Gibson Presses Economist to Agree Recession Ahead

ABC anchor Charles Gibson twice pushed reluctant guest expert Sam Stovall, chief investment strategist at Standard & Poor's, to agree that high oil prices and the housing “crisis” will soon lead to a recession. On Tuesday's World News, Gibson outlined: “So, the housing crisis, the Treasury Secretary says it's a significant risk to the economy, the Fed Chairman says it's a significant drag on the economy, we have oil prices over $80 a barrel. Sam, isn't that a classic formula for a recession?” Stovall replied that “what I think is encouraging investors is the pro-activeness of the Fed and government officials by making sure that they get ahead of the curve and fend off the recession.” But Gibson was undeterred from his pessimistic assumptions and pressed again about whether the economy is “really broad-based enough to endure this kind of oil price hike and this kind of housing crisis and not have a recession?” Stovall maintained that oil and housing have impacted the economy, yet “our feeling is we'll probably...get away unscathed.”

The October 16 World News on ABC led with a story from Dan Harris on the “housing crisis.” Then Gibson had this discussion with Stovall:
CHARLES GIBSON: So, the housing crisis, the Treasury Secretary says it's a significant risk to the economy, the Fed Chairman says it's a significant drag on the economy, we have oil prices over $80 a barrel. Sam, isn't that a classic formula for a recession?

SAM STOVALL: Well I think certainly Charlie that those are elements that people have to worry about. Going back to 1970, every recession has been accompanied by a year over year decline in residential construction. Plus, when we take a look at the forecast for housing prices, S&P forecasts a decline from peak to trough of eleven percent and we're only half way there. But what I think is encouraging investors is the pro-activeness of the Fed and government officials by making sure that they get ahead of the curve and fend off the recession.

GIBSON: So you say housing prices have another five percent, perhaps, to go down, the oil prices are high. Now in Dan's [Harris] piece, someone said there, well we're a very broad-based economy. Are we really broad-based enough to endure this kind of oil price hike and this kind of housing crisis and not have a recession?

STOVALL: Well, certainly we forecast that we're expecting to see about a two percent increase in the growth of the U.S. economy this year, about one percentage point of that was declined because of the housing woes and also with oil prices. We anticipate that about for every ten dollar increase in the price of oil it takes away one-quarter of one percent of economic growth. It does not leave us a lot of wiggle room, but since the economy is fairly broad, and consumers end up using less oil than they did twenty years ago, that our feeling is we'll probably will get away unscathed.

GIBSON: A remarkably resilient economy then we have.
Resilient enough to resist a downbeat media.
Brent Baker
Brent Baker
Brent Baker is the Steven P.J. Wood Senior Fellow and VP for Research and Publications at the Media Research Center