How Econo News is Spun - Paul Craig Roberts

How Economic News Is Spun

"The few reporters and columnists who are brave or naive enough to speak out are
constrained by editors, who are constrained by owners and advertisers."

By Paul Craig Roberts

Readers ask me to reconcile the jobs and debt data that I report to them with
the positive economic outlook and good news that comes to them from regular news
sources. Some readers are being snide, but most are sincere.

I am pleased to provide the explanation. First, let me give my reassurances that
the numbers I report to you come straight from official U.S. government
statistics. I do not massage the numbers or rework them in any way. I cannot
assure you that the numbers are perfectly reported to, and collected by, the
government, but they are the only numbers we have.

Here is how to reconcile my reports with the good news you get from the
mainstream media:

First, when the U.S. Department of Labor, for example, releases the monthly
payroll jobs data, the press release will put the best spin on the data. The
focus is on the aggregate number of new jobs created the previous month - for
example, 150,000 new jobs. That sounds good. News reporters report the press
release. They do not look into the data to see what kinds of jobs have been
created and what kinds are being lost. They do not look back in time and provide
a net job creation number over a longer period of time.

This is why the American public is unaware that higher-paid jobs in export and
import-competitive industries are being phased out, along with engineering and
other professional "knowledge jobs," and replaced with lower-paid jobs in
domestic services. The replacement of higher-paid jobs with lower-paid jobs is
one reason for the decline in median household income over the past five years.
It is not a large decline, but it is a decline. How can it be possible for the
economy to be doing well when median household income is not growing and when
economic growth is based on increased consumer indebtedness?

Many economists mistake offshore outsourcing with free trade based on
comparative advantage. As a result of this mistake, ideology speaks instead of
economic analysis. For example, Matthew J. Slaughter, an economics professor at
Dartmouth, commits a huge error when he writes: "For every one job that U.S.
multinationals created abroad in their foreign affiliates, they created nearly
two U.S. jobs in their parent operations."

If Slaughter had consulted the Bureau of Labor Statistics payroll jobs data, he
would have realized that his claim could not possibly be true. Slaughter did not
come to his conclusion by examining aggregate job creation. Instead, he measured
the growth of U.S. multinational employment and failed to take into account the
two reasons for an increase in multinational employment: Multinationals acquired
many existing smaller firms, thus raising multinational employment but not
overall employment, and many firms established foreign operations for the first
time and thereby became multinationals, thus adding their existing employment to
Slaughter's number for multinational employment.

ABC News' John Stossel, a libertarian hero, recently made a similar error. In
debunking Lou Dobbs' concern with U.S. jobs lost to offshore outsourcing,
Stossel invokes the California-based company, Collabnet. He quotes the CEO's
claim that outsourcing saves his company money and lets him hire more Americans.
Turning to Collabnet's Webpage, it is very interesting to see the employment
opportunities that the company posts for the United States and for India.

In India, Collabnet has openings for eight engineers, a sales engineer, a
technical writer and a telemarketing representative. In the United States,
Collabnet has openings for one engineer, a receptionist/office assistant, and
positions in marketing, sales, services and operations. Collabnet is a perfect
example of what Lou Dobbs and I report: The engineering and design jobs move
abroad, and Americans are employed to sell and market the foreign-made products.

Second, Wall Street economists are salesmen. The companies that employ them want
to sell stocks and bonds. They don't want bad news. A bear market is not good
for business. Similarly, business associations have the agenda of their members.
Offshore outsourcing reduces their labor costs and boosts their profits and
performance-based bonuses. Therefore, it is natural that their association
reports put a positive spin on outsourcing. The same organizations benefit from
work visas that allow them to bring foreign workers in as indentured servants to
replace their more fractious and higher-paid American employees. Thus, the myth
of a U.S. shortage of engineers and scientists. This myth is used to wheedle
more subsidies in the form of more H-1B visas out of Congress.

Third, official U.S. government reports are written to obfuscate serious
problems for which the government has no solution. For example, "The Economic
Report of the President," written by the Council of Economic Advisers, blames
the huge U.S. trade deficit on the low rate of domestic savings. The report
claims that if only Americans would save more of their incomes, they would not
spend so much on imports, and the $726 billion trade gap would close.

This analysis is nonsensical on its face. Offshore outsourcing has turned U.S.
production into imports. Americans are now dependent on offshore production for
their clothes, manufactured goods and advanced technology products. There are
simply no longer domestic suppliers of many of the products on which Americans

Moreover, many Americans are struggling to make ends meet, having lost their
jobs to offshore outsourcing. They are living on credit cards and struggling to
make minimum payments. Median household real incomes are falling, as higher-paid
jobs are outsourced while Americans are relegated to lower-paying jobs in
domestic services. They haven't a dollar to save.

As Charles McMillion points out, the Feb. 28 report from the Bureau of Economic
Analysis shows that all GDP growth in the fourth quarter of 2005 was due to the
accumulation of unsold inventory and that consumers continued to outspend their

Matthew Spiegleman, a Conference Board economist, claims that manufacturing jobs
are only slightly higher paid than domestic service jobs. He reaches this
conclusion by comparing only hourly pay and leaving out the longer manufacturing
workweek and the associated benefits, such as health care and pensions.

Stossel simply does not know enough economics to be aware that he is being used.
The bought-and-paid-for-economists are simply earning their living and their
grants by serving the interests of corporate outsourcers.

Fourth, policy reports from think tanks reflect what the donors want to hear.
Truth can be "negative" and taken as a reflection on the favored administration
in power. Consider, for example, the conservative Bruce Bartlett, who was
recently fired by the National Center for Policy Analysis for writing a truthful
book about George Bush's economic policies. Donors to NCPA saw Bartlett's book
as an attack on George Bush, their hero, and withheld $165,000 in donations.
There were not enough Bartlett supporters to step in and fill the gap, so he was
fired in order to save donations.

When I held the William E. Simon chair in political economy at the Center for
Strategic and International Studies, I saw internal memos describing the grants
CSIS could receive from the George H.W. Bush administration in exchange for
removing me from the Simon chair.

In America, "truth" has long been for sale. We see it in expert witness
testimony, in the corrupt reports from forensic labs that send innocent people
to prison and even in policy disputes among scientists themselves. In
scholarship, ideas that are too challenging to prevailing opinion have a rough
row to hoe and often cannot get a hearing.

Even the president of Harvard University, Larry Summers, an academic economist
of some note and a former secretary of the treasury, was forced to resign
because he offered a politically incorrect hypothesis about the relative
scarcity of women in science.

The few reporters and columnists who are brave or naive enough to speak out are
constrained by editors, who are constrained by owners and advertisers. For
example, it is impermissible to examine the gaping holes in the 9-11 Commission
Report. Publications and editors are intimidated by the charge of "conspiracy
theory," just as criticism of Israel is muted for fear of being labeled

All of these reasons and others make truth a scarce commodity. Censorship exists
everywhere and is especially heavy in the U.S. mainstream media.


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