In the wake of a European debt crisis, the recent G-20 meeting in Toronto revealed the intention of many European nations to begin dramatically tightening their fiscal belts.
The world leaders agreed to cut deficits in half by 2013 and "start to stabilize their debt-to-output ratios by 2016," according to Bloomberg Businessweek. That goal conflicted with President Barack Obama's wishes. During the economic summit, he "urged continued spending to support growth."
Overall, the news media have been supportive of the Obama's spending requests, a trend some continued in reports about the summit.
An "American Morning" segment painted a flattering picture of Obama at the G-20 summit by ignoring the "rift" between Obama's push for more stimulus and Europe's desire to slash budgets. Christine Romans made it sound as if everyone came to an agreement.
John Roberts introduced Romans segment saying, "The G-20 summit final communiqué was issued yesterday with a big nod toward both deficit reduction and continuing stimulus and you've got to wonder how do you have both." Romans replied that the group was "saying that they can do both. In the very near term keep the stimulus going, but longer term they have to look to cutting deficits."
In contrast, CBS "Evening News" declared that Obama "for the most part did not succeed" at convincing European leaders to agree to more spending.
ABC "World News Sunday" reported that Obama had "lost an argument," but sided with his calls for greater spending by warning that "some economists say that (budget cutting) could plunge the world into a second recession."
While other economists "say" that stimulus is not the answer, "World News" didn't include any of those voices and had only one economist on that night to support additional spending.
Liberal New York Times columnist and Nobel Prize winner Paul Krugman went even further than "World News" in an attempt to scare up support for more spending. Krugman's June 28 column warned that the economy is in the beginning stages of a "third depression," and austerity would push us into one. His claims were promoted by the fill-in host of "The Ed Show" on MSNBC and his guest, left-wing economist Dean Baker, on June 28.
Few people in the news media have challenged such calls for government spending, but some people on the financial network CNBC have supplied other views. CNBC's Larry Kudlow and Steve Forbes debunked Krugman's claim on June 28. Kudlow said, "But Steve, the so-called spending cuts or tax increases or deficit reduction hasn't happened yet. In the last two years, we've had gargantuan spending and ultra-easy money, which is what Professor Krugman has been advocating the whole time. And he still thinks we're in a depression. So I need to ask you, maybe his policies are what threaten the depression."
Forbes agreed and replied, "It's like the old physicians who continue to bleed the patient and wonder why the patient isn't getting better and then bleeds the patient even more." Forbes argued that the U.S. needs spending cuts, tax cuts (or at least maintaining tax rates) and the stabilization of the dollar.
CNBC's Rick Santelli had a much different recipe for economic recovery than Krugman, shouting on June 28, "I want the government to stop spending! Stop spending, stop spending, stop spending, stop spending! That's what we want, stop spending!"
After a heated debate with CNBC's Steve Liesman, Santelli declared: "Our deficit is too big and we need to knuckle under and we need to live too prudently, prudently."
Obama Wants to Spend Now, Pay Later
Obama urged countries at the G-20 summit to continue spending, but CBS "Morning News" reported June 28 that "even before the summit, President Obama says he intended to slash deficit spending in half by 2012."
That would be an enormous challenge since the federal deficit is projected to reach $1.6 trillion this year, according to Reuters.
"I'm serious about it," Obama said at a G-20 news conference. Reuters reported that Obama's special deficit commission will make recommendations Dec. 1, after the 2010 congressional elections.
"I'm doing it because I said I was going to do it," Obama said. "People should learn that lesson about me, because next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, because I'm calling their bluff."
Ryan Ellis, tax policy director for Americans for Tax Reform, pointed out the timing of Obama's "difficult choices." Ellis told the Business & Media Institute, "Why isn't he proposing these ‘very difficult choices' now, before the election? Is he afraid that his tax increases (which are all he could be talking about) would be unpopular?"
Another tax expert, Andrew Moylan of the National Taxpayers Union, told BMI "‘Difficult choices' is thinly veiled code for massive tax hikes that would be necessary to pay for Washington's unconscionable spending spree."
Moylan said he thought "we're likely to see proposals to eliminate at least some of the 2001 and 2003 tax cuts (in all likelihood, raising the top rate back to 39.6 percent, reinstating a death tax of something like 45 percent, and eliminating the lower capital gains and dividends tax rate of 15 percent)."
And that's "on top of the myriad other tax hike proposals," Democrats have suggested like an energy tax and financial transaction tax, Moylan said.
What sort of impact would those tax hikes have on an economic recovery? Moylan told BMI no tax hikes improve economic growth so "we can say with confidence that those tax hikes would make the recovery slower than it might otherwise be."
Media Embraced Obama's Spendy Ways, Blamed Deficit on Bush
Obama has spent like no other since he became president. In 2010, he submitted the largest federal budget ever at a whopping $3.8 trillion. To put this in perspective: Obama is proposing a budget $700 billion larger than big spender Pres. George W. Bush's last budget. It's twice the size of Pres. Bill Clinton's last budget of $1.9 trillion, who was credited with generating a budget surplus.
Despite that "staggering" budget, at the time broadcast networks managed to paint Obama as a fiscal conservative and deficit slasher.
The news media, with few exceptions, promoted Congress and Obama's spending spree by favorably reporting the $787 billion stimulus, the auto bailout, the Cash for Clunkers program and rarely asking how it would all be paid for down the road. Now that government stimulus is unpopular with Americans, the networks barely reported Obama's request for $50 billion to bail out state and local governments. Sen. Bob Casey, D-Pa., is also asking for $165 billion to bail out labor union pensions.
Journalists have used multiple tactics to shift blame away from Obama's spendthrift ways. In some cases, reports have simply ignored massive deficits. Others have agreed that Obama needed to spend in order to fix the economy, despite the deficits that would be incurred. Still others have repeated the White House's own claim that the previous administration is to blame for the huge debt.
On Oct. 8, 2009, CBS "Evening News" ignored the fact that the federal deficit had risen to $1.4 trillion, three times what it was one year earlier. But on Oct. 7, 2008, under President George W. Bush, Katie Couric made sure to mention the "record federal deficit" had tripled from the prior year.
In 2010, after Obama submitted the largest federal budget in history, with a projected deficit of $1.6 trillion, the networks showed their support.
NBC's Savannah Guthrie portrayed all the excess spending as a way to get the economy back on track saying: "He's asking for $100 billion to spur job growth - things like tax cuts for small business, tax breaks to increase wages - and he's doing this knowing that it will drive up the deficit, certainly even more in the short term. But all economists agree the real way to get a chunk out of the deficit is to increase hiring."
Guthrie was highlighting only a tiny fraction of the overall budget and failed to criticize the administration for not finding ways to cut more waste.
Taking a slightly different tack to express support, CBS's Bill Plante agreed with the president's spending priorities on Feb. 1, 2010, saying Obama "needs' to spend right now.
"He needs to spend more money in the short-term to create jobs, but he desperately needs to spend a lot less over the long-term," Plante said on "The Early Show."
Stories also followed Obama's lead in blaming his predecessor for the huge deficit. Many reporters pointed their fingers at the Bush administration, including ABC's David Muir. His Feb. 1 "World News" report nearly copied Obama's budget announcement right down to the blame on "previous administrations."
Muir pinned the record deficits on President Bush's tax cuts and war spending when he answered the question: "How did we get here?"
His timeline of the expanding federal deficit began with an image of Bush signing a bill and the words "Tax relief for America." This has long been the claim of the national news media. While Bush was certainly responsible for helping balloon the federal deficit, ATR's Ellis told the Business & Media Institute the tax cuts weren't the problem, overspending was.
Like Muir, CNN's Fareed Zakaria demonstrated his economic ignorance by claiming that the Bush tax cuts were "the single largest part of the black hole that is the federal budget deficit."
But the facts don't bear out Zakaria's claim. According to Ellis, tax revenues were higher than the average when Bush took office, but fell before the tax cuts because of the dot-com bust and the 2001 recession.
"Federal tax revenues are much more dependent on the economy than they are on tax policy. Tax revenues ROSE as a percent of the economy in the years after the BTC (Bush Tax Cuts) became law. They only fell again when the economy imploded," Ellis explained.