For more than a week, NewsBusters has been pointing out that media seem to be adopting the 1992 Bill Clinton playbook of presenting the economy as being in much worse shape than it really is.
On Sunday, former Clinton administration adviser George Stephanopoulos took this doom and gloom posture by repeatedly depicting the nation as already being in a recession.
In fact, he began the most recent installment of ABC's "This Week":
The resignation letters were flying this week. Eliot Spitzer of New York, Admiral Fallon at Central Command, Geraldine Ferraro from the Clinton campaign, and Rev. Jeremiah Wright from Obama, all against the backdrop of an economy almost certainly in recession.
Minutes later, he pressed his first guest, House Speaker Nancy Pelosi (D-Cali.), on this issue:
GEORGE STEPHANOPOULOS, HOST: There's a witches brew of bad news out there. Are we in a recession?
NANCY PELOSI (D-Cali.): Well, many people across our country believe that we are because of how this economy is impacting them and their homes. I don't like to use the word because I...
STEPHANOPOULOS: Why not?
PELOSI: Well, I think that what we need now is confidence.
This was interestingly the subject of an op-ed published in Sunday's Washington Post by MIT behavioral economics professor Dan Ariely entitled "Shhh...Don't Say 'Recession'"(emphasis added):
If (as is often the case) talking about sex makes people more interested in having it, does that mean that the current talk about a recession could actually be creating one?
Or so one general finding of behavioral economics would have us believe. With all this chatter about a recession, consumers might, for example, hold off on buying that new dishwasher because of the "bad economy," or pass up the more expensive restaurant because "we're in a recession." Without any discussion about recession, we're unlikely to change our pattern of behavior. But talking about it can be a force that affects our decisions and alters our consumption habits.
This suggests that if we just ignored the talk about recession, we would repeat our past behaviors and not deviate much from our pre-recession pattern of purchasing decisions. But when everyone is talking about recession, it's likely to make us stop, rethink our past decisions and feel that something needs to change. And so we change our patterns, start acting as if we're in a recession -- and thereby create one.
Yet, such didn't seem to concern Stephanopoulos who later asked Pelosi:
Are you worried that we're headed for an economic emergency, a financial crisis?
A similar panic was discussed with Stephanopoulos's next guest, Treasury Secretary Henry Paulson, regarding the Federal Reserve's announcement on Friday of an organized bailout of investment firm Bear Stearns:
So your concern is that if Bear Stearns does not get this money, we could have an unstable financial crisis?
Moments later, Stephanopoulos quoted an investment adviser who is known in the industry as a "perma-bear":
Let me throw at you something that was quoted in the New York Times this morning, William A. Fleckenstein, who's the president of Fleckenstein Capital in Washington. He says, “Why not set an example of Bear Stearns, the guys who have this record of dog-eat-dog, we’re brass knuckles, we’re tough? This is the perfect time to set an example, but they are not interested in setting an example. We are Bailout Nation.”
Sadly, Stephanopoulos didn't feel it was necessary to share with viewers who Fleckenstein is, and what his financial positions are concerning the markets. Here's how market research organization CXO Advisory Group summarized Fleckenstein's views and track record (emphasis added):
- Bill Fleckenstein has been consistently and confidently very pessimistic about the U.S. economy, and especially disparaging of the Federal Reserve's management of the money supply. He believes the economy must experience much more pain to work off the excesses of the Internet bubble, often comparing current financial conditions to those of the most disastrous in U.S. history.
- He has been mostly a short-seller of stocks in recent years, based on his belief that the stock market is grossly overvalued and therefore doomed to fall significantly in a continuing bear market. His pronouncements sometimes tend toward the apocalyptic, making it difficult to judge him correct at any point over the past four years. (From his 1/10/05 commentary: "I don’t believe that there has been a moment in time in the last 50 years where the stock market has been more lopsidedly tilted toward all risk and no reward.") A typical investor might well have interpreted his advice to mean staying out of the market, or shorting the market, for practically all of the period examined. [...]
- Based on subsequent stock market performance and our judgments about his forecasts for overall stock market direction, Bill Fleckenstein has been right 30% of the time, a very poor record. His forecast sample size is moderate, as is therefore our confidence in this conclusion.
In summary, Bill Fleckenstein's stuck-on-pending-disaster outlook has resulted in a very weak stock market forecasting record over the past few years. When disaster does strike, he will have warned us, and warned us, and warned us...
Once again, Fleckenstein is what we in the industry call a "perma-bear," meaning that he is always short stocks -- has actually managed a short hedge fund since 1996 -- and will benefit financially if the Federal Reserve allows banking and securities companies to fail.
Sadly, Stephanopoulos chose not to fully apprise viewers of Fleckenstein's vested interest in -- and well documented prognostications of -- our nation's financial collapse.
Of course, this didn't prevent George to continually pound the table about the dire condition of the economy:
How about the broader question of where the economy is right now? President Bush was very careful on Friday not to use the word "recession." I mean, you all have been very reluctant to do that. Yet, 70 percent of the economists surveyed by the Wall Street Journal say that's where we are.
Ah, yes...the famous Wall Street Journal survey that everyone in the press have been citing. Yet, few have been completely forthcoming about this report (emphasis added):
A Wall Street Journal survey of more than 50 economic forecasters in early March found a profound shift toward pessimism: About 70% say the U.S. is currently in recession, and on average they put the odds that this recession will be worse than the past two mild, short recessions at nearly 50%.
Hmmm. So, about 35 economic forecasters say we're in a recession, and that means we are?
Now, I'm not trying to be glib here, for we might very well be in a recession at this moment. However, we weren't in the fourth quarter, and the first quarter Gross Domestic Product numbers won't be released until late May, with the second quarter results out in late August. As such, we won't know if we're in a recession for another five months yet.
Additionally, as NewsBusters reported on March 8, regardless of some of the recently bearish economic data, and quite contrary to the way media reported the February unemployment numbers, the job losses of the past two months are only one fifth the average we've seen in the first two months of the previous four recessions going back to 1979.
Does that mean we shouldn't be asking such questions? Certainly not. However, a survey of 101 senior executives just released by the Boston Consulting Group found that only 37.6 percent of them believe that we're in a recession now.
Who's right? I don't know, and nobody will for months to come. However, as MIT's Ariely accurately stated on Sunday, the more we talk about recession, the more it becomes a self-fulfilling prophecy.
Unless that's what media members like Stephanopoulos want, maybe it would be better for them to use the "R-word" more sparingly, or, at the very least, avoid making on-air pronouncements like "economy almost certainly in recession."