It's Not "Liberal Media Bias"; It's the Economy, Stupid

To those of us who started writing about economics on the web, Barry Rithotlz is like a blog Godfather. His blog the Big Picture was one of the first economics blogs I found and is one I still read regularly. He inspired many of us to start writing ourselves.

Thankfully, Barry is also a deeply irreverent voice challenging standard assumptions about practically everything. However, his arguments are not crouched in ignorance; they are in fact some of the best researched and documented columns in any medium. Several days ago he published an article titled Pervasive Pollyannas of Prosperity where he made the following points:

We have heard longstanding charges of liberal media bias, going all the way back to Spiro Agnew's Nattering Nabobs of Negativism (September 11, 1970). Whatever validity that Trojan horse might have ever had has now jumped the shark. Mass Media is owned by large corporate interests (Disney, Viacom, News Corp, Time Warner, etc.). If anything, the disconnect between reality and the "Pervasive Pollyannas of Prosperity" has rendered moot William Safire's catchphrase.

Indeed, the bias is precisely the other way -- between reality and ideological absurdity.

Its the Lite Beer marketing syndrome: If your product is pisswater, and fattening to boot, you never admit that in your advertising. Instead, you frame the debate as whether it "tastes great or is less filling." Its jiu jitsu marketing, turning your liability into an advantage. The misdirection is often effective.

How absurd has the Panglossian cheerleading become? On my pal Larry Kudlow's show last night, several of Candide's descendants talked about how great stocks are if you hold them for 30 years. That's right, the holding period for equities according to this crowd is three decades. Of course, this means every pullback is a buying opportunity. Words such as these can only be spoken by someone who has never worked on a trading desk or managed assets professionally -- or if they did, they lost most of their clients' money.

Rather than address why the public is so unhappy, the triple Ps toss charges of bias. Ignore the worst monthly Auto Sales since 1992, ignore the latest signs of consumer distress (Starbucks closing 500 stores). And when that stops working, PPP starts discussing the long run, ignoring the trading wisdom of Keynes. Its yet more evidence of the pollution of economics with partisan politics. Fortunately for most of the Pervasive Pollyannas of Prosperity, they don't have to live off their market calls. Those who invest based on their "Never say recession" worldview best have another source of income. Fortunately, most of the public isn't so easily misled.

This is something that has irritated me for some time -- the cheerleading at the expense of factual analysis. I live in Houston, Texas where all we have on the AM dial is right-wing radio. From 6 AM to midnight, we are saturated with the likes of Hannity, Rush, Gallagher and their ilk. To hear them talk, you'd think we're just going through a minor correction which the "liberal media" is blowing completely out of proportion (you can also read such garbage from the likes of Captain Ed, Red State and Newsbusters.) If we only continued to think happy thoughts and put a super-positive spin on everything all would be well.

This is a pure Orwellian fantasy of the highest order. The underlying facts of the current economy are terrible; as I will outline below we've got serious problems that can't be spun away with "happy thoughts". But that doesn't stop the right-wing idiots from continuing to push their "liberal media is talking down a great economy" line of attack. So, the next time you hear a talking head say, "all we need is happier reporting" respond with observations of facts presented below and see what they say.

I'm going to base this analysis on a document from the most liberal group ever imagined. This group is so liberal they make the phrase "liberal Democrat" look like a member of the John Birch Society. This group is often the target of right wing attacks because of their liberal nature. In fact, this group is politically to the left of th ACLU and anybody who attended the Woodstock summer of love festival. So -- who is this group? the Federal Reserve. About every month and a half, they release a document called the Beige Book. This book is filled with Democratic party talking points. There is not one right wing point to balance out the hardened leftist communist, defeatist rhetoric contained therein. It is a disgusting document that is filled with anti-American bile. Here is the main hateful paragraph of their latest release.

Reports from the Federal Reserve Districts suggest that economic activity remained generally weak in late April and May. Three Districts described economic activity as softer, weaker, or lower, with an additional four Districts reporting slower, sluggish, or modest economic growth. The remaining five Districts of Philadelphia, Cleveland, Atlanta, St. Louis, and San Francisco described activity as stable or little changed in recent weeks.

Consumer spending slowed since the last report as incomes were pinched by rising energy and food prices. Higher energy prices also appeared to damp domestic tourism. Reports on nonfinancial services varied across Districts and industries. Manufacturing activity was generally soft in recent weeks, with weak demand for housing-related and some other products but with increasing demand for exports. Residential real estate markets remained weak across most Districts. Commercial real estate conditions varied across Districts, as did reports on nonresidential construction activity. Lending activity also varied across Districts and market segments, though tighter credit standards were reported for most loan categories. Districts reporting on the agriculture and energy sectors noted improved crop conditions and increased drilling and extraction activity.

Reports of higher input costs were widespread. Manufacturing contacts in several Districts noted some ability to pass along higher costs to customers. Retailers reported mixed results with respect to raising final goods prices. In most Districts, wage pressures were reported as moderate or limited for all but a few skilled-labor positions, as hiring activity remained spotty in most Districts.

Clear, this group of people hate America.

I'm going to turn off the sarcasm and return to bland econ mode now. Let's take a look at what the Federal Reserve is talking about.

Consumer spending slowed since the last report as incomes were pinched by rising energy and food prices. Higher energy prices also appeared to damp domestic tourism.

Reports of higher input costs were widespread. Manufacturing contacts in several Districts noted some ability to pass along higher costs to customers. Retailers reported mixed results with respect to raising final goods prices.

Oil is a big problem right now. My wife and I had a party last night and oil/gas prices were a big topic of conversation. The general consensus was if gas prices remain at current levels we're going to see profound changes in US behavior. Here is a long-term chart of oil prices:

Prices have increased from $40/bbl at the beginning of 2004 to to over $140/bbl today. That's a 250% increase of the basic commodity that powers most of out transportation. That's a profound increase that is bound to slip into every single nook and cranny of the economy in one way or the other. In short -- this is a big issue, that is not going away any time soon.

Consumer spending slowed since the last report as incomes were pinched by rising energy and food prices.

"Bonddad -- look at that increase! Things are turning around!" Sure they are. And how often will the federal government be able to mail out stimulus checks to keep people spending? Take a look at personal income:

We had one of the biggest bumps in the last 20 years thanks to the federal government doling out money. What do you think is going to happen in the next few months after those checks stop coming out from Washington? Considering year over year employment growth has been dropping for several years:

And the unemployment rate is increasing (wasn't this number suppose to magically come down because of the increase in teen unemployment in the last number, Captain Ed?):

I wouldn't be expecting a wage increase anytime soon.

Reports on nonfinancial services varied across Districts and industries.

The ISM non-manufacturing index has been creeping downward for the last 3 years. It is currently below 50 indicating a contraction and has been reading at that level for 4 of the last 6 months. This indicates that things in the non-manufacturing sector are not going well.

Manufacturing activity was generally soft in recent weeks, with weak demand for housing-related and some other products but with increasing demand for exports.

The year-over-year industrial production number has been decreasing for the last 6 months,

Capacity utilization has been decreasing,

And the Empire (NY Fed) and Philly Fed indexes have been in poor shape for the last 5 months. The only good news is:

The ISM manufacturing indexes recent read about 50. But considering where this number has been over the last 5 months, we'll need at least one more month of positive news before we can say things are good -- and then only if we get confirmation from one of the other numbers listed above. The overwhelming news from manufacturing is negative right now -- at least according to these really stubborn things called facts and statistics.

Residential real estate markets remained weak across most Districts

Here's the short lesson in the US' current real estate market.

Existing home inventory is at a mammoth level in both real terms

And month's of available supply.

As a result,

Home prices in 20 U.S. metropolitan areas fell in April by the most on record, signaling the housing recession is far from over, a private survey showed today.

The S&P/Case-Shiller home-price index dropped 15.3 percent from a year earlier, less than forecast, after a 14.3 percent decline in March. The group began keeping year-over-year records in 2001. A separate report showed consumer confidence slumped this month to the lowest level in 16 years.

Mortgage defaults and foreclosures are adding to the glut of properties on the market, while stricter loan rules are making it more difficult for prospective buyers to get financing. The prolonged real-estate slump, along with higher fuel prices and a shrinking job market, is taking a toll on consumers and the economy.

Commercial real estate conditions varied across Districts, as did reports on nonresidential construction activity. Lending activity also varied across Districts and market segments, though tighter credit standards were reported for most loan categories.

Banking is doing so well that:

Securities firms and banks have reported more than $400 billion of writedowns and credit losses, and raised about $322 billion to replenish reserves since the start of last year, data compiled by Bloomberg show. Anshu Jain, head of global markets at Deutsche Bank AG, said this week that the contagion sparked by the U.S. subprime mortgage collapse has erased more than a fifth of the banking industry's value and is ``by no means over.''

And another bastion of liberal media bias, a group that hates America and in unpatriotic has said the following about the US banking system:

# INDUSTRY EARNINGS DECLINE 46 PERCENT FROM YEAR-EARLIER LEVEL

# LOSS PROVISIONS ABSORB A HIGHER SHARE OF REVENUE
# TROUBLED LOANS ACCUMULATE IN REAL ESTATE PORTFOLIOS
# LENDING GROWTH SLOWS
# FOURTH QUARTER 2007 EARNINGS ARE REVISED BELOW $1 BILLION

.....

Deteriorating asset quality concentrated in real estate loan portfolios continued to take a toll on the earnings performance of many insured institutions in first quarter 2008. Higher loss provisions were the primary reason that industry earnings for the quarter totaled only $19.3 billion, compared to $35.6 billion a year earlier. FDIC-insured commercial banks and savings institutions set aside $37.1 billion in loan-loss provisions during the quarter, more than four times the $9.2 billion set aside in first quarter 2007. Provisions absorbed 24 percent of the industry's net operating revenue (net interest income plus total noninterest income) in the quarter, compared to only 6 percent in the first quarter of 2007. The average return on assets (ROA) was 0.59 percent, falling from 1.20 percent in first quarter 2007. The first quarter's ROA is the second-lowest since fourth quarter 1991. The downward trend in profitability was relatively broad: slightly more than half of all insured institutions (50.4 percent) reported year-over-year declines in quarterly earnings. However, the brunt of the earnings decline was borne by larger institutions. Almost two out of every three institutions with more than $10 billion in assets (62.4 percent) reported lower net income in the first quarter, and four large institutions accounted for more than half of the $16.3-billion decline in industry net income.

That liberal, America hating institution is the FDIC from their latest Quarterly banking Profile

So, to Larry Kudlow, Captain Ed, Newsbusters, Donald Luskin and anyone else who is telling us the economy is just fine and dandy, please provide facts to refute everything mentioned above. Please provide facts that demonstrate:

1.) The consumer is in great shape

2.) Manufacturing is going gangbusters,

3.) Real Estate is just about to bottom,

4.) The financial sector is about to turn around

When you can write a fact based paper that demonstrates the above mentioned points, please do so. However, you opinion that the liberal media is talking down a great economy is, well, garbage. I am calling it such and am awaiting your fact-based response to the points made by the Federal Reserve and the FDIC.

Comments

[GreedyOldPsychopaths]

Bonddad,

Thanks for the post. I've noticed that most of the data is concentrated on a four-year period with a monthly/quarterly frequency. Have you considered trending annual income data (personal, disposable, and savings) over a longer period? The contention: there's a more fundamental issue with the economy. Data is available from the BEA and includes chained 2000 dollar data, although there are contentions concerning use of "chained" data.

Here's the downloadable BEA data:
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=58&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=1987&LastYear=2007&3Place=N&Update=Update&JavaBox=no#Mid

Performing some Excel calculations: per capita income, unchained, more than doubled during 1987-2007, ($20,000+). However, per capita income, chained dollars, only increased by $9,000. Flat PC income growth.

Now look at disposable income versus outlays (expenditures), i.e. savings. In 1987, per capita personal savings, in terms of 2000 dollars, was more than $1,500. Astoundingly, per capita personal savings averaged less than $140 in 2007. Now consider personal debt coupled with 2008's economic meltdown of the financial/housing sector. Consumers are pinched Hale, and it's been a long, slow, and steady decline. But why? Stock market performance? Corruption/deregulation? Energy? Bubbles? Debt? Consumption/production?

Now compare this data to the top 1% incomes and you will discover a completely different situation. But in 2008, this may have begun to change. Economically, we're all in a "slow boat to China", pun intended.

[guajiro]

Great Bonddads of Fire!!!
I love the charts! None of the conservative hacks you mentioned would dare show up to answer you. They would be exposed for the frauds they are. You know, it's been my dream FOREVER to see a live one on one debate on economics between someone such as yourself versus the kidlowe or neil cavuto with each one having 2-3 minutes to respond, WITHOUT COMMERCIALS.
As for your comment: "I live in Houston, Texas where all we have on the AM dial is right-wing radio. From 6 AM to midnight, we are saturated with the likes of Hannity, Rush, Gallagher and their ilk. "
I believe that from Houston west to San Antonio and south to the border, there are no liberal radio station talk shows, AT ALL. It's no wonder rednecks think the world of the chimp.

[Herrington]

I was there in '72, in '90, 2000, and am still here, just. The common experience in all these "downturns" is that the press has no damned idea how to report on them, other than to decry the effects. It is not only possible, but highly likely that no one in the MSM has any idea of what an economy is. If they do, they are certainly not sharing that wisdom with their audience.

Not literally, but figuratively, an economy is a complex organsim with specialized tissues, cells. Some process food, others find it, still others tell you when you are injured. They all must work together or the thing dies. Right now, they are not working together, but instead seem to be acting like single celled organisms. It is someone else's job to do the stuff that provides the environment in which I live.

As no single cell can do much without the other types of cell. It takes a Republican cell to imagine that they can survive without taking care not to injure the other types of cell so much that they can no longer do their jobs.

The fact that this is not the primary concern of every single man/woman in government and in private enterprise is a landmark in stupidity. Simple, brutal, selfish stupidity. It is kind of like a virus has invaded some cells critical to our health, its goal to propagate, indifferent to the survival of the host. Its kind will find another.

[sweetgreensnowpea]

even tapeworms know better than to kill their host.

[Sciguy]

Very interesting analogy!

[clarkbarr]

Bonddad, please a question.

If there is NO change in revenues and we increase deficit spending to fund Mc Cain's proposed military buildup, at what point will the Federal government go insolvent and have to go to the IMF?

[Sciguy]

Thank you for yet another great blog, Bonddad!

[CAPTAINSKIPPY]

Bonddad, thank you for staying focused on a core issue that voters are able to track and to understand, as the wallet and the bank statements are compulsive truth tellers. The politicians who lie about your security and about defending your civil rights are the same ones who lie about your financial well-being and related concerns (e.g.health care). It'n no coincidence that we are always able to spend more for the Defense Department, but usually come up short on medical coverage for all our citizens. Keeping a focus on money matters will help all of us to move the country toward a brighter and "kinder, gentler" place, that the first King George once mentioned, before he exploded his idea into a thousand points of light . Again, thanks and keep up the good work!

[Guynemer]

So which of Senator Obama's grande plans do you think will turn the economy around, taxing capital gains (which is denounced by virtually every serious economist) or a windfall profit tax on EXXON and Shell (of course, not the largest oil companies which include Saudi Aramco, China National, Petroleos Mexicanos or Vezuela)?

Oh, yes we can!

[Bonddad]

I do not support a windfall profits tax, largely because it is impossible to define what a "windfall" amount is. I do support drilling in the US provided the revenue is taxed heavily and used to fund the development of the alternate energy sector in the form of R&D expenditures and tax credits. Unlike Republicans, I believe in paying for expenditures. I wrote about his in a previous article which you can access by searching under my name.

Clinton raised income taxes in 1994 to balance the budget. The economy still expanded. The key to his success was he actually balanced the budget and he increased taxes when the economy was expanding. While the right wing pundits howled their predictions of economic collapse were wrong. I have written about the problem facing the next president as well. You can access that by searching under my name.

[Guynemer]

McCain is often accused on flip-flopping on the issue of Bush's tax cuts. The reality is, the year he refused to pass those tax cuts was because the budget wasn't balanced. It was loaded with expensive earmarks. Senator Obama's record on these earmarks is abyssmal - some $740M of requests over the last 3 years. On the other-hand, the only record that McCain has ever asked for an earmark was in 1992, when he asked for $5M for the Environmental Protection Agency.

For the record, the key to Clinton's success was the fiscally frugal Republican party, of the time, that drafted the budget.

You want a balanced budget? Vote McCain.

[nikto]

The Corporate Media is forbidden from linking/attacking the White House on this topic,
UNTIL January 20th, 2008.

From that moment on, all our problems will be continuously dumped on the White House steps
by our lovely Big Biz Media.

They have not forgotten how to criticiize a President or administration.

It's just that they exist ONLY TO CRITICIZE DEMOCRATS AND LIBERALS AND
ALL THINGS NOT-CONSERVATIVE.

We'll all see.

[RTIII]

Of course, you are correct.

[castlerider]

Bondad,
I live in Houston too. I sure wish I could hear you on the radio instead of the idiots who purvey their ignoramous-speak so they can continue to get contracts that pay up to 400 MILLION. Doesn't take a rocket scientist to figure out that one.. That someone's getting led to the slaughterhouse for their meat of the biggest transfer of wealth in the history of our nation. Absolutely horrible, what they're doing to our country.

Bondad, do you ever visit the radio station on Lovett in the Montrose area called Pacifica? Would you consider gracing us with some of your intelligence and wisdom on the listener-supported free radio? Leo Gold on the new capital show knows who you are, and I bet he would help point you in a good direction so that it could be a great experience for you and all of us as well. Come on up to the next level, buddy. We could all hear you nationwide on the world wide internet web at www.kpft.org !!! All kidding aside sir, your information is absolutely critical to the people in this country, and although I faithfully always read your posts, I feel it truly deserves a wider berth.

I pray you would consider it. It's a free radio right here in Houston. The country needs you, bro.

[FemWorkingClass]

Thank you for this summary of the U.S. goverment's OWN statistics. I expect these reports will soon be 'classified' and unavailable to the general public much as the 'Pentagon Papers' were. Bread and Circuses (American Idol) anyone? The 'financial services' sector have theirs and that's all the greedy pigs care about. Opposition to reregulation already congregates in the Obama campaign staff. If he can't bring along enough support of the right (left) kind in Congress sufficient reform will not occur. Not only will immigration of skilled and unskilled workers slow to a trickle but a 'brain drain' of emigration will begin. I fear for my grandchildren's future.

[NavyMom]

I'm encouraged by the memory of 1992. George First kept insisting that the economy wasn't tanking while most Americans could see and feel that it was.

[researcher]

here is the short answer

we are screwed

hey we are a super power invade iran and take their oil and sell it

demos will do nothing

the folks in europe will do less

go for it while the bush crime family rapes the world

give it up for the bushs

they know america and europe best

you can screw americans and demos and they come back for more

reagan knew that best of anyone

[castlerider]

You're right. That's what they think. And that's what the Chimp thought about Iraq, at the persuasion of his chief war criminal henchmen Cheney, Rumsfeld, Rice, Rove, et al.

But it backfired, and the whole country got dragged into it. They thought they would be heroes. That they could take the place in 2 weeks, that would be it. Greeted as liberators!!

I'm glad to high heaven they've lost their golden fleece of criminal momentum. It's all we have- them knowing they would absolutely be tried as war criminals, and impeachment would no longer be "off the table."

[dolphy]

Don't forget that 80% of Americans (USA only) thought the same thing. We were so effing proud of being "the only superpower" and look at what it got us. Greed and too much pride (short for fascism) got us here.

[Incredulous]

"Liberal media bias" is a Republican talking point, just like "Republicans are tough on terror". These talking points get repeated by pundits and surrogates in the mainstream media over and over and over and over, until the mantra slowly sinks into the conscience of the American public. And soon, the Republican talking points become ingrained as some universal truth. The truth is, the mainstream media is nothing more than the propaganda arm of the Republican Party. And as for "tough on terror", Republicans were in charge when the terrorists successfully attacked America, Bin Laden is still on the loose, they took their eye off the ball in Afghanistan, they invaded a country that had NOTHING to do with 911, their folly has cost the American taxpayer trillions, sending the economy tanking, gas is at a world record high, and did I mention Bin Laden still being on the loose. And this is "tough on terror"? Cable news has a "liberal media bias"? Tell that to Lou Dobbs, Sean Hannity, Bill O'Reilly and the rest of the propagandists. Limbaugh, Coulter, Kristol and on and on... tell them about the "liberal media bias". However, since the mainstream media IS the propaganda arm of the Republican Party, we'll continue to get Republican talking points presented as news, and Americans will continue to succumb to the brainwashing. We'll see in November how many Americans have awakened from their stupor.

[zigzag1]

The tough guys really solved that anthrax mystery also heh?

[dartagnan]

"To hear them talk, you'd think we're just going through a minor correction which the "liberal media" is blowing completely out of proportion ..."

A month or so ago the right-wingers were (I kid you not) trying to claim the souring of the economy was the fault of the Democrats in Congress. I guess they figured out pretty soon that THAT bullspit wouldn't sell, so they're back in denial mode.

It is crucial to remember that the economic melt-down we are witnessing is NOT simply the result of Smirky McChimp's mind-boggling incompetence and venality (although those have been factors) but the natural and inevitable fruit of three decades of conservative Republicans policies, from trickle-down tax cuts to deregulation to union-busting starving our infrastructure needs to gorge our already bloated "defense" establishment.

[nikto]

dartagnan,

You can say that again!!

So I will:

"It is crucial to remember that the economic melt-down we are witnessing is NOT simply the result of Smirky McChimp's mind-boggling incompetence and venality (although those have been factors) but the natural and inevitable fruit of three decades of conservative Republicans policies, from trickle-down tax cuts to deregulation to union-busting starving our infrastructure needs to gorge our already bloated "defense" establishment."

Good post, worth repeating. Important point.

[nunzia]

It's the economy only till the next attack. Then it's the military and McCain.
Keep you eye on Bushco.