CNN's Erin Burnett Makes Misleading Claims About Federal Reserve

08/31/2012 10:34 pm ET | Updated Aug 31, 2012
  • Bonnie Kavoussi Master's student in economics, the University of Michigan

CNN anchor Erin Burnett claimed Friday that the Federal Reserve is spending money wastefully, but that's not exactly true.

"$1 million per job. That's what America's top money man says we've spent on stimulus from the Fed alone," Burnett said on her CNN show "OutFront" on Friday.

"That is not a cheap cost per job," Burnett said. "For those who are keeping track, we are not counting the president's extra $2 trillion or so in stimulus in that money. Just the Fed's money divided by the number of jobs."

In fact, the Obama administration's only stimulus, in 2009, amounted to $787 billion, less than half of Burnett's number. But the worse mistake was conceptual: Though Burnett acknowledged on her show that the Federal Reserve spent money that did not exist before, she still likened it to government spending. This is wrong because the Federal Reserve creates its own money.

The Federal Reserve's asset purchases are not money that "we" have spent. Instead, the Federal Reserve has ordered the creation of new money to buy $2.3 trillion in U.S. government bonds, mortgage-backed securities, and other largely safe debt through its two rounds of quantitative easing, or monetary stimulus.

Federal Reserve Chairman Ben Bernanke said during a speech in Jackson Hole, Wyo., on Friday that the Federal Reserve's monetary stimulus has created or saved more than 2 million private-sector jobs. He also said that the Fed has bought $2.3 trillion in assets so far to stimulate the economy. Burnett used those two statistics to twist the facts.

Imagine being able to print $100 bills in your basement and buy anything with that money. That is akin to what the Federal Reserve does to work toward achieving its dual mandate of price stability and maximum employment. The U.S. Treasury Department prints cash at the Federal Reserve's bidding.

Burnett's own guest Laura Tyson, a business school professor at the University of California at Berkeley and senior fellow at the Center for American Progress, called out Burnett for the misleading assertions.

"I think that it's very, very, very -- I want to do three very's -- misleading to talk about spending money," Tyson told Burnett. "It is correct to say that the Fed has been involved in a balance-sheet transaction. It has been buying assets. It is holding those assets on its books. It believes -- and I think there is evidence to support this view -- that those assets will make money for the taxpayers. So to compare this to government spending is just misleading."

These mistakes are particularly noteworthy because Burnett is a business news veteran who also has worked at Goldman Sachs and Citigroup. She was an anchor at CNBC before moving to CNN last year. Burnett also has worked at Bloomberg TV.

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