The "Recession" is a Media Myth

John Lott writes today about the effort of the media and the Democrats to talk down the economy in hopes of helping Democrats win in November:

Despite all that, this last week, Barack Obama proclaimed “As most experts know, our economy is in a recession.” Hillary Clinton made similar staements last fall. Yet, as any economist knows, a recession is two consecutive quarters of negative growth, and we haven’t even had one single quarter of negative growth reported. The economy slowed down significantly during the end of last year, but that was after a sizzling annual GDP growth rate of 4.9 percent in the third quarter....

The media’s focus on the negative side of everything surely helps explain people’s pessimism. In a recent interview Fox’s Neil Cavuto claimed this bias “is all part of the media’s plan to get a Democrat in the White House.”

Indeed, research has indicated that media bias is real. Kevin Hassett and I looked at 12,620 newspaper and wire service headlines from 1985 through 2004 for stories on the release of official government releasing numbers on the unemployment rate, number of people employed, gross domestic product (GDP), retail sales, and durable goods.

Even after accounting for how well the economy was doing (e.g., what the unemployment rate was and whether it was going up or down), there was still a big difference in how positive or negative the headlines were. Democratic presidents got about 15 percent more positive headlines than Republicans for the same economic news.

Yet, the hysteria created by this coverage can have another cost. It creates pressure for government to “do something,” even if that rush to do something actually ends up hurting the economy. For example, Obama's promises last week “to amend our bankruptcy laws so families aren't forced to stick to the terms of a home loan” will only further drive down the value of mortgage-backed securities, making any unstable financial institutions that hold them even more likely to fail. In the long term, who is going to want to loan money when the contract can be rewritten at a later date?

The news media have generated a lot of fear. Ben Stein has a point when he says “The actual economic conditions are not that bad. I think if we have a recession, if we have a serious recession, a great deal will lie at the media’s feet.” Hopefully a little perspective will enter the picture before even more harm is done.

You may remember that in the latter half of 2000 the economy was in an actual recession, but the media didn't dare report that with an election looming. When candidate George Bush dared to challenge the Democrats on the economy he was accused of "trying to talk down the economy". Then, mysteriously, upon his election the economic news suddenly turned to recession and the effort was made to blame the economic troubles on the newly elected president.

It never changes.