Economic Sour Grapes

Any data analysis is useless unless it follows the old axiom requiring the need to compare "apples to apples." Citing raw dollars in the U.S. budget over the span of decades borders on useless. As the size of the U.S. and global economy grows a more valid comparison would be percent of GDP. It seems in coverage of the economy most mainstream media folks just wants to stick with sour grapes.

It was that way in 2004 when the press chose to castigate President Bush for a better econoly than it praised Bill Clinton for. Here's a bit of retrospection from David Frum at the American Enterprise Institute via Austin Bay.

In 1996, Bill Clinton ran for reelection as president. The U.S. economy was doing well at the time: unemployment down to 5.2%, inflation under control at 3%, and overall growth at 2.2%. And the press reported all this good news: According to the 2004 MRC study, 85% of all major economic stories on the economy in the summer of 1996 were positive.

Eight years later, George W. Bush was running for re-election as president. The U.S. economy in 2004 did much better than in 1996: The economy grew at a 3.9% pace, while unemployment and inflation roughly matched their 1996 levels (5.4% and 2.7% respectively). Yet this time, 77% of all major media economic coverage was negative. (For the full report, see www.mediaresearch.org/realitycheck/2004/fax2004
1020.asp.) And since the 2004 election, the barrage of bad news has continued: reports of housing bubbles, warnings of an imminent collapse in the U.S. dollar, and so on.

And fresh from today's Opinion Journal:

Our favorite agonist is Kent Conrad, the Senate Budget Committee Chairman, and he didn't disappoint. "The President's budget is filled with debt and deception, disconnected from reality, and continues to move America in the wrong direction," said the Senator who was himself blocked from sneaking nearly $5 billion in "emergency" farm spending into a military construction bill in the final days of the last Congress. The North Dakotan needs to keep shouting disaster in a crowded political theater so he can justify his desire for a big tax increase.

The news Mr. Conrad won't broadcast is that over the past three years the federal deficit has shrunk by 58%. The Congressional Budget Office--not the White House--is estimating that the current year's deficit (for fiscal 2007) will fall to $172 billion. That's not bad given continuing Katrina relief spending, $30 billion for homeland security, and a couple hundred billion or so to fight the war on terror.

The White House is projecting that its new budget will eliminate the deficit by 2012 assuming Mr. Bush's tax cuts are extended after 2010. We don't put much stock in future budget forecasts because they depend on so many variables. But even CBO predicts the deficit should remain near or below 1% of GDP for the rest of the Bush Presidency. That's well below the 40-year average of 2.4% of GDP.

This also means that the federal debt burden will continue to fall. Alarmists point to the $1.4 trillion rise in total federal debt from 2003-2006, but that amount is dwarfed by the $14 trillion in new household wealth created over the same period. And for all the international scolding of an allegedly profligate America, U.S. federal debt as a share of GDP is falling again (see the top chart nearby). At 37% in 2006 and heading south, the U.S. figure compares to 52% in Germany, 43% in France, and 79% in Japan. Once again rising total "debt" is a scare word used to justify higher taxes.

But how does the media report our recent economy? Before last November's election it was all housing bubble, wage gap, etc., etc. Now that it's a Democrat congress the wind is changing again.

And yet, bizarrely, at this very moment of maximum worry, the press reports--so negative, for so long--are suddenly turning positive again. On Jan. 31, Associated Press reporter Andrew Taylor filed a story from Washington that opened cheerily: "The House passed a [US] $463.5-billion spending bill Wednesday that covers about one-sixth of the federal budget as Democrats cleared away the financial mess they inherited from Republicans."

No bias here. Move along. Move along.