Treasury, who helped reorganize AIG, outlined how disastrous the consequences of default would likely be. Speaking on CNBC on Tuesday, he said that a Treasury default would affect investors of all sorts, and he criticized those who downplay the consequences.
"This would make the Lehman Brothers bankruptcy look like a walk in a park on a sunny day," he told CNBC's David Faber. "They're really playing with fire." [The Huffington Post, 4/13/11]
Fox Figures Have Also Advocated For Balanced Budget Amendment Experts Say Will Hurt The Economy
Fox's Camerota Declares GOP's Balanced Budget Amendment "Makes Perfect Sense." On the July 19 broadcast of Fox News' Fox & Friends, guest host Alisyn Camerota stated that that a balanced budget amendment "makes perfect sense" and that President Obama and congressional Democrats oppose it "maybe because it's a Republican idea, or maybe because they think that it would tie their hands, and they wouldn't be able to have the latitude in spending." [Fox News, Fox & Friends, 7/19/11, via Media Matters]
Doocy Asks Sen. McCaskill Why It Is "Not Realistic To Balance The Budget And Have An Amendment To That Effect." During the July 22 edition of Fox News' Fox & Friends, after guest Sen. Claire McCaskill (D-MO) called the House bill that included the balanced budget amendment "not realistic," co-host Steve Doocy responded by asking, "It's not realistic to balance the budget and have an amendment to that effect?" [Fox News, Fox & Friends, 7/22/11, via Media Matters]
Bolling: It Would Be "Fantastic" If Balanced Budget Amendment Went To The States." During the July 31 edition of Fox News' Fox & Friends Sunday, Bolling stated that it would be "fantastic" if a balanced budget amendment was sent to the states to ratify. [Fox News, Fox & Friends, 7/31/11, via Media Matters]
Hannity On CCB Vote: "I Love What the House Did Today." On the July 19 edition of his Fox News show, host Sean Hannity stated of the House GOP's cut, cap, and balance bill, which included a balanced budget amendment: "I love what the House did today. Cut, cap and balance because you have kids, kids, kids. ... It makes the most sense to me." [Fox News, Hannity, 7/19/11, via Nexis]
Hannity: "Why Would Liberals Oppose Cut, Cap, And Balance? Tell Me Why It's Not Good For The Country." On the July 18 edition of his show, Hannity hyped the House bill to "cut, cap, and balance" government spending and asked Democratic strategist Bob Beckel: "Why would liberals oppose cut, cap and balance? Tell me why it's not good for the country." From the broadcast:
HANNITY: OK. Now, how important is it Republicans not go along with the McConnell deal? Because I think this is it.
NOELLE NIKPOUR, REPUBLICAN STATEGIST: I've got to tell you, taxes did not get us into this trouble. It's government spending. Spending got us into trouble.
HANNITY: Exactly. Cut, cap and balance works for you?
NIKPOUR: You know, this goes beyond this. This isn't just this just one little thing. We need to think of a solution to pay our debt long term.
HANNITY: Cut, cap and balance do it?
NIKPOUR: Absolutely it can do it.
CHARLES GASPARINO, FBN CORRESPONDENT: It could do it. He's going to wring my neck when I say this. We are not going to default, even if we don't raise the debt cap. That is the bottom line. We have enough on hand to pay debt service and that's all the markets care about.
Despite all that nonsense from Moody's and S & P, Treasury bond prices are going up. Yields are going down. I'm telling you, we have enough money to pay that, we have enough money to pay Medicare, maybe social security. Do we have enough to keep government going forever the size of it right now? No. And that's what the American people should be dealing with; we should be having an argument about the size of government.
BECKEL: You have lost your mind.
HANNITY: Will you get rid of that liberal side of you for just a minute, because you are a smart analyst. I want to ask you a serious question. Why would liberals oppose cut, cap and balance? Tell me why it's not good for the country.
BECKEL: Because the balanced budget amendment is something we have always opposed, because it would force you into making drastic cuts you don't need. Can I just go back to what you said? First of all, it won't pass because it requires 2/3 vote. It will get through the House, probably, but it will not get through the Senate. [Fox News, Hannity, 7/18/11, via Nexis]
Economic Experts On Both Sides Have Said Balanced Budget Amendment Would Make Recessions Worse, Harm Economy
Former George H.W. Bush Treasury Official: Amendment "Would Force The Federal Government To Make Economic Recessions Worse." Bruce Bartlett wrote in a Fiscal Times column that a balanced budget amendment "would force the federal government to make economic recessions worse. Since federal revenues fall and spending rises automatically in economic downturns, it would force spending cuts and tax increases at precisely the point when the economy is reeling, potentially turning a modest downturn into a depression." [The Fiscal Times, 8/27/10]
AEI's Ornstein: Balanced Budget Amendment Is "About The Most Irresponsible Action Imaginable." CNN.com reported:
Striving to achieve a balanced budget by way of a constitutional amendment would be "irresponsible," according to one seasoned congressional observer.
"It is about the most irresponsible action imaginable," said Norman Ornstein, a resident scholar at the conservative American Enterprise Institute. "It would virtually ensure that an economic downturn would end up as a deep depression, by erasing any real ability of the government to pursue countercyclical fiscal policies and in fact demanding the opposite, at the worst possible time." [CNNMoney, 3/29/11]
CBPP: "A Group Of Leading Economists, Including Five Nobel Laureates" Released Public Letter To Obama And Congress "Opposing A Constitutional Balanced Budget Amendment." On July 19, the Center on Budget and Policy Priorities (CBPP) stated that a group of seven leading economists, including five Noble Laureates in economics, "publicly released a letter to President Obama and Congress opposing a constitutional balanced budget amendment." From the letter:
We, the undersigned economists, urge the rejection of proposals to add a balanced-budget amendment to the U.S. Constitution. While the nation faces significant fiscal problems that need to be addressed through measures that start to take effect after the economy is strong enough to absorb them, writing a requirement into the Constitution that the budget be balanced each year would represent very unsound policy. Adding additional restrictions, as some balanced budget amendment proposals would do, such as an arbitrary cap on total federal expenditures, would make the balanced budget amendment even worse.
1. A balanced budget amendment would mandate perverse actions in the face of recessions. In economic downturns, tax revenues fall and some outlays, such as unemployment benefits, rise. These so-called built-in stabilizers increase the deficit but limit declines of after-tax income and purchasing power. To keep the budget balanced every year would aggravate recessions.
5. An overall spending cap, which is part of some proposed amendments, would further limit Congress's ability to fight recessions through either the built-in automatic stabilizers or deliberate changes in fiscal policy. Even during expansions, a binding spending cap could harm economic growth because increases in high-return investments -- even those fully paid for with additional revenue -- would be deemed unconstitutional if not offset by other spending reductions. A binding spending cap also would mean that emergency spending (for example on natural disasters) would necessitate reductions elsewhere, leading to increased volatility in the funding for non-emergency programs.
7. It is dangerous to try to balance the budget too quickly in today's economy. The large spending cuts and/or tax increases that would be needed to do so would greatly damage an already-weak recovery. [Center for Budget and Policy Priorities, 7/19/11]