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Talking down the economy

 

By James D. Agresti
October 14, 2008
 

There are numerous factors that impact the U.S. economy, but one has been singled out by economists, media titans and leading politicians as a pervasive underlying force: The public mindset. This key dynamic is significantly influenced by people and institutions who have the public's ear. Though rarely discussed in the current news frenzy surrounding the economy, recent history sheds a great deal of light on the matter.

 

In early 2001 as Bill Clinton left and George Bush entered the Oval Office, GDP growth had sunk into negative territory,[1] the dot.com bubble had burst sending the stock market in a downward spiral,[2] [3] [4] and Treasury Department profit estimates for nonfinancial corporations, which were previously reported as growing for the past two years, were later found to be off by as much as 29.9% and had been in rapid decline.[5] [6] [7]


Not wanting to be blamed for economic conditions that preexisted any policies implemented by his administration, Bush and other members of his team brought attention to problems that beset the economy.[8] This was greeted by a backlash from Democratic leaders and prominent media outlets, who objected that Bush was "talking down the economy" and that this would erode public confidence and trigger economic troubles.


Making the case that Bush's "talk" was damaging the economy, an article in the Washington Post flatly stated that economic indicators "deteriorated considerably" following "a drumbeat of ominous forecasts by the Bush administration." [9] In fact, it was later found that GDP growth had sunk into negative territory several months before Bush took office.[10] Another article in the Post quoted an economist who asserted, "What happened is that a few politicians opened their mouths and started to use the R-word [recession]. And then newspapers started to run big headlines about layoffs." [11]


In a house editorial, the New York Times lectured "it is important" that President Bush "quit talking down the economy…." [12] Likewise, a column in the Times took Bush to task for not being a "cheerleader" for the nation's economy.[13]


An article in Time magazine critiqued President Bush and the media for being pessimistic about the economy and pointedly declared, "The worry factor is not to be underplayed. Recessions and bear markets are as much about psychology as fundamentals…." [14]


In a Chicago Tribune editorial penned by one of their senior writers, it was stated that "public perception fuels the nation's fiscal health," "the mind of the consumer is the most important commodity in the economy," and we will "never know for sure how much" Bush's statements have "directly contributed to the decline in confidence." [15]


Likewise, an Associated Press news analysis faulted the Bush administration for talking negatively about the economy, asserting "there is no evidence that economic growth has actually turned negative," and quoting an economist who analogized Bush's remarks on the economy to a basketball coach who tells his team that their last coach was "lousy" and "you're a rotten team." [16]


All of the above was made in concert with similar assertions by Democratic politicians and their economists. In March 2001, the lead Democrats in the Senate and House of Representatives held a joint press conference proclaiming that the "Bush administration has been talking down the economy now for some time" and "what we're seeing is a talking down of the economy." [17] [18] [19]


In the midst of all this, Bush's concern that he would be blamed for economic conditions he had inherited became a reality. Less than two months after he took office,[20] [21] an article was published in the New York Times with the headline, "60 Percent Favor Bush, but Economy Is Major Concern." In it, it was reported that "some Democrats are pointing fingers at Mr. Bush" and quoted a financial analyst as stating, "Everything just seems to be going in the wrong direction now; there are so many job cuts. People I know are losing their jobs. This didn't happen during the Clinton administration." [22]


Less than two months later in May 2001, the same press outlets that had recently warned about the dangers of "talking down the economy" were doing exactly that. Within the space of only two articles published on the same day in the New York Times and Washington Post, the following verbiage was used in reference to the nation's economic health:


"already sluggish," "weakness," "weakening," "weakened," "has been weakening," "even weaker," "even more economic weakness," "big job losses," "job-cutting," "rising unemployment," "shrinking profits," "job cuts," "jump in unemployment," "recession fear," "job loss," "dashing hopes," "continuing corporate layoffs," "hiring freezes," "pull back sharply on their spending," "rising unemployment," "dampen consumer spending," "pace of layoffs shows no sign of abating," "falloff in hiring has been so steep and so sudden," "most forecasters expect the jobless rate to rise," "layoffs renew recession fear," "tipping the economy into recession," "might be nearing, or even in, a recession." [23] [24]


At the time these stories were published, Bush had been in office for less than four months and Congress had yet to pass his first major economic proposal.[25] Furthermore, the first federal budget of Bush's tenure was still five months away from being implemented.[26]


Since then, pessimistic characterizations of the economy by the press and Democratic politicians have continued unrestrained, even in the face of robust economic indicators to the contrary. Since most people do not have the experience or context to interpret economic statistics, they are often left with little more than the spin that press outlets place upon these figures. Flagrant double standards have been employed by the media in this regard, usually rising to a peak during Presidential election years. Media watchdog organizations and commentators have documented obvious patterns in such cases. For example:


• During the quarter preceding Bill Clinton's victory over George H. Bush's bid for a second term in the election of 1992, 97% of economic portrayals on the big three television evening newscasts were negative. Yet, this changed immediately and drastically once the election was over, and more than 60% of economic portrayals for the remaining two months of the year were positive. (Center for Media and Public Affairs.)[27]


• Three key economic indices for the year that preceded Bill Clinton's re-election in 1996 and George W. Bush's re-election in 2004 were as follows:

 

   1996  2004
GDP growth  4.0%  3.2%
Unemployment  5.5%  5.6%
Inflation (CPI)  3.0%  2.5%

[28] [29] [30]


Despite the fundamental similarities between these figures, there was a distinct contrast in media portrayals of the economy. For example, in 1996 when Clinton was up for reelection, Adam Nagourney of the New York Times wrote, "the economy is good." [31] Yet, as noted by columnist Jack Kelly, when Bush was up for reelection in 2004, Nagourney declared the economy was "faltering." [32] Numerous examples of such biased reporting on the economy have been documented by right-leaning commentators and organizations such as the Media Research Center.[33] [34] [35] [36] [37]


• Perhaps the most concrete indicator of slanted economic reporting on a widespread level is public opinion polls that show a major disconnect between perception and reality. As pointed out by libertarian commentator Larry Elder, a November 2005 poll found 43% of Americans believed the country was in a recession.[38] [39] Yet, the year leading up to this poll showed analogous GDP growth, unemployment and inflation to the year that led up to Clinton's reelection in 1996.[40] [41] [42]


With another presidential election upon us and a Republican in the White House, negatively skewed economic reporting is climaxing, and in concurrence with this, economic conditions are worsening. For example, little more than a month ago on August 28th, GDP growth for the previous quarter was revised from 1.9% to 3.3% (which happens to be precisely the average of the past 25 years and 3.8 points higher than when Bill Clinton left office).[43] Yet a snapshot of the New York Times home page taken five hours after they published this news item displays a pattern consistent with media reporting in previous elections. The positive economic development was placed in an obscure location and given a nondescript headline. Had this article been placed prominently with an informative caption, it would have undermined the story that was given the lead position.[44]

 

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In marked contrast, earlier in the same month when the initial (and lower) GDP figure was reported, it was made the lead headline and presented with a caption that read, "Economists construed the disappointing quarter as clear indication that the economy remains snagged in the weeds of a widening downturn." [45] The article itself also failed to mention that "the first release of many economic indicators," as explained in a text published by the Wharton School, "contains pieces of data that are far from reliable and thus considered preliminary." [46] [47]


Likewise, a few days later in the buildup to the current financial crisis, Yahoo News placed the following Associated Press headline and caption at the top of their news features:


Jobless rate jumps to 5-year high of 6.1 percent (AP)
AP - The nation's unemployment rate zoomed to a five-year high of 6.1 percent in August as employers slashed 84,000 jobs, dramatic proof of the mounting damage a deeply troubled economy is inflicting on workers and businesses alike.[48]


Increasing unemployment is a clear negative development, but a rate of 6.1% is not far off from the annual average of the past 25 years (5.8%).[49] This is not to deny the nation is in troubled economic times, but given what the press and politicians affirmed about "talking down the economy" less than 8 years ago, there can be little doubt that they have played and are playing a major role in damaging it now.

 

Sidebar – Economic Fallacies and Realities


With the media's linkage of political fortunes to economic statistics, several misconceptions have gained ground in the public mind. The first is the notion that the credit and blame for general economic conditions can be rationally attributed to the President.


The reach of the federal government in the U.S. economy is pervasive, and over time it has acquired expansive powers that impact economic conditions.[50] However, the federal government consumes about 18% of the nation's GDP,[51] leaving the vast majority of economic activity in the hands of the American people.[52] Thus, the statement in the Chicago Tribune that "the mind of the consumer is the most important commodity in the economy."


Furthermore, while the executive branch of the federal government has broad powers that can influence the economy, the Constitution vests legislative and taxing authority in the hands of Congress.[53] [54] On top of this, roughly two-thirds of all federal expenditures are entitlement programs like Social Security and Medicare in which finances are primarily controlled by laws made by previous Congresses and Presidents.[55]


There are more than 60 parameters that economists, journalists and politicians analyze and slice in making economic assessments and portrayals.[56] Therefore, it is almost always possible for partisans to find bad news in a sea of good and vice versa. However, three of the most cited and regarded economic indicators are GDP growth,[57] [58] unemployment,[59] and inflation (CPI).[60] [61] [62] These are graphed below for the past 25 years along with a record of the parties controlling Congress and President.[63]


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[64]

 

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Sources

 

[1] Table 1.1.1: "Percent Change From Preceding Period in Real Gross Domestic Product." Bureau of Economic Analysis, U.S. Department of Commerce. Downloaded 10/3/2008, Last revised September 26, 2008. Line 1. http://bea.gov/national/nipaweb/TableView.asp?SelectedTable=...


2001, 1st quarter: -0.5%


[2] Transcript: "Inside the Dot.Com Crash." CNN Moneyline, December 26, 2000. http://transcripts.cnn.com/TRANSCRIPTS/0012/26/se.01.html


One year ago at this time, Internet stocks were in the midst of an astonishing rally, and their future seemed limitless. But since then, investors have been facing a brutal reality check, watching their shares fall 70, 80, 90 percent from their highs and in some cases disappear completely.


[3] Web page: "Dow Jones Wilshire Broad Market Indexes." Accessed October 10, 2008 at http://www.wilshire.com/Indexes/Broad/


The Dow Jones Wilshire 5000 Total Market Index represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. No other index comes close to offering its comprehensiveness.


[4] Web page: "Dow Jones Wilshire 5000 Composite Index." Accessed October 9, 2008 at http://www.wilshire.com/quote.html?symbol=dwc


Data plot for the past decade:

 

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[5] Book: Guide to Economic Indicators. By Richard Stutely. Fifth edition. Bloomberg Press, 2003. Page 40: "[T]he rush to publish information often means that figures are revised several times as new information comes to hand, perhaps causing major changes in interpretation. For example, industrial production figures may be based initially on sales and output data and adjusted later to take account of changes in inventories not caught in the sales figures."


[6] Article: "Sunny Clinton forecast leaves cloud over Bush." By Robert Novak. CNN, August 9, 2002. http://archives.cnn.com/2002/ALLPOLITICS/08/09/column.novak/


The Commerce Department's Bureau of Economic Analysis estimates before-tax profits of domestic nonfinancial corporations quarterly. Revised figures last week showed profits were really lower by 10.7 percent, 12.2 percent, 15.2 percent and 18 percent for the four quarters of 1999. In 2000, this gap became a chasm. The revised quarterly profits for the election year are lower than the announced figures by 23.3 percent, 25.9 percent, 29.9 percent and 28.2 percent.


[7] Table 1.14: "Gross Value Added of Domestic Corporate Business in Current Dollars and Gross Value Added of Nonfinancial Domestic Corporate Business in Current and Chained Dollar." Bureau of Economic Analysis, U.S. Department of Commerce. Downloaded 10/10/2008, Last revised September 26, 2008. Line 36: "Nonfinancial corporate business: Profits before tax (without IVA and CCAdj)." http://www.bea.gov/national/nipaweb/TableView.asp?Selected...


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[8] Transcript: "CBS Evening News with Dan Rather." March 27, 2001. Rather: "President Bush is trying to distance himself from blame for economic problems and to deflect critics who say he isn't helping matters with repeated negative talk about it."


[9] Article: "Democrats Accuse Bush of Helping to Slow the Economy; White House Denies Aim Is to Sell Tax Cut." By Dana Milbank. Washington Post, March 16, 2001. Page A8. http://www.washingtonpost.com/


The latest back-and-forth, coming amid market turmoil, follows a drumbeat of ominous forecasts by the Bush administration. It began in December, when Vice President-elect Cheney warned that the country could be "on the front edge of a recession." Since then, economic indicators have deteriorated considerably.


[10] Table 1.1.1: "Percent Change From Preceding Period in Real Gross Domestic Product." Bureau of Economic Analysis, U.S. Department of Commerce. Downloaded 10/3/2008, Last revised September 26, 2008. Line 1. http://bea.gov/national/nipaweb/TableView.asp?SelectedTable=...


2000, 3rd quarter (Jul-Sept): -0.5%


[11] Article: "With Words, Bush Runs Economic Risk." By Glenn Kessler and Paul Blustein. Washington Post, March 15, 2001. Page A1. http://www.washingtonpost.com/


Kenneth Goldstein, a Conference Board economist… suggested that consumers have seen little impact from the slowing economy, but their long-term outlook had been affected by what opinion makers and the media were saying.


"What happened is that a few politicians opened their mouths and started to use the R-word," Goldstein ventured. "And then newspapers started to run big headlines about layoffs."


[12] House editorial: "A Moment of Economic Suspense." New York Times, March 14, 2001. http://query.nytimes.com/gst/fullpage.html?res=...


No one has a magic formula for ensuring prosperity. But there are important policy tools available and good reasons to believe that a recession is avoidable. The White House and the Fed, as well as Congress, must now work in concert to prop up consumer confidence.


The Federal Reserve must continue to do its part by further dropping interest rates to encourage spending. It is important, too, for President Bush to quit talking down the economy in order to build Congressional and public support for his tax cut.


[13] Article: "Washington Memo; For Bush, a Chronicle Of Bad News Foretold." By David E. Rosenbaum. New York Times, March 19, 2001. http://query.nytimes.com/gst/fullpage.html?res=...


Normally, presidents are cheerleaders for the nation's economy. …


Now comes George W. Bush, who is presenting what an analysis in The Financial Times last week called ''the novel spectacle'' of a president ''urging citizens to ignore good economic news and focus on the bad.''


[14] Article: "Zap!" By Daniel Kadlec and others. Time, Mar. 26, 2001. http://www.time.com/time/magazine/article/0,9171,999526,00.html


The worry factor is not to be underplayed. Recessions and bear markets are as much about psychology as fundamentals, which is precisely why the stock market--unable to find something it can believe in--has worked up such a sweat. To that extent, the media may be fueling the pessimism. In January, TIME put the worried faces of a family of four on the cover and expounded on HOW TO SURVIVE THE SLUMP. More depressing has been the recent stream of daily headlines about plunging stock prices. And in a high-risk bid to win support for his tax cuts, President Bush has been sounding alarm bells that reach into every kitchen.


[15] Editorial: "Hold the Soup; It Takes a Sound Mind to Drive a Strong Economy; Public Perception Fuels the Nation's Fiscal Health." By William Neikirk. Chicago Tribune, February 11, 2001. http://www.chicagotribune.com/


All this is based on a simple premise: The mind of the consumer is the most important commodity in the economy. And for a good reason: Two-thirds of gross domestic product, the market value of annual production of goods and service, is consumer spending. …


One will never know for sure how much Greenspan and President Bush have directly contributed to the decline in confidence. To put it mildly, neither has been a cheerleader, with the Fed chairman telling Congress the economy was, in effect, near a recession, and the president, pushing his $1.6 trillion tax cut, warning the economy may be "in danger."


[16] News analysis: "Bush: Talking down economy to build up tax cut?" By Tom Raum. Associated Press, March 28, 2001.


He has been warning of dark clouds in the economic skies for months, and his top spokesman, Ari Fleischer, has referred to the slowdown as an ''economic downturn,'' even though there is no evidence that economic growth has actually turned negative. …


David Wyss, chief economist at Standard & Poor's Corp., said the consumer confidence report suggests Americans ''are no longer worried, or as worried, that the economy will be in worse shape a year from now.''


Bush should start being a little more upbeat himself, Wyss suggested. ''If you're a basketball coach, and you come in and tell your team 'my predecessor was a lousy coach' and 'you're a rotten team,' that's not a way to win the next game,'' he said.


[17] Article: "With Words, Bush Runs Economic Risk." By Glenn Kessler and Paul Blustein. Washington Post, March 15, 2001. Page A1. http://www.washingtonpost.com/


Democrats have begun making the case that Bush's rhetoric has already crossed the line and helped to dangerously undermine consumer confidence at a delicate time…


Gene Sperling, who served as an economic adviser to President Bill Clinton, said, "… It is very possible that the president's continued drumbeat on talking down the economy has become a self-fulfilling prophecy."


[18] Article: "Democrats Accuse Bush of Helping to Slow the Economy; White House Denies Aim Is to Sell Tax Cut." By Dana Milbank. Washington Post, March 16, 2001. Page A8. http://www.washingtonpost.com/


"I think what we're seeing is a talking down of the economy," House Minority Leader Richard A. Gephardt (D-Mo.) said in a news conference yesterday, suggesting President Bush's pessimistic outlook is a bid to sell his tax cut. "I think that kind of economic leadership is irresponsible. I think it's mismanagement of our economy."


[19] Article: "Democrats put blame on Bush." By Dave Boyer. Washington Times, March 16, 2001. http://washingtontimes.com/


"The Bush administration has been talking down the economy now for some time," said Senate Minority Leader Tom Daschle at a Capitol Hill news conference with House Minority Leader Richard A. Gephardt.


[20] Bush was inaugurated January 20, 2001.

 

[21] Twentieth Amendment to the Constitution of the United States. Ratified January 23, 1933. http://justfacts.com/constitution.asp#Amendment20


Section 1. The terms of the President and Vice President shall end at noon on the 20th day of January, and the terms of Senators and Representatives at noon on the 3d day of January, of the years in which such terms would have ended if this article had not been ratified; and the terms of their successors shall then begin.


[22] Article: "60 Percent Favor Bush, but Economy Is Major Concern." By Richard L. Berke and Janet Elder. New York Times, March 14, 2001. http://www.nytimes.com/2001/03/14/politics/14POLL.html?...


Already, some Democrats are pointing fingers at Mr. Bush. Ben Deloach, 54, a poll respondent from Norfolk, Va., said in a follow-up interview, "Everything just seems to be going in the wrong direction now; there are so many job cuts." Mr. Deloach, a financial analyst, added: "People I know are losing their jobs. This didn't happen during the Clinton administration." (Bush has yet to enact a single budget, therefore these layoffs are a result of the Clinton administration.)


[23] Article: "U.S. Jobless Rate Rose to 4.5% in April." By Louis Uchitelle. New York Times, May 5, 2001. http://query.nytimes.com/gst/fullpage.html?res=...


[24] Article: "Layoffs Renew Recession Fear: April Job Loss Biggest in Decade." By Steven Pearlstein and John M. Berry. Washington Post, May 5, 2001. Page A1. http://www.washingtonpost.com/


[25] Article: "$1.35 trillion tax cut becomes law." By Kelly Wallace. CNN, June 7, 2001. http://archives.cnn.com/2001/ALLPOLITICS/06/07/bush.taxes/


President George W. Bush signed into law Thursday the first major piece of legislation of his presidency, a $1.35 trillion tax cut over 10 years.


[26] "Citizen's Guide to the Federal Budget: Fiscal Year 2000." Section 3: "How Does the Government Create a Budget?" Government Printing Office, Updated January 24, 2008. http://www.gpoaccess.gov/usbudget/fy00/guide03.html


The President and Congress both play major roles in developing the Federal budget.


The President's Budget


The law requires that, by the first Monday in February, the President submit to Congress his proposed Federal budget for the next fiscal year, which begins October 1. …


The President's budget is his plan for the next year. But it's just a proposal. After receiving it, Congress has its own budget process to follow. Only after the Congress passes, and the President signs the required spending bills has the Government created its actual budget.


[27] Media Monitor: "It's Still the Economy, Bill: How TV Economic News Has Changed Since Clinton's Election." Edited by S. Robert Lichter and Linda S. Lichter. Volume 7, Number 5. Center for Media and Public Affairs, May 1993. http://www.cmpa.com/files/media_monitor/93may.pdf


Page 1:


… the ABC, CBS, and NBC evening newscasts together…


Page 3:


(To measure news tone, we tally all assessments of the overall economy and individual sectors by reporters and sources. This measurement derives from specific positive and negative evaluations of economic health, not inferences about economic statistics.) … Through the entire third quarter (July-Sept) of 1992, 97 percent of all sources turned thumbs down on the economy's performance.


Then the gloom boom suddenly ended, as positive assessments jumped from only three percent to 50 percent during the fourth quarter. From the November 3 presidential election through the end of the year, over 60 percent of economic evaluations were favorable.


[28] Table 1.1.1: "Percent Change From Preceding Period in Real Gross Domestic Product." Bureau of Economic Analysis, U.S. Department of Commerce. Downloaded 10/3/2008, Last revised September 26, 2008. Line 1. http://bea.gov/national/nipaweb/TableView.asp?SelectedTable=...

 

1995-IV

 1996-I

 1996-II

 1996-III

 Average

3.0

 2.9

 6.7

 3.4

 4.0

 

2003-IV

 2004-I

 2004-II

 2004-III

 Average

2.7

 3

 3.5

 3.6

 3.2


[29] Table: "Unemployment Rate - Civilian Labor Force - LNS14000000." Bureau of Labor Statistics, U.S. Department of Labor. Data extracted October 3, 2008. http://data.bls.gov/cgi-bin/surveymost?ln

 

1995

1996

Oct

 Nov

 Dec

 Jan

 Feb

 Mar

 Apr

 May

 Jun

 Jul

 Aug

 Sep

 Avg.

5.5

 5.6

 5.6

 5.6

 5.5

 5.5

 5.6

 5.6

 5.3

 5.5

 5.1

 5.2

 5.5

 

2003

2004

Oct

 Nov

 Dec

 Jan

 Feb

 Mar

 Apr

 May

 Jun

 Jul

 Aug

 Sep

 Avg.

6.0

 5.8

 5.7

 5.7

 5.6

 5.8

 5.6

 5.6

 5.6

 5.5

 5.4

 5.4

 5.6


[30] Table: "Consumer Price Index, All Urban Consumers (CPI-U), U.S. city average, All items." Bureau of Labor Statistics, U.S. Department of Labor, September 16, 2008. ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

 

CPI

Sept 1995

 Sept 1996

 Increase

153.2

 157.8

 3.0%

 

CPI

Sept 2003

 Sept 2004

 Increase

185.2  189.9  2.5%


[31] Article: "The Year of the Yawn." By Adam Nagourney. New York Times, November 3, 1996. http://query.nytimes.com/gst/fullpage.html?res=...


The economy is good, the country is not at war and President Clinton has rebounded from the depths of his unpopularity just two years before. …


''When you're an incumbent, and the economy is doing well,'' Mr. Stephanopoulos said recently, ''boring is good.''


[32] Article: "U.S. economy is fine: The only thing faltering is media objectivity." By Jack Kelly. Pittsburgh Post-Gazette, April 04, 2004. http://www.post-gazette.com/pg/04095/295352.stm


[33] Article: "Threats and Responses: The Overview; Rice Would Take More Questions From 9/11 Panel." By Adam Nagourney & Richard W. Stevenson. New York Times, http://query.nytimes.com/gst/fullpage.html?res=...


With the economy faltering and Democrats so united, Mr. Bush's terrorism credentials are portrayed by his supporters as the strongest assets he has going against Mr. Kerry.


[34] Column: "The Media's Elastic Economy." By L. Brent Bozell III. Media Research Center, November 2, 2004. http://www.mediaresearch.org/BozellColumns/newscolumn/2004/col20041102.asp


[35] Report: "One Economy, Two Spins." By Dan Gainor. Free Market Project, Media Research Center, October 14, 2004. http://www.freemarketproject.org/specialreports/2004/jobs_study/sr20041014.asp


[36] Column: "Under Democrats, Slower Growth was Seen as Good News." Media Research Center, October 29, 2004. http://www.mediaresearch.org/realitycheck/2004/fax20041029.asp


[37] Article: "Predicting Presidential Winners: Is It the Economy, or Is It the Media?" By Rich Noyes. Media Research Center, June 2, 2000. http://www.mediaresearch.org/medianomics/2000/mn20000602.asp


[38] Column: "Democratic delusions." By Larry Elder. WorldNetDaily, December 22, 2005. http://www.worldnetdaily.com/index.php?pageId=34030


Forty-three percent of Americans, according to a recent American Research Group poll, said the economy was in a recession. …


… Most economists define a recession as three consecutive quarters of falling real gross national product. Yet for the last 10 quarters, the economy grew at an average of more than 3 percent, with the latest quarter coming in at 4.3 percent. Inflation and interest rates remain low, with homeownership at an all-time high. … Unemployment, coming in at 5 percent, remains lower than the average unemployment rate during the '70s, '80s and '90s.


[39] Poll Update: "American Research Group, Economic Upheaval." National Journal Group, December 19, 2005.

 
Nat'l Econ In Recession? …


11/05 – 43%


[40] Table 1.1.1: "Percent Change From Preceding Period in Real Gross Domestic Product." Bureau of Economic Analysis, U.S. Department of Commerce. Downloaded 10/3/2008, Last revised September 26, 2008. Line 1. http://bea.gov/national/nipaweb/TableView.asp?SelectedTable=...

 

1995-IV

 1996-I

 1996-II

 1996-III

 Average

3.0

 2.9

 6.7

 3.4

 4.0

 

2004-IV

 2005-I

 2005-II

 2005-III

 Average

2.5

 3.0

 2.6

 3.8

 3.0


[41] Table: "Unemployment Rate - Civilian Labor Force - LNS14000000." Bureau of Labor Statistics, U.S. Department of Labor. Data extracted October 3, 2008. http://data.bls.gov/cgi-bin/surveymost?ln

 

1995

1996

Oct

 Nov

 Dec

 Jan

 Feb

 Mar

 Apr

 May

 Jun

 Jul

 Aug

 Sep

 Avg.

5.5

 5.6

 5.6

 5.6

 5.5

 5.5

 5.6

 5.6

 5.3

 5.5

 5.1

 5.2

 5.5

 

2004

2005

Nov

 Dec

 Jan

 Feb

 Mar

 Apr

 May

 Jun

 Jul

 Aug

 Sep

 Oct

 Avg.

5.4

 5.4

 5.2

 5.4

 5.2

 5.1

 5.1

 5.0

 5.0

 4.9

 5.1

 5.0

 5.2


[42] Table: "Consumer Price Index, All Urban Consumers (CPI-U), U.S. city average, All items." Bureau of Labor Statistics, U.S. Department of Labor, September 16, 2008. ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

 

CPI

Sep 1995

 Sep 1996

 Increase

153.2

 157.8

 3.0%

 

CPI

Oct 2004

 Oct 2005

 Increase

190.9

 199.2

 4.3%


[43] Table 1.1.1: "Percent Change From Preceding Period in Real Gross Domestic Product." Bureau of Economic Analysis, U.S. Department of Commerce. Downloaded 10/9/2008, Last revised September 26, 2008. Line 1. http://bea.gov/national/nipaweb/TableView.asp?SelectedTable=...

 

2001, 1st quarter: -0.5%


NOTE: Average of annual data from 1983-2007.


[44] Article: "Economic Growth Revised Higher." By Michael M. Grynbaum. New York Times, August 29, 2008. http://www.nytimes.com/2008/08/29/business/29econ.html?_r=...


Gross domestic product rose at a 3.3 percent clip in the second quarter, the Commerce Department said, a significant jump over the original estimate of 1.9 percent growth. G.D.P., the broadest measure of the nation's economic activity, is considered a good barometer of America's economic health.


[45] Article: "G.D.P. Grows at Tepid 1.9% Pace Despite Stimulus." By Peter S. Goodman. New York Times, August 1, 2008. http://www.nytimes.com/


NOTE: The article was subsequently retitled "More Arrows Seen Pointing to a Recession" and is located at http://www.nytimes.com/2008/08/01/business/01econ.html?hp


[46] Book: The Secrets of Economic Indicators. By Bernard Baumohl. Fourth edition, Wharton School Publishing, 2005.


Page 21:


Government agencies and private groups that supply economic data to the public are under tremendous pressure to get it out quickly, and that's not easy. … It's a hurried process where accuracy and completeness take a back seat at times to getting the information out on deadline. For this reason the first release of many economic indicators contain pieces of data that are far from reliable and thus considered preliminary.


Of course, to many investors, it makes little difference whether the initial data is reliable. They'll trade on these numbers anyway because these figures represent the very latest information they can get on the economy. Later, though, as more information is received and after statisticians have had a chance to review their computations, the preliminary figures undergo one or more revisions. Though revisions to earlier data are also read by investors, they generally do not spark much trading because by then the information refers to a time period that has long since passed. Investors usually focus on the future, not the past. Economists, however, take revisions more seriously because the new figures can affect their forecasts of economic activity.


[47] Book: Tracking America's Economy. By Norman Frumkin. M.E. Sharpe, 2004. Page 21:


Economic indicators are developed from data obtained in surveys of households, businesses, and governments, and from tax and regulatory reports submitted to the federal and state governments. … Because policymakers in the presidential administration, Congress, and the Federal Reserve System want the indicators as soon as possible following the month or quarter to which they refer, the data are initially provided on a preliminary basis and are subsequently revised as more complete and accurate survey information is received. The use of preliminary and revised information results from the tension between the need for both timely and accurate data. Revisions are sometimes substantial, and therefore it is important that preliminary information be treated as tentative.

 
[48] Article: "Jobless rate jumps to 5-year high of 6.1 percent (AP)." By Jeannine Aversa. Associated Press, September 5, 2008. http://news.yahoo.com/


NOTE: This article was displayed as the top headline on Yahoo! Mail at 9/5/08 11:00 AM.


[49] Table: "Unemployment Rate - Civilian Labor Force - LNS14000000." Bureau of Labor Statistics, U.S. Department of Labor. Data extracted October 3, 2008. http://data.bls.gov/cgi-bin/surveymost?ln


NOTE: To establish annual unemployment rates, averages were taken of the months in each year from 1983 to 2007. These figures were then verified through a cross-check with data from the Social Security Administration and then averaged over the 25 year period.


[50] For an explanation of how the federal government came to acquire such power, see http://justfacts.com/socialspending.basics.asp


[51] Report: "The Federal Government's Financial Health: A Citizen's Guide to the 2007 Financial Report of the United States Government." Accessed October 11, 2008 at http://www.whitehouse.gov/omb/financial/reports/citizens_guide.pdf


Page 6: "Since World War II, federal revenue as a share of GDP has been roughly constant at around 18 percent."


[52] Article: "Economics." Contributor: Henry J. Aaron, Ph.D. (Senior Fellow, Brookings Institution). World Book Encyclopedia, 2007 Deluxe Edition.


Every day, millions of men and women in the United States work on farms and in factories and offices. These men and women produce trillions of dollars worth of goods and services each year. The government does not tell the people where to work. It does not decide where most of the factories should be built. Nor does the government dictate what prices will be charged for most goods and services. Yet the work is done, the prices are set, and most Americans get the products they need.


How does the economy work with so little planning? The desire of most people to improve their own welfare makes it work. In the United States, people are free to improve their economic standing. They may try to find a job where they please and generally may spend their income as they wish. Of course, the government takes part in many economic activities. But for the most part, individuals and private businesses run the American economy.


[53] Constitution of the United States. Signed September 17, 1787. Enacted June 21, 1788. http://justfacts.com/constitution.asp


Article I, Section 1: "All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives."


Article I, Section 7: "All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."


Article I, Section 8: "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States…"


[54] "Citizen's Guide to the Federal Budget: Fiscal Year 2000." Section 3: "How Does the Government Create a Budget?" Government Printing Office, Updated January 24, 2008. http://www.gpoaccess.gov/usbudget/fy00/guide03.html


The President and Congress both play major roles in developing the Federal budget.


The President's Budget


The law requires that, by the first Monday in February, the President submit to Congress his proposed Federal budget for the next fiscal year, which begins October 1. …


The President's budget is his plan for the next year. But it's just a proposal. After receiving it, Congress has its own budget process to follow. Only after the Congress passes, and the President signs the required spending bills has the Government created its actual budget.


[55] "Citizen's Guide to the Federal Budget: Fiscal Year 2000." Section 3: "How Does the Government Create a Budget?" Government Printing Office, Updated January 24, 2008. http://www.gpoaccess.gov/usbudget/fy00/guide03.html


• Discretionary spending, which accounts for one-third of all Federal spending, is what the President and Congress must decide to spend for the next year through the 13 annual appropriations bills. It includes money for such activities as the FBI and the Coast Guard, for housing and education, for space exploration and highway construction, and for defense and foreign aid.


• Mandatory spending, which accounts for two-thirds of all spending, is authorized by permanent laws, not by the 13 annual appropriations bills. It includes entitlements--such as Social Security, Medicare, veterans' benefits, and Food Stamps--through which individuals receive benefits because they are eligible based on their age, income, or other criteria. It also includes interest on the national debt, which the Government pays to individuals and institutions that hold Treasury bonds and other Government securities. The President and Congress can change the law in order to change the spending on entitlements and other mandatory programs--but they don't have to.


[56] Book: Guide to Economic Indicators. By Norman Frumkin. Fourth edition. M.E. Sharpe, 2006. xiii: "The book explains the basic features of more than sixty statistical measures of the U.S. economy."


[57] Book: Guide to Economic Indicators. By Richard Stutely. Fifth edition. Bloomberg Press, 2003. Page 29: "All the major industrial countries now use GDP as their main measure of national economic activity."


[58] Book: Tracking America's Economy. By Norman Frumkin. M.E. Sharpe, 2004. Pages 3-4: "The overall performance of the economy is reflected in its economic growth. … This chapter highlights the gross domestic product (GDP) as the primary measure of economic growth."


[59] Book: Guide to Economic Indicators. By Norman Frumkin. Fourth edition. M.E. Sharpe, 2006. Page 245: "The unemployment rate is a major indicator of the degree to which the economy provides jobs for those seeking work."


[60] Book: Tracking America's Economy. By Norman Frumkin. M.E. Sharpe, 2004. Page 271: "This chapter focuses on the consumer price index (CPI) as the prime measure of inflation and deflation in the economy. The CPI is the most widely cited measure of price change…"


[61] Book: Guide to Economic Indicators. By Richard Stutely. Fifth edition. Bloomberg Press, 2003. Page 21: "The consumer price index (CPI) is the indicator most people use to track inflation." Page 215: "CPIs are the most timely and best understood inflation indicators. … Consumer expenditures and GDP deflators are often better guides to inflation, but usually they are not available quickly enough."


[62] Book: Guide to Economic Indicators. By Norman Frumkin. Fourth edition. M.E. Sharpe, 2006. Page 48: "The CPI-U represents all urban households including urban workers in all occupations, the unemployed, and retired persons; it accounts for about 87 percent of the noninstitutional population."


[63] Summary of information from the following sources:


1) "U.S. Presidential Election Results." Encyclopædia Britannica, 2007. http://www.britannica.com/


2) Web Page: "Party Divisions of the House of Representatives, 1789-Present." Office of the Clerk, United States House of Representatives. Accessed November 17, 2007 at http://clerk.house.gov/art_history/house_history/partyDiv.html


3) Web Page: "Party Division in the Senate, 1789-Present." Historical Office, United States Senate. Accessed June 25, 2008 at
http://www.senate.gov/pagelayout/history/one_item_and_teasers/partydiv.htm


SUMMARY:


1983: Reagan is President. Democrats have commanding majority* in House and Republicans have majority in Senate.

1985: Reagan's second term.

1987: Democrats acquire commanding majority* in Senate.

1989: G.H. Bush takes office.

1993: Clinton takes office.

1995: Republicans acquire majority in House and Senate.

1997: Clinton's second term. Republicans acquire commanding majority* in Senate.

2001: G.W. Bush takes office. Democrats acquire majority in Senate. #

2003: Republicans acquire majority in Senate.

2005: Bush's second term. Republicans acquire commanding majority* in Senate.

2007: Democrats acquire majority in House and Senate.


* "Commanding majority" arbitrarily defined as at least 20% more members than the opposing party.
# Control of the Senate switched back and forth during this period with Democrats holding it for the majority of time.

 

[64] Table 1.1.1: "Percent Change From Preceding Period in Real Gross Domestic Product." Bureau of Economic Analysis, U.S. Department of Commerce. Downloaded 10/3/2008, Last revised September 26, 2008. Line 1. http://bea.gov/national/nipaweb/TableView.asp?SelectedTable=...


[65] Table: "Unemployment Rate - Civilian Labor Force - LNS14000000." Bureau of Labor Statistics, U.S. Department of Labor. Data extracted October 3, 2008. http://data.bls.gov/cgi-bin/surveymost?ln


[66] Table: "Consumer Price Index, All Urban Consumers (CPI-U), U.S. city average, All items." Bureau of Labor Statistics, U.S. Department of Labor, September 16, 2008. ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
 

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