In many respects, 2005 was the strongest economic year the United
States has experienced since 1999. The Gross Domestic Product
continued its uninterrupted string of consecutive 3-percent or
better quarterly increases 10 quarters in a row, the longest
streak since the mid-80s. The nation added 2 million new non-farm
payroll jobs. The average net wealth of the citizenry reached
another all-time high a total of more than $51 trillion by the
third quarter of 2005. And, as the Labor Department just reported on
January 18, inflation as measured by the Consumer Price Index was
virtually the same in 2005 as it was in 2004, while rising at the
core level (excluding energy and food) at the average rate for the
last decade.
Yet, regardless of the continuous stream of positive
economic news, CNN financial reports were normally quite bearish all
year, in particular asserting that wages werent keeping up with
inflation, causing the average worker to lose ground financially.
Phrases like falling wages have turned an assault on the middle
class into a war on the middle class and The new jobs that are
being created are by and large low-wage jobs were uttered on a
fairly regular basis during CNN broadcasts throughout 2005. ABusiness & Media Institute analysis of CNNs newscasts on wages and inflation
throughout the year revealed that journalists touted the
relationship between wages and inflation as a cause for concern,
instead of the positive sign of economic recovery that it really
was.
The first hint of this direction came on
January 10 during CNN Live Today. CNN-FN Personal Finance Editor
Gerri Willis was invited on to discuss inflation: So are the battle
days of inflation coming back to bite you? We'll tell you what to do
if you think rising prices are going to hit your wallet when CNN
Live Today continues. Willis then gave viewers a description of
the horrors of inflation including: When inflation ticks higher,
higher, higher, the amount of money you're paid if it stays the same
means you're actually losing ground against inflation, what you earn
is less.
What made this statement somewhat odd was that just
five days later, Susan Lisovicz was making exactly the opposite case
on In the Money in a discussion about the presidents Social
Security plan: But one thing that we know for sure is that under
this proposal, your first-year benefits would be tied to the rate of
inflation rather than the rise in wages over workers' lifetime. We
know that the inflation rate moves slower than the latter.
This position that wages always rise at a faster rate
than inflation was one that became extremely common on CNN in the
months that followed, as the president advanced an overhaul of the
nations Social Security system. As a result, there was little
discussion of inflation cutting into peoples paychecks on CNN until
Social Security reform all but faded away. Once spring arrived,
CNNs position on inflation and wages mysteriously changed again.
On the April 11 installment of Lou Dobbs Tonight, the
network reintroduced this inflation is killing the middle class
concept, and the program practically bludgeoned its viewers with
this premise right through the end of December. That April evening,
Kitty Pilgrim, who was filling in for Dobbs, gloomily introduced
this segment: Well, the standard of living for America's middle
class is facing a major new threat tonight. For the first time in 14
years, pay raises are not keeping up with rising prices. Lisa
Sylvester reiterated this premise: For the first time in 14 years,
workers' wages have not kept up with inflation. Wages increased 2.5
percent, but the Consumer Price Index rose 2.7 percent. The reason
wages have been stagnant, too many workers and too few jobs.
Unfortunately, Pilgrim and Sylvester were wrongnot
about the current data, but about the fact that this was the first
time in 14 years that the CPI rose more than wages. According to the
Bureau of Labor Statistics, it also happened in 2003, and in 1992,
1993, and 1994. Somehow, CNN missed those years.
That didnt undermine CNNs focus on this issue. Once
summer arrived, the heat was really turned on. Dobbs began his
August 9 economic segment:
Well, the economy continues to grow, and unemployment remains at low levels. Many Americans, nonetheless, question the health of the economy. In fact, President Bush's poll numbers on the economy are at the lowest level ever. That amid stagnant wages, rising healthcare costs and soaring gasoline prices.
Dobbs then introduced Lisa Sylvester with: The Bush administration may be optimistic about the economy, but millions of middle class Americans, nonetheless, suffering in what should be good economic times. Surveys show middle class Americans believe Washington is instead rewarding big business, and at their expense. In her piece on wages, Sylvester referenced data compiled by a liberal think tank:
According to the Economic Policy Institute, wages from April to June grew 2.4 percent, compared to the same time last year. But inflation rose even more, 2.9 percent. American families are trying to stretch their paychecks to cover rising housing costs, gas prices and health care.
Unfortunately, CNN and EPI didnt offer a proper
historic perspective concerning inflation surpassing wages in the
first half of an economic recovery. According to the Bureau of Labor
Statistics, in the four years since the recession ended in 2001,
wages in America have grown by 10.93 percent while inflation
increased by 11.37 percent. This is quite similar to the four years
that followed the end of the 90-91 recession when wages also grew
by 10.91 percent with inflation expanding by 11.31 percent. And, in
the first four years of the 80s economic expansion, wages increased
by 12.36 percent as inflation rose by 13.22 percent. As such, when
it comes to wages and inflation, the current recovery is following
exactly the same pattern as the previous two, a fact that was lost
on CNN. Reporters portrayed the data as horrible news for
middle-class Americans, rather than confirmation that the economy
was in a strong recovery which was the truth.
Regardless of the facts, Dobbs was at it again in the
fall, beginning his October 14 economic installment:
Tonight middle class Americans and those who aspire to the middle class face a growing cost of living crisis. Inflation last month up at the fastest pace in 25 years, while wages are falling. And Americans are being hit with new waves of job cuts, triggering new job insecurity for millions of workers.
Christine Romans concluded the yearlong diatribe on
wages in America in a Lou Dobbs Tonight installment on December
30: Still ahead, gas prices, a new bankruptcy law, falling wages
have turned an assault on the middle class into a war on the middle
class.
Sadly, in all of his discussions on this issue, Dobbs
chose not to inform his viewers that there is a rather lively debate
amongst economists as to whether the wage data being calculated by
the BLS is giving us an accurate picture of earnings. As Alan
Reynolds of the conservative Cato Institute
wrote
in September: The most obvious flaw in the average earnings figures
as Stephen Moore pointed out in an Aug. 29 column, The Wages of
Prosperity is that they totally ignore health, pension and other
benefits. With benefits included, real compensation per hour was up
3.6 percent between the second quarters of 2004 and 2005 among
non-farm businesses, and up 5.6 percent in manufacturing.
Reynolds contentions were supported by a December 30
Wall Street Journal editorial:
Critics of the U.S economic model charge that income gains for workers still have not caught up with the losses from the 2000-2001 high-tech collapse. Now they have. The Treasury Department reported last week that real hourly wages are up 1.1% versus the previous business cycle peak in early 2001. Workers are now earning more per hour in real terms than they did at the height of the 1990s expansion.
Apparently, CNN was more interested in fear than facts.
Noel Sheppard is an economist, business owner, and contributing
writer to the Business & Media Institute. He is also contributing editor
for the Media Research Centers NewsBusters.org. Noel welcomes
feedback at
nsheppard@costlogic.com.
