< The R-Word

Transcript

Friday, January 11, 2008

BOB GARFIELD:
This is On the Media. I'm Bob Garfield.
BROOKE GLADSTONE:
And I'm Brooke Gladstone. Feeling anxious? Out of sorts? It could be the war, or politics, or seasonal affective disorder. But it could be something that begins with “R”:
[CLIPS]
FEMALE CORRESPONDANT:
First, there are more signs of a looming recession.
MALE CORRESPONDANT:
Are we headed for a recession? And if that’s the case -
FEMALE CORRESPONDANT:
Economists say the risk of recession is over 50 percent. This is according to -
MALE CORRESPONDANT:
Yeah, well, you can say it.
FEMALE CORRESPONDANT:
Recession?

MALE CORRESPONDANT:
Recession. You can say it. It’s okay. It’s out there. People are talking about it —
[OVERTALK]
FEMALE CORRESPONDANT:
It hurts a little bit. It hurts.
MALE CORRESPONDANT:
I know –
[END OF CLIPS]
BROOKE GLADSTONE:
Reporters and pundits may have determined that it’s time to invoke the R-word, but the White House certainly is less inclined.
PRESIDENT GEORGE BUSH:
There are signs that cause us to be ever more diligent and to make sure that good policies come out of Washington.
BROOKE GLADSTONE:
Recession has always been the economic forecast that dare not speak its name in the West Wing. Here’s a clip from the defunct TV show of the same name in which a White House aide explains why.
[CLIP]
JOSH:
We don't ever use that word around here.
LARRY:
What word, “recession”?
JOSH:
No!
WILL:
If we say it, we give it credence.
LARRY:
What should we call it?
JOSH:
I don't care. Call it a boat show or a beer garden or a bagel.
LARRY:
So if it is a bagel, the Fed thinks it’s going to be a mild bagel.
[END OF CLIP]
BROOKE GLADSTONE:
But it shouldn't be hard to call a spade a spade – or a bagel a bagel. Right?
[CLIP]
JEFFREY SAUT:
It depends on what your definition of a recession is.
SUSIE GHARIB:
Well, it’s two consecutive quarters of negative growth.
JEFFREY SAUT:
I could make a pretty cogent argument that the employment population grows at about one percent. And if GDP falls below that, then by default you’re in a recession.
SUSIE GHARIB:
Okay.
[END OF CLIP]
BROOKE GLADSTONE:
Okay, it can be confusing. That’s why the government relies on the private and independent National Bureau of Economic Research to make the official call. But the NBER’s definition of recession is even fuzzier, calling it a “significant decline in economic activity lasting for a few months.” And the data it uses to make that determination take between six months and a year to compile and analyze. In 2001, they didn't call it until after it was over. Meanwhile, the pundits bloviate.
[CLIP]
MALE CORRESPONDANT:
Well, I think we could have what I might term a selective recession.
MALE CORRESPONDANT:
Slowdown yes, recession, no. Global recession, no.
FEMALE CORRESPONDANT:
Well —
[OVERTALK]
MALE CORRESPONDANT:
I can sit down here and put my name on the line and say recession, early 2008.
[END CLIP]
BROOKE GLADSTONE:
Dean Baker, economist and co-director at the Center for Economic Policy Research and a blogger at the liberal American Prospect, says the media wait too long to use the word because they're inclined to view things through the rose-colored glasses of Wall Street economists.
DEAN BAKER:
You know, just to give you a very concrete example, in the fall of 2000, just before the last recession, I was looking at the Blue Chip 50 forecast – you know, say, 50 people ostensibly making independent forecasts. Not one of them saw a recession that was less than six months away.
BROOKE GLADSTONE:
Baker acknowledges the risks of using the word too soon, but he thinks the media are more often guilty of applying it too late.
DEAN BAKER:
You know, failing to see a recession coming, failing to call it after it’s here, and we get people who make the wrong decisions the other way, so we have a lot of people that get the new car or new house and then they end up losing their job. So we haven't really done those people a favor.
BROOKE GLADSTONE:
But Dan Gainor, director of the Business and Media Institute, part of the conservative Media Research Center, says the liberal media, biased against the current administration, are all too eager to tell the awful truth about recession, even when it isn't true.
DAN GAINOR:
And so if you want to acknowledge that they're finally using it when it’s right, you have to similarly say that when they used it in 2004 or '05, '06 and '07, they were wrong.
BROOKE GLADSTONE:
Gainor and Baker don't agree on much, except this. When the media invoke the R-word they affect how we feel and how we act. Baker says that’s good.
DEAN BAKER:
We're starting to see that already. Many of the members of Congress are discussing stimulus packages. President Bush indicated that, you know, they're thinking about a stimulus package. He hasn't decided he'd support one, but, you know, there’s discussions of this.

And if people start to use the R-word more frequently, that’s likely to push those discussions along much more quickly.
BROOKE GLADSTONE:
But Gainor says the media too often make self-fulfilling prophecies - for example, in September, when ABC ran a report called The Road to Recession, based on what turned out to be faulty job numbers. When the numbers were revised -
DAN GAINOR:
You didn't see them recant. They just continued to report more recession stories. So when you watch the Consumer Confidence Index and you watch that drop, how can you not connect the dots and see that the one’s affecting the other?
BROOKE GLADSTONE:
We called David Wessel, The Wall Street Journal’s economics editor, to see where he stands on the tug-of-war over recession. He says newsrooms aren't nearly as powerful as people think.
DAVID WESSEL:
I personally think that we are a much better reflection of what’s going on in the economy than a cause of people being depressed. So when you see the Consumer Confidence numbers falling, I think it’s because people are actually worried about their paychecks and their job security and their health insurance.

But there are people who allege the opposite. So we try very hard not to fall victim to what we're accused of, which is emphasizing the negative and not the positive. Sometimes the people are making predictions because it’s a good way to get attention. Sometimes they make predictions because they happen to be from the party that’s not in power. And at the paper, we try and be very careful about how we use the word.

I happen to write a column in The Wall Street Journal, and I wrote a column where I said I thought we were going to have one. But the reporters I work with wouldn't say that until we actually had some hard evidence.
BROOKE GLADSTONE:
Right. And what is that evidence for The Wall Street Journal?
DAVID WESSEL:
Well, think of yourself as being in a car with a blindfold on and the car starts to go down a hill. And you can feel you’re going down a hill, but you don't really know whether that’s just a little dip in the road and you’re about to go up again or whether you've reached, you know, the Rockies on your way down. Well, that’s sort of the way we are when we think about a recession.
BROOKE GLADSTONE:
Now, it’s a great analogy, but what’s the evidence before a paper like The Wall Street Journal –
DAVID WESSEL:
Right.
BROOKE GLADSTONE:
- decides there’s a recession?
DAVID WESSEL:
Well, we would look largely at the government data on the economy, things like the unemployment rate, something called industrial output, which is the amount of stuff made by factories in the country, and in the monthly numbers on how much money people have coming into their bank accounts and their paychecks and stuff like that. And if you saw all those start to go down, we would be pretty convinced we were in a recession.

But I want to emphasize just how hard it is. Back in 1990, we now know the recession began in July. But in August 1990, we were writing that economists were divided about whether the economy entered recession. We quoted Alan Greenspan as saying he didn't think we were having a recession. And so even though it was well underway, at the time it wasn't obvious.
BROOKE GLADSTONE:
We were speaking to Dean Baker. He was saying that economists tend to emphasize the positive and that this could affect the way the economy is reported.
DAVID WESSEL:
Well, I think what Dean means is that economists aren't as pessimistic as he usually is.
[BROOKE LAUGHS]
I do notice a kind of strange tendency among the economists though, which is to put the odds of recession at 45 percent. It’s sort of like they don't have the guts to say we’re in recession. We're going to have one. They get the odds up to 45 percent.

I wrote a column that said I expect to be looking back and explaining why we had a recession in 2008. Some economists cornered me at a conference I was at and said I was too pessimistic, and it turned out he put the odds at 45 percent.
[BROOKE LAUGHS]
And I said, okay, my odds are 52 percent. Yours are 45 percent. We have some big disagreement? [BROOKE LAUGHS]

It is true that you have to look at where the economists live. If you live on Wall Street you may have a different point of view than if you’re a factory worker in Ohio. I think what makes this period sort of interesting is Wall Street is having a pretty bad time, so we've noticed quite a bit of pessimism from Wall Street economists rather than the optimism that Dean thinks that he usually sees.
BROOKE GLADSTONE:
Could you give us a little peek into the newsroom if you guys have a meeting or a discussion or a exchange of email or some sort of forum wherein you decide whether or not the word “recession” will be used in the news pages?
DAVID WESSEL:
My experience is at some point, some editor in New York will ask at our morning meeting or in an email to me, do we know enough to say flatly that the economy is in recession? Just like you don't need the weatherman to tell you that it’s raining outside, The Wall Street Journal can say it’s raining. We don't have to say according to the National Weather Service.

At some point we will feel confident enough to say the economy appears to be in recession or something like that. But we're not there yet.
BROOKE GLADSTONE:
Were there lessons from 1990 that you’re applying to the current case?
DAVID WESSEL:
What I find interesting in going back is how long it took us to figure out what was going on. And that is a bit frightening. We actually have a whole lot more data than we used to in real time. The computers have made it much easier to sort of take the instant pulse of the economy. And to the extent that we can get information from people, or, if not real numbers, get clues from them, we'll use it.

We have a story, a prominent story talking about how AT&T, the phone company, said that it noticed an increase in people not paying their phone bills and disconnecting their phone line. That was one of those early warnings that makes you wonder, wow, maybe things are really getting worse.

And sometimes economists deride that as anecdotal — but, you know, we're journalists. I look at anecdote as the singular of data. They don't go out and talk to people very often. They just sit there and look at these numbers and make educated guesses. We try and take the best of what they do and the best of what we do and to give people a full picture.
BROOKE GLADSTONE:
David Wessel is the economics editor of The Wall Street Journal.