Networks Hype Threat of Default, But Were Wrong about ‘Fiscal Cliff’ Impact

Between the government shut down and the debt ceiling limit about to be crossed Oct. 17, the news media is screaming like the house is on fire. The Obama administration has also warned of dangers. Of course, that’s nothing new.

In many cases following the Obama administration’s reports and threats, the networks were hysterical in their coverage of the “fiscal cliff” and the sequester in late 2012 and early 2013. They repeated predictions and made claims that in many cases, simply failed to happen.

With the latest fiscal crisis, the three broadcast networks have warned or worried about U.S. default in 48 stories on the morning and evening news programs between Oct. 1, and the morning of Oct. 15. In 17 of those stories, they even referred to a possible default as “catastrophic.” Bloomberg Businessweek echoed these same fears, declaring on Oct. 7 that a U.S. default would be “an economic calamity like none the world has ever seen.”

President Obama attempted to scare the financial markets over the upcoming debt ceiling deadline, in an Oct. 2 interview with CNBC’s John Harwood. He stated “I think [Wall Street] should be concerned.”

Others have remained much calmer. Moody’s credit rating agency disputed the widespread predictions of default and said the government would continue to finance their debts so the credit rating of the country would be safe. The news networks, however, ignored this argument.

The fact is, it is uncertain what will happen on Oct. 17 if the U.S. reaches the debt ceiling without an increase. But what is certain is that in the past many predictions aired by the networks have missed the mark altogether.

CBS twice referred to the possibility of “economic disaster” in the two months before the fiscal cliff and even touted the idea that “a fiscal cliff compromise this year would “risk the entire economy,” on Nov. 22 “This Morning.” ABC twice referred to the fiscal cliff as “doomsday.”

In fact the very term, “fiscal cliff” as coined by Federal Reserve Chairman Ben Bernanke, suggested an impending disaster. Bernanke certainly intended to promote fiscal cliff fears, warning on Nov. 20, 2012, that “the economy will go off the cliff.”

The fiscal cliff included both tax increases and spending cuts, but the cuts were delayed from the initial Jan. 1, 2013 deadline to March 1. The fiscal cliff ended up raising taxes on 77 percent of Americans, with an average annual increase of $1257, according to CNN. The cuts to government spending came to be known as “the sequester.” According to Veronique de Rugy’s post at National Review Online, “As the CBO report shows, only $44 billion of the $85 billion sequester will be cuts in actual federal outlays for 2013. That number pales in comparison with the projected level of spending that year, the $845 billion deficit, and the $224 billion on interest payments.”

The fiscal cliff did not result in an economic apocalypse. The Media Research Center’s Business and Media Institute has examined the five most outrageous failed predictions the networks made on their morning and evening news shows about the fiscal cliff or sequester. Often, they were just following the Obama administration’s lead.

 

One: The United States will slide back into recession

The mainstream media often warned that, if the fiscal cliff took effect, the U.S. would suffer another recession. The Obama administration encouraged such fears.

On Aug. 22, 2012,  the Congressional Budget Office (CBO) forecast an economic contraction of 0.5 percent as a result of the fiscal cliff. Bernanke also warned that the economic would “go off the cliff.”

Incredibly, ABC, CBS and NBC news programs warned of recession as a consequence of the fiscal cliff 65 times on morning and evening shows in 2012. In December alone, the networks made 30 of those claims. In one of those instances, Major Garrett told CBS “This Morning” viewers about “warnings of a recession that have rattled Wall Street and consumer confidence.”

The vast majority of fiscal cliff provisions took effect in early 2013, yet, so far, there has not been another recession. The economy continued its slow growth throughout 2013.

 

Two: Unemployment Will Soar, Possibly to 12 Percent!

Another threat of the fiscal cliff, that the government and the broadcast networks warned of was massive unemployment. The CBO released a report Nov. 8 claiming that unemployment would rise to 9.1 percent within a year. The major networks immediately seized on this prediction, citing it six times in the next four days.

Outrageously, on Oct. 26, CBS  “This Morning,” reported that unemployment could skyrocket up to 12 percent, citing a National Association of Manufacturers (NAM) report. At the time, unemployment was between 7.8 percent and 7.9 percent.

Fortunately, the CBO and NAM predictions turned out to be far off. Unemployment has not skyrocketed as predicted, rather it has decreased from 7.8 percent in December 2012 to 7.3 percent in August 2013.

 

Three: Increased threat of terrorism and violent crime

There were plenty of other dire predictions, including the claim from news outlets and the government that Americans would be “less safe.” The Obama administration asked each federal agency to determine what would have to be trimmed from their budgets and agency responses fueled media predictions in the last two weeks of February. Predictably, these agencies warned of very serious consequences.

On June 30, 2013, The Washington Post compiled a series of 48 pre-sequester predictions made by federal agencies. They found that half of these predictions did not come true and only 11 were accurate.

The Department of Justice’s Feb. 1 report warned that furloughs would result in “7,000 FBI employees not working each day.” They further predicted increased terrorist attacks, violent crime and human trafficking. The FBI furloughs would be necessary, they claimed, as “the Department [of Justice] cannot achieve the cuts required by sequestration without furloughing staff this fiscal year.”

Between Feb. 19 and Feb. 27, the networks ran seven stories about the need to cut FBI staff from the Department of Justice payroll. In anticipation of the cuts, Attorney General Eric Holder said on the Feb. 26 broadcast of NBC “Nightly News,” “There is going to be pain. And the American people are going to be less safe.” NBC accepted his declaration without question.

In spite of those extreme warnings from the DOJ and the networks, not a single FBI agent was furloughed. Instead, the DOJ cut $227 million of expired funds which could not have been used on new programs anyway. On April 24, Holder acknowledged that “the Department [of Justice] will not need to furlough any employees this fiscal year due to sequestration.” Perhaps, they ought to have looked more closely at their expired funds before spreading fear about terrorists or violent criminals.

 

Four: ‘Airport Hell’

One of the networks’ favorite sequester predictions was the havoc that would result from cuts to the Federal Aviation Administration (FAA) and the Transportation Security Administration (TSA).

They predicted that furloughs of air traffic controllers and airport security personnel would increase wait times at airports dramatically. Between Feb. 22 and March 1, the major networks ran 13 stories highlighting the airport delays if sequester was implemented. ABC’s Feb. 22 “World News with Diane Sawyer” went further referring to these delays as “airport hell.”

The FAA and TSA each asserted the need to furlough employees and when NBC  “Nightly News” interviewed Secretary of Transportation Roy LaHood on Feb. 23 he warned that cuts would be a “calamity.”

In response, Congress passed legislation allowing the FAA to shift $253 million into other parts of the budget on May 10 and gave TSA extra appropriations to avoid furloughs.

 

Five: Meat shortages and Higher Prices

The major networks also predicted meat shortages due to a reduction in food safety inspections, based on government claims.

Between Feb. 17 and Feb. 27, ABC, CBS, and NBC highlighted this concern nine times. The Feb. 25 “Today Show” predicted that sequester would “jack up prices” of meat.

Much of these reports stemmed from a pair of agency reports from the Department of Health and Human Services (HHS) and the Department of Agriculture (USDA). The HHS report detailed potential reductions in Food and Drug Administration (FDA) funding and claimed “FDA would conduct approximately 2,100 fewer … inspections.”

Furthermore, the USDA predicted “a nationwide shutdown of meat and poultry plants during a furlough of inspection personnel.”

Like many predictions before, this one did not come true either. An appropriations bill passed by Congress in March extended funding to the USDA to avoid furloughs of meat inspectors.

The Washington Post reported that by June there was no certainty that there would be any drop in the level of inspections. Instead, the FDA was able to cut costs pertaining to “travel, training and conference costs.”

Sean Long
Sean Long is a former writer for MRC Business.