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What The Media Tell Americans About Free Enterprise

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December 1996


Inflating CPI Adjustment Concerns
Networks Worry About `Loss' to Seniors, Ignore Wage Angle

Good news, after being filtered through the national media, can become bad news.

The most recent example: A congressionally appointed panel of economists found that the Consumer Price Index (CPI) overstates inflation by about one percentage point per year. This means that entitlement programs, whose budget-busting increases are determined by the CPI, have grown too much in recent years and that their growth can be slowed while still providing for recipients based on their actual costs of living.

Great news, right? Not if you ask ABC and CBS. "We begin tonight with money," announced ABC's Peter Jennings on the December 5 World News Tonight. "Maybe a little less for you, depending on who you are, and certainly a little more for Uncle Sam." Reporter Lisa Stark then explained that "one third of the federal budget is tied to the CPI, so cutting the official inflation measurement 1.1 percent would lower all government payments based on cost of living, saving the government a trillion dollars over the next twelve years. But cutting those payments would affect 60 million Americans, including seniors who stand to lose an average of $100 a year in Social Security."

According to Dan Rather, on that same night's CBS Evening News, "A plan officially proposed in Washington today could affect the incomes of millions of Americans, especially those older or at the lower end of the economic scale." Reporter Ray Brady explained the mechanics of the CPI with an example: "Take the average Social Security check. It will rise from $724 to $745 a month in January, but it will rise to just $737, a difference of eight dollars, if the congressional commission has its way."

Brady ran a soundbite from Margrit Pittman, a Social Security recipient at a seniors' center, who said, "For many people who come here, eight dollars a month is a big loss. That may be the only eight dollars they have to ever go to the movies."

But how can someone "lose" what they never had? And if the cost-of-living increases in these programs match the actual cost of living, why would any entitlement recipients have to change their lifestyles? Neither Stark nor Brady asked.

And none of the networks pointed out how the CPI adjustment undermines one of their favorite economic stories from early this year -- wage stagnation. Dan Rather said that "millions of American workers know it. Despite soaring profits and a record Wall Street, U.S. businesses are still cutting good jobs and barely raising wages." CBS' Wyatt Andrews described "an increasingly anxious middle class, whose dreams of upward mobility have met a downward reality."

ABC's Jeff Greenfield reported on "something very disturbing behind the record Wall Street numbers and corporate profits." He interviewed an economist who said, "This surge in financial markets was really based on an untenable situation of workers taking a real squeeze in living standards to improve corporate profit margins and competitive prowess." And NBC's Tom Brokaw announced that 1996 would be "another long, anxious year for the American middle class."

But according to economics columnist Robert Samuelson, writing in the December 11 Washington Post, the commission's report "demolishes the theory that living standards have stagnated." Samuelson pointed out that the "stagnation theory has always been a statistical illusion. If your income rises three percent and prices rise three percent, then you've got no 'real' income gain. But if inflation has actually risen two percent, then income is up one percent. This is what's happened."

Declared Samuelson: "No longer should it be possible for some economists and politicians to contend that average families have simply run in place in recent decades." Such a contention shouldn't be possible for journalists, either.


Rich Noyes


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