http://www.foxnews.com/story/0,2933,343671,00.html

The 'Recession' Is a Media Myth

Tuesday , April 01, 2008
By John R. Lott, Jr.

During the 2000 election, with Bill Clinton as president, the economy
was viewed through rose-colored glasses. According to polls, voters
didn’t realize that the country was in a recession. Although the economy
started shrinking in July 2000, most Americans through the entire year
thought that the economy was fine.

But over the last half-year, the media and politicians have said we were
in a recession even while the economy was still growing.

Gas prices are going up. The economy is slowing. Talk of recession is
seemingly everywhere. While the majority of people rate their personal
finances positively, consumer confidence in the economy has plunged to a
16-year low, well below what it was during the last year of the Clinton
administration when we were in a recession.

A Nexis search on news stories during the three-month period from July
2000 through September 2000 using the keywords “economy recession US”
produces 1,388. By contrast, the same search over just the last month
finds 3,166. Or, even more telling, take the three months from July
through September last year, when the GDP was growing at a phenomenal
4.9 percent. The same type of Google search shows 2,475 news stories.

Over 78 percent more negative news stories discussed a recession when
the economy under a Republican was soaring than occurred under a
Democrat when the economy was shrinking.

A little perspective on the economy would be helpful. The average
unemployment rate during President Clinton was 5.2 percent. The average
under President George W. Bush is just slightly below 5.2. The current
unemployment rate is4.8 percent, almost half a percentage point lower
than these averages.

The average inflation rate under Clinton was 2.6 percent, under Bush it
is 2.7 percent. Indeed, one has to go back to the Kennedy administration
to find a lower average rate. True the inflation rate over the last year
has gone up to 4 percent, but that is still lower than the average
inflation rate under all the presidents from Nixon through Bush’s father.

Gas prices are indeed up 33 percent over the last year, but to get an
average of 4 percent means that lots of other prices must have stayed
the same or gone down. On other fronts, seasonally adjusted civilian
employment is 650,000 people greater than it was a year ago. Personal
income grew at a strong half of one percent in just February.

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.

Housing has obviously been a big drag on the economy, but many other
sectors of the economy, such as exports, have been doing well, some
extremely well. For example, aerospace exports increased by over 13
percent last year.

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.

John Lott is the author of Freedomnomics and a senior research scientist
at the University of Maryland.



--
Steve W.