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The Media Depression that Wasn't (Even Close)

Federal Reserve Chairman Ben Bernanke announced on Sept. 14 that the “recession is very likely over at this point.” Good news if he turns out to be right, but it will also mean that the network news media were wildly wrong about the economy – again.


The networks have been looking for good economic news lately, but it wasn’t very long ago that journalists on ABC, NBC and CBS were constantly comparing the U.S. economy to the Great Depression and ultimately using that fear to sell the huge plans of the Obama administration.


NBC even profiled a “modern day shanty town” in Sacramento, Calif. March 9, showing viewers historic photographs of “Hoovervilles” as Chris Jansing narrated: “These images so hauntingly reminiscent of the iconic photos of the 1930s and the Great Depression.”


After several “haunting” photos, an image of the tent city appeared in black and white before it was colorized – an unsubtle attempt to persuade viewers that this is a second Depression.


Since Jan. 1, 2009 the networks have talked about a Great Depression in 301 stories, sixty percent (184 stories) were concentrated in the first three months of the year – January, February and March – coinciding with major policy initiatives including the $787 billion stimulus package. That doesn’t even include the hundreds of references and predictions made in 2008 including questions like: “Is the American economy heading over a cliff?”


ABC’s Charles Gibson also found parallels to the Depression-era on March 31, 2009 when he discussed the G20 summit of world leaders by referencing a similar London meeting in 1933.


“In 1933, leaders from around the globe also gathered in London to try and save the world from Great Depression. They did not,” Gibson said. “After weeks of squabbling and recriminations, their gathering ended, and the Depression got worse.”


Of course, at the 2009 London gathering President Obama was meeting to discuss international finance regulation and increased stimulus spending (two major agenda items for his administration.)


Despite claims from the White House and the media that the U.S. faced a second Great Depression, the country never came close to it. For example, the unemployment rate in 1932 was at 25 percent, while unemployment currently stands at the 26-year-high of 9.7 percent.


Allan H. Meltzer, a Carnegie Mellon professor of economics, made that point in an op-ed in the Wall Street Journal on Aug. 31. Meltzer also had an answer for why “opinion makers insist on inaccurate and frightening analogies that overstate the severity of present conditions.”


“First, there is a strong political motivation to make this recession out to be worse than it actually is. The Obama administration wanted to make it appear as though it saved us from an incipient disaster, so it overstated its achievements. The White House also wanted to foist its huge ‘stimulus’ program on the country in order to redistribute income.”


Business & Media Institute adviser and economist Don Boudreaux told BMI his best guess as to why Bush and Obama “fed these fears,” was that “they sensed that Americans would be more willing to grant much more power to Washington”  if they feared a “replay” of the Great Depression.


Meltzer was right that the Obama administration has tried to take credit for preventing another Depression. On Sept. 3, Vice President Joe Biden was promoting the stimulus package saying, “[T]he Recovery Act has played a significant role in changing the trajectory of our economy, and changing the conversation about the economy in this country. Instead of talking about the beginning of a depression, we're talking about the end of a recession – eight months after taking office."


 

Depression Rhetoric Stimulates Government Spending


In 2008, Obama campaigned on the threat of economic despair. “We are in the worst financial crisis since the Great Depression, and a lot of you I think are worried about your jobs, your pensions, your retirement accounts," he said on Oct. 7, according to Reuters.


That theme continued into his presidency and was used to promote bailouts and the $787 billion in stimulus spending, to call for financial regulation and even to push health care reform. In succession, much of the media campaigned for each of those causes – basing some of their support on the danger of another Great Depression.


CNBC’s Jim Cramer loudly advocated a General Motors bailout Nov. 11, warning that the U.S. economy would “meltdown” without it.


“I don’t care – for the same reason that AIG was in the business of a criminal conspiracy – big deal,” Cramer said. “It’s like look – we got to bail them out. We have to. We have to keep the Great Depression off the table.” Cramer had said the same thing about the bailout of American International Group, Inc.  (AIG).


On the Jan. 4 “This Week with George Stephanopoulos,’ even before Obama took office, The Nation’s Katrina Vanden Heuvel called for a $1 trillion government spending package because “We’re facing, I don’t need to tell this table, we’re facing the most severe economic conditions since the Great Depression and possibly more complicated because of a global recession. Action and action now is needed and those are the lines.”


ABC News’ Cokie Roberts replied, “I think everybody agrees with that, though. I mean I think that the willingness right now to do something very big is greater than I've ever seen it.”


Looking at the news media alone, Roberts was right about the “willingness” to do something drastic particularly when it came to spending taxpayer dollars.


ABC, CBS and NBC relied on pro-stimulus voices by a more-than 2-to-1 ratio according to a Special Report from the Business & Media Institute. In fact, NBC’s Scott Cohn told “Nightly News” viewers “Economic stimulus isn’t just a political debate around here. It could be a matter of survival.”


Those networks also ignored the more than 250 economists who opposed the stimulus package. Not one of those economists was interviewed by the networks between Election Day 2008 and Feb. 10, 2009 when the Senate approved the initial stimulus plan.



Giving Obama Credit for a Turnaround

 

After spending much of 2008 and early 2009 ginning up fears of a Great Depression, the news media is giving the Obama administration credit for preventing an economic situation that we never came close to.


The administration has made those claims on multiple occasions. Biden touted the impact of the stimulus in rescuing the economy on Sept. 3 and White House economic adviser Austan Goolsbee claimed Obama “prevented the Great Depression,” according to a May 29 Bloomberg story.


“I am thrilled, overjoyed that we aren’t all out of our jobs and we have prevented the Great Depression,” Goolsbee said.


Obama himself implied that the stimulus stopped a second Great Depression in his Sept. 14 speech on the anniversary of Lehman Brothers failure. “And if taxpayers ever have to step in again to prevent a second Great Depression, the financial industry will have to pay the taxpayer back – every cent, “Obama said.


But it wasn’t just the administration trying to take credit for a turnaround, the media were at it too.


ABC’s Terry Moran applauded the president on June 17 “Nightline” saying, “Well, he arrived in the middle of a financial storm not seen since the Great Depression. Record foreclosures, sky-high unemployment, and once great companies in freefall. Add to it all a public outrage over Wall Street's greed and Washington’s bailouts. But five months into the Obama administration, there are green shoots to suggest the recession is receding. That this economy may be stabilizing.”

CNBC’s Jim Cramer, who often appears on sister networks NBC and MSNBC, announced “the Depression over” on April 2.

“The Depression is over and now we have a president who has gone from bear-in-chief to bull-in-chief, and that’s why we now like him,” Cramer said. “He’s changed his genus, if not his phylum. We keep ours and now Obama knows if he kills your 401(k), IRA and 529 plan, he can’t make it up by taking some money from the rich and just giving everybody a G or two.”

Despite the media’s praise for him, Obama didn’t rescue America from a second Great Depression, according to economist and BMI adviser Don Boudreaux.

“The claim [about a Great Depression] was overstated – vastly so. There was no evidence to support it. First, unemployment is still not as bad as it was in the early 1980s, much less the far-worse 1930s,“ Boudreaux explained. “Second, although the 2008-2009 percentage fall in GDP is indeed the second largest since the Great Depression (excluding that of the immediate post-WWII military scale down), it is only 3.9 percent. This figure is not only far smaller than the 26.7 percent figure for 1929-1933, but is very close to the 3.7 percent figure for 1957-58, the 3.2 percent figure of 1974-75, and the 2.9 percent figure for 1981-82.”

Boudreaux also responded to Obama’s claims of rescuing the economy saying it is the “nature of the politician.”

“But, at best, such claims would be like Brother Love crediting his magic elixir for making your cold go away about ten days after you drank it,” Boudreaux concluded.