The news about the economy isn't all bad, but it's sorely lacking

Sunday, February 22, 2009

If you bother to read all the way through this column, please do not presume that my intent is to bash the news media. I am part of the media, and I am proud of everyone who toils to keep you informed.

But I think newspapers, TV and radio have, in some ways, done a terrible job of reporting on our current economic situation. The hype may have made things worse.

My purpose today is to help you better understand what's going on.

Let me also offer this disclaimer up front:

The economy is a staggeringly complex topic. Thank goodness news outlets have tried to keep us informed about it. But the value of information is only as good as our ability to comprehend it.

Having said that, I wonder if the news media have had a hand in creating this mess.

I don't think for a minute that any reporter or broadcaster or editor or producer purposely did something to shove a running chain saw into the heart of the American economy. We might, however, have created perceptions that, in turn, led to misunderstandings which, in turn, generated unwarranted panic which, in turn, resulted in some terrible financial decisions.

For more than a year before economists officially confirmed this recession, the media hammered away at the possibility we might be in one. "Recession" is a powerful word used in certain contexts. And the daily references made us all jittery. Some of us made financial decisions and investment decisions that had the effect of slowing the economy.

Against the backdrop of huge corporate misdeeds like Enron, we began to wonder if anything related to the economy was stable. We got our answer when the world's largest insurance company, AIG, suddenly appeared to be drowning in demands for which it had insufficient reserves.

As all of this unfolded, the news media dutifully reported the highlights while providing little explanation of why and how. So we assumed the fault lay at the feet of crooked CEOs, crooked politicians and crooked oversight agencies. If something goes bad in the modern world, there is a tendency to hastily assume there must be a crook lurking nearby.

But the media didn't just report. Newspaper articles and broadcast stories have treated this new economic phenomenon the same way it treats the peccadilloes of rock stars and Hollywood actors. Soon we were caught up in the gee-whiz fallout of the news of the day.

The economy has become a superstar. Every day we get new doses of speculation along with the virtually incomprehensible reports of bailout and stimulus plans that are measured in trillions of dollars. All the hype is there, but so little to help us comprehend.

Just this past week there were a couple of examples of how we report on the latest economic news:

* On "60 Minutes" last Sunday, the CEO of Nucor, the highly profitable U.S. steelmaker with a plant in Blytheville, Ark., defended his successful lobbying effort to make "buy American" part of the stimulus bill signed by President Obama on Tuesday. Under this provision, steel used in infrastructure projects funded by stimulus dollars must be made in the U.S. Foreign steel is considerably cheaper, but the thinking is that a program to stimulate the U.S. economy ought to have a ripple effect, and buying overseas steel wouldn't do much for steelworkers here.

The CEO of Caterpillar, the world's largest manufacturer of heavy equipment and based in the president's home state, said the "buy American" requirement would have a boomerang effect. The official said more expensive U.S. steel would make Caterpillar uncompetitive in the worldwide heavy-equipment market, and most of the company's sales are to foreign buyers.

Wait a minute. The Nucor CEO wants U.S. steel used in federally funded stimulus projects. Caterpillar isn't a federally funded bailout project. It can buy cheap foreign steel if it wants. But that wasn't mentioned in the "60 Minutes" report.

* In reporting about the signing of the latest stimulus-bailout package, nearly every news outlet in America reported on the recovery plans offered by GM and Chrysler. Both automakers said they would trim production to match lowered sales estimates. OK, that makes sense.

And GM said it would slash 47,000 workers, many of them at overseas plants.

Wait a minute. Isn't the bailout-stimulus plan designed to put Americans back to work? I didn't read or see that anyone in the news media seemed too concerned about the disconnect between creating jobs and slashing payrolls.

Taken individually, the "buy American" and GM/Chrysler scenarios aren't enough to bring down the economy. But when there are hundreds of similar reports framing our understanding of what's happening to the economy, they can't help but take away the confidence of even the savviest economist.

Think about it. The erosion of confidence in virtually every sector of the economy is why we are in a recession. Workers are afraid of losing their jobs. Consumers are afraid to spend. Retailers are hesitant to let inventories get too high. Investors appear to be inverting the "buy low, sell high" maxim. Lenders are holding on to cash for fear they will make bad loans.

All of which is dutifully reported in the news media. Readers and viewers want those facts. They also should be told why. And they need some context for the information they're getting.

Let me use another example that's not related to the economy to show how the media delivers information.

In one of his State of the Union addresses, President Clinton announced an ambitious plan to put 100,000 more police officers on the streets to combat crime. This was a big headline. The president got considerable credit.

The fact is that the 100,000 extra police never materialized. Some extra federal dollars were used to keep police jobs stable rather than being cut.

To this day, what we remember is that President Clinton added 100,000 police, and crime rates went down. As recently as April of last year, Hillary Clinton was proposing in her presidential campaign a new $4 billion-a-year program to add another 100,000 police officers. It had a nice, familiar ring.

Within the past month a high-ranking government official was heard to say, during a TV interview, that one of the greatest accomplishments of the Clinton administration was adding 100,000 police officers.

And the interviewer didn't even blink her eyes.

By the way, Clinton also was the president who was going to get funding for 100,000 more teachers, as reported throughout the news media.

But it never happened.

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