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Thoughts on the language used in covering the economy

COMMENTARY | March 14, 2008

On the theory that words matter, Henry Banta would have reporters and editors ban the phrases 'consumer confidence' and 'stimulating investment' for the time being, and focus on economic realities.

By Henry Banta

Language matters. Unfortunately the language used by the media to cover the economy contains too many cliches. The problem with cliches is not that they are wrong, but that they condition the way we think. They mask reality. For example, there is the matter of “consumer confidence.” In normal times there may be something useful in this concept, at least for professional economists. But in the current context it can be very misleading. It implies that somehow things would be better if people just felt better – more confident. But the current economic problems are not about how people feel. When people have run out of cash and exhausted their ability to borrow they are not going to spend no matter how confident they feel. Reporters and editors could make a modest contribution to the quality of public discourse by retiring the phrase “consumer confidence” until the next upturn of the business cycle, and in the meantime focus on the real economic condition of consumers.

Another phrase that deserves temporary retirement is “stimulating investment.” The phrase has a lovely ring to it. Who can be against stimulating investment and creating jobs? The problem is that the stock recipe for such stimulation is cutting corporate taxes. The theory is that if we cut taxes corporations will have more money to create jobs. The futility of such a policy as stimulus is obvious from the fact major corporations are awash in cash. Why give them more when they are sitting on what they have? (We do not even need to get to the question of whether they pay any taxes in the first place.) It is worth noting that during the Great Depression (as Mr. Bernanke does in his book on the Depression) there were large corporations that had sufficient cash and liquid assets to expand production but could not find the opportunities to do so. As a worker during the Depression put it, “There is no point in making things when there is nobody to buy them.”

It must be admitted that taking these two phrases out of the vocabulary could result in a lot of blank spaces. On the other hand, if we all had to actually discuss the economic realities of consumer spending and what drives investment decisions we might get some improvement in how we think about these issues. In particular we might put to rest another cliche. We might stop thinking that dealing with income and wealth distribution is “class warfare.” 

An economy with a wide gap between a very small class of very rich and everyone else has some real economic vulnerabilities. If we seriously expect middle class spending to get us out of our current economic nose dive we need to look hard at inequality. It might be useful to recognize that for about two decades the middle class share of the economy has stagnated. Middle class people have maintained their spending by working harder, consuming their savings (including borrowing against the equity in their homes) and piling up mountains of debt. We might recognize that this has a lot to do with middle class families that cannot make their mortgage payments or even pay their credit card bills. Talking about this has nothing to do with class warfare.

Recession Vs Depression
03/15/2008, 10:32 AM

I notice that in the current frame of mind, in stories, on the economy. That the current popular word to use is "recession", describing the current state of economical affairs. Yet reporters, are afraid, to ask the question," Are we in another Depression?".

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