Economist Dean Baker gives his take on media coverage of the economy
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington.
This begins a series we’re going to be doing throughout the U.S. presidential elections on economics in the elections. And joining us on a regular basis will be Dean Baker. Dean is the codirector of the Center for Economic and Policy Research. He’s the author of many books and writes in many publications. His most recent book is The End of Loser Liberalism: Making Markets Progressive. Thanks for joining us, Dean.
DEAN BAKER, CODIRECTOR, CENTER FOR ECONOMIC AND POLICY RESEARCH: Thanks for having me.
JAY: So how do you make so farâ€”what do you make so far of how the media is covering the economy in the elections, particularly in the presidential back-and-forth?
BAKER: Well, it’s overwhelmingly a he said, she said story. And, you know, what we have first and foremost is, you know, how Obama’s policies have tried to lift us out of the recession or failed, and we just don’t get any serious analysis of that. So we have President Obama, of course, saying, you know, things are better because of his policies than they otherwise would have been. And there is evidence to support that independent of it. [incompr.] the Congressional Budget Office, the nonpartisan Congressional Budget Office, estimates that his stimulus created two to three million jobs. There’s a number of independent studies come to similar conclusions using, you know, different sorts of methodologies.
Then on the other side we have Republicans saying, no, it was bad, it’s created uncertainty. But they don’t really have any evidence for this. So the argument is supposedly because, you know, we had this big stimulus, that businesses aren’t investing. And, you know, this isn’t that hard to investigate, in the sense that we could just go, okay, well, are businesses investing? And this is something I wrote about in my blog, Beat the Press, just a couple of days ago, because if you look at it, the investment share, the investment in equipment and software, the relevant category here, it’s pretty much back to its pre-recession level. So the Republican argument, at least on its face, doesn’t have any evidence to support it. Now, maybe you could find an economist that can give you a story, but at the most basic level, just saying, oh no, businesses are really scared, they won’t invest, that seems to be contradicted by the fact that they are investing.
JAY: So part of this is sort of the way the climate change debate used to be handled or still is handled. You would have two supposedly equal arguments, but one of which had sort of deep scientific investigation behind it and the other which most people, most scientists think does not, with some exception. But they treat these as equal partners. So it’s simplyâ€”it’s like, I guess, part of horse race coverage: you cover the two horses, and then whatever the two horses say is equal, and that’s the end of your responsibility as a journalist.
BAKER: That’s right. And what’s so pernicious about this is, of course, that they, the reporters, at least in principle, have time. I mean, this is their job. So they have time to investigate and, okay, here’s what Governor Romney said or people in his campaign said, here’s what President Obama, people in the administration said. In principle they have the time to do that. The readers, the person listening to National Public Radio or, you know, whatever it might be, they’re not going to have time to go flipping around on the web to say, oh, is that claim true? So if there’s clear evidence that bears on truth of the claim, it’s the reporter’s responsibility to bring that to their audience.
JAY: And this piece you wrote about this was specifically critical of NPR, which I guess people hoped would have more of this in-depth take that you’re talking about. I mean, this specific take on NPR, is this a representation of what you think is a more general critique of NPR?
BAKER: Well, I don’t think NPR stands out as being bad. I think, in fact, they’re way better than most. That’s in part why I focus on National Public Radio or The Times or, yeah, The Post. They’re in principle the best [incompr.] I think that [incompr.] atypical for NPR’s reporting to always do that, but I certainly can find many other cases where they do that sort of he said, she said rather than trying to get to, you know, the evidences to, you know, one side or the other actually having a better argument.
JAY: Now, the other side is true, too. Like, you find on MSNBC and other places that are kind of pro-Democrat, you find sort of taking without measure or analysis things the Democrats are taking. What do you make of that coverage? Like, for example, Democrats are talking about recent growth in the GDP, and there’s been a lot of questions raised how real that is.
BAKER: Well, I have to say I don’t watch MSNBC. Not anything against MSNBCâ€”literally, I don’t have cable. So I’m notâ€”you know, I [incompr.] here or there, but I’m not often watching it.
But, you know, I think thereâ€”I’d say there’s two different issues. You know, one, you have a talk show where youâ€”you know, Rachel Maddow, and she’ll have someone on, she’s not necessarily going to contradict everything they say. But, you know, the Democrats certainly, I think, have overplayed their [praise] for President Obama in the sense that, you know, I wouldn’t be posting about the growth we’ve been seeing. The fourth quarter of last year, the economy grew at a 3 percent rate, which is okay, but that’s not the sort of growth you’d like to see coming out of this sort of severe downturn that we had back in 2008-2009. I mean [incompr.] in the ’70s and the ’80s, the economy was growing at 7 or 8 percent for, you know, a year or two years till we got back to where we’d been. So 3 percent growth is not something particularly to be bragging about right now, and people should be pointing that out. I do that, of course, in my blog, that that’s not particularly good. I think we could probably sustain somewhere close to 3 percent, maybe a little less, but that’s really not a very good story. That’s going to take us about a decade to get back to our potential level of output, and I don’t think anyone really has grounds to brag about that.
JAY: David Stockman was on the Bill Maher show last week, and he said that 3 percent doesn’t mean that much, ’cause he says that it was mostly warehouse andâ€”what’s the term for it?â€”stocks were down and they’re replenishing stocks, and then when that’s over, that 3 percent growth is kind of not going to even appear again.
BAKER: Well, we actually hadâ€”if you look at final demand (that’s the category of GDP where you don’t count inventories), we have 3 percent growth in the third quarter, but inventories were contracting that quarter, so they were a drag on growth. It went somewhat the other way in the fourth quarter. I suspect we’ll be somewhat less than 3 percent in this quarter (the data comes out next week) because of inventories going the negative, being a drag on growth. But for the year 2012, my guess is it will be between 2.5 and 3 percent, which, again, I don’t consider anything to brag about. You know, it’s better than a recession, better than not growing, but I don’tâ€”that’s not especially strong growth for an economy coming out of a severe downturn.
JAY: Now, and neither party’s really talking about the dangers or potential danger we’re facing in the next year. IMF said recently that they think there’s going to be continued very slow growth, but there’s a real probability of a serious crash. They talked about euro and the possibility of the euro zone really breaking up. They talked about the price of oil. Is this being avoided in the campaign? And how serious a threat as it?
BAKER: I don’t think there’s a big threat of a disorderly breakup of the euro zone, basically because, you know, the actors there, obviously the European Central Bank first and foremost, but the individual countries, Germany being the most important here, they understand what’s at stake. So my guess is that as you get to a crisis where here’s thatâ€”you know, let’s say Spain or one of the other heavily indebted countries seems to be approaching crisis, I think they’ll rush in there with the Band-Aids, the adhesive tape, and do whatever’s necessary to paper things over. I don’t think there’ll be a meltdown, you know, the sort of collapse that we had, say, following the bankruptcy of Lehman in 2008. So I won’t say it’s impossible. I mean, you do have a dangerous situation there, but I think that they care enough to prevent it from happening.
JAY: And the recession in Europe, which isâ€”has to get deeper and more profound, one thinks, given the kind of austerity policies being pursued by most of the governments or all of the governments in Europe, what effect will that have, do you think, on the American economy?
BAKER: Well, it’s somewhat of a negative, but again I think people overplay that, ’cause we’re notâ€”the alternative, the counterfactual if we didn’t have this austerity wasn’t, you know, robust growth in Europe, as Europe may be growing 1, 1.5 percent, and instead of having, you know, small positive, we’re looking at small negative, you know, maybe a -0.5, perhaps -1 percent. That’s somewhat of a drag on the U.S. economy, but it’s just not that big a deal. Aroundâ€”our exports to the euro zone countries are a bit less than 2 percent of GDP. If that falls by 20 percent, which would be a real big fall, that’s still just four-tenths of a percentage point of GDPâ€”not trivial, but, I mean, that’s very far from, you know, wrecking our economy.
JAY: So both parties are campaigning on jobs, jobs, jobs. Unemployment has not moved very much. Is either party presenting real solutions to unemployment?
BAKER: No. And, you know, I think the story here is that the Republicans are saying why don’t we just keep doing what we always say we should doâ€”cut taxes for the wealthy, deregulate business? And it’s almost as though we didn’t have the Bush administration. It’s really kind of incredible because, you know, we did just try this. I mean, why would you think it’s going to do something different now than it did, you know, four years ago, eight years ago? So that’s their line. And the Democrats, you know, President Obama’s pretty reluctant to put forward anything that’s really aggressive, whichâ€”you know, I guess it does badly in focus groups or whatever. I don’t really know.
But, you know, it’s pretty clear to me what we need is the government has to step in and create demand. We still are recovering from the collapse of a housing bubble. Between the lost construction demand and investment demand, we’re down about $1.2 trillion in annual demand in the economy, and there’s nothing to make that up. And, you know, I was on a show this morning with a conservative economist, and she was saying, oh, well, the private sector this and that. Well, we don’t know how to make the private sector do that. You know, [incompr.] give them tax cuts or, you know, whatever you want to do. They don’t just spend money for nothing. And that’s probably a good thing. But in any case, in the short term, in the near term, the only way to get the economy back towards its potential level of output is by increased government stimulus. The longer term, we have to look to getting the dollar down so we can get the trade deficit closer to balance. That would be a good thing to do. But that’s going to take time. That can’t happen overnight.
JAY: Alright. Thanks for joining us, Dean.
BAKER: Thanks for having me on.
JAY: And thank you for joining us on The Real News Network.
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