Networks Ignore Contradiction Between Obama's Middle Class Giveaways, Spending 'Freeze'

In an attempt to boost flagging approval ratings, President Barack Obama announced a series of initiatives aimed at helping out the middle class on Jan. 25, two days ahead of his State of the Union address.

The networks, which have protected him from public outrage for months, praised the initiative. NBC heralded the move, giving Obama credit for "getting the message" Jan. 25. CBS's Katie Couric said the same thing that night.

"Good evening, everyone. He got the message: it's the economy middle-class voters are most worried about. And with critical congressional elections coming up this year, President Obama today rolled out a series of proposals designed to show he's on the case," Couric said as she teased White House correspondent Chip Reid's story.

On Jan. 25, Obama announced several proposals targeting the middle class including:

• Double the child care tax credit for people making less than $85,000 per year.
• Expand tax credits for retirement savings
• $102.5 million spending on elder care
• Lowering the cap on federal student loan payments to 10 percent of income above a basic living allowance and the number of years payments must be made before loans will be forgiven. That would cost taxpayers $1 billion
• Require employers set up individual retirement accounts for workers if they don't offer retirement plans
• Add $1.6 billion to child-care funding assistance

All three evening newscasts failed to mention costs of those proposals on Jan 25, while national newspapers downplayed the price tag.

The New York Times called the proposals "modest initiatives" and described the elder care spending as a "pittance," while The Washington Post described the list as "relatively inexpensive initiatives to help middle-class families."

The network and print media included some political critics, but should have included reactions from economists about the so-called "modest" initiatives and their impact on the economy.

Business & Media Institute adviser and Hillsdale economics professor Gary Wolfram said, "It's definitely an attempt to see if the middle class will buy into proposals which may benefit them in the short run, but harm the economy in the short and long run. In the end, the middle class is going to be worse off under these things than if none of them pass."

Specifically, Wolfram said the student loan changes would bid up the price of college tuition and the employer mandate for individual retirement accounts would increase the cost of hiring (leading to fewer hires).

A Spending ‘Freeze' that Would ‘Barely' Dent the Deficit

In an apparent contradiction, Obama is reportedly going to propose a freeze on discretionary spending during this SOTU speech.

Reuter's said on Jan. 26 that "Obama is seeking a three-year freeze on some domestic programs in his 2011 budget that would save $250 billion by 2020."

According to The Washington Post, the spending freeze "would affect only about one-eighth of the nation's $3.5 trillion budget, the bulk of which is devoted to entitlement programs such as Social Security, Medicare and Medicaid."

Yet CBS "Morning News" said it would be a freeze on "most domestic spending." NBC's "Today" mentioned that (if passed) it would save $250 billion over 10 years. But neither program provided the context of how large the deficit really is. And the CBS "Early Show" touted it as a "big spending freeze."

This year the U.S. is facing a $1.35 trillion budget deficit in 2010 according to the Congressional Budget Office. The entire national debt is more than $12.3 trillion.

Daniel Mitchell, a CATO senior fellow and BMI adviser, wrote that "Many critics will correctly note that this is like going on a drunken binge in Vegas and then temporarily joining Alcoholics Anonymous. Others will point out that more than 80 percent of the budget has been exempted, which also is an accurate criticism."

Mitchell said the freeze would be "semi-meaningful" if it's a "genuine" spending freeze, rather than a make-believe one but that it is not clear yet, which the White House is proposing. CATO also has a graphic illustrating recent growth in discretionary spending and the proposed freeze on its blog.

Alison Fraser wondered if the freeze was a "fakeroo" on Jan. 26. She pointed out a potential problem with the freeze for Heritage Foundation's blog: The Foundry.

"If it applies to last year's supercharged spending on stimulus steroids baseline, it's no freeze at all, but a locking in of spending that was supposed to be temporary," Fraser wrote.

While the network evening reports Jan. 27 did make it clear that the freeze would have little impact on the enormous deficit, they didn't explain Fraser's point - that the freeze would come after a year of "supercharged" spending. The Washington Post explained that December spending bills already approved a 4.1 percent increase in "discretionary spending" and an 8.2 percent increase for federal agencies unrelated to defense.

The Post also acknowledged that "the freeze would shave no more than $15 billion off next year's budget - barely denting a deficit projected to exceed $1 trillion for the third year in a row."

The networks also failed to tell viewers that Obama's call for an across the board spending freeze is an about face from his 2008 campaign. He campaigned against such a spending freeze when Sen. John McCain proposed it in the first debate. Obama declared that it would be a "hatchet," when what was needed is a "scalpel."

You can read the Business & Media Institute's entire analysis here.