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What The Media Tell Americans About Free Enterprise

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Friday, January 28, 2000

Volume 8, Number 2

CNN Earns Dunce Cap For Biased Newsroom Report

Two liberal public policy groups, the Center on Budget and Policy Priorities (CBPP) and the Economic Policy Institute (EPI), got a lot of attention recently when they released a report alleging a sizeable and growing income gap between rich and poor workers. Their report received little critical media coverage, but perhaps none was as glowing as a pair of reports on CNN's Newsroom, a half-hour cable news program produced for use in classrooms all over the world.

This was Newsroom's lead on January 19, as read by anchor Tom Haynes: "We start today's show with a familiar refrain: The rich get richer and the poor get poorer. In the United States in 2000, it appears you're either shouting from the rooftops or singing the blues. According to a report from two policy groups, America has two anthems, and the musical divide is growing."

Newsroom then showed students two reports that had aired the previous day on CNN -- one piece by Don Knapp on the study's findings, and a second report by Aram Rosten on "what it means on a human scale." Neither report, however, properly labeled the study's authors, nor did they include any quotes from experts who questioned the study's premise or methodology.

Knapp's story, which adults would have seen on CNN's mid-day Newsday report on January 18, summarized the study's key assertions. "The average income of the top 20 percent of families is $137,500, while the poorest 20 percent earn about $13,000 a year. Since 1978, adjusting for inflation, rich folks gained $34,000 in annual income on average, while poor families lost $900," he reported. Then, confusing wealth with income, Knapp claimed, "the richest 20 percent is now more than 10 times richer than the poorest 20 percent."

Knapp also relayed the CBPP's and EPI's liberal policy recommendations: "The study urges federal and state governments to avoid tax cuts that benefit the rich, increase minimum wages and come up with tax credits for the very poor."

Newsroom's second report, which originally aired in prime time on CNN's The World Today, featured the plight of 38-year-old Lucille Taylor, who makes $7.60 an hour working at a thrift store in Marietta, Georgia. Correspondent Aram Rosten said Taylor, who has two children, "lives in low-income housing where the lawns are dirt. Inside, the walls are painted cinder block and the appliances are aging. She says, it's no news to her that the gap between the poor and the wealthy is growing."

"It don't make me angry, it just make me frustrated," Taylor told Rosten. "When are the poor going to get a break? When are we going to get a break?"

Neither story provided students (or anyone else, for that matter) with information they could have used to think more critically about the study. For example, just as the Census Bureau does when it produces reports on income distrubution, the CBPP-EPI researchers split the U.S. population into five segments (quintiles), each containing an equal number of families. But, as the Heritage Foundation's Robert Rector and Rea Hedermen point out, since families contain different numbers of people, so does each quintile. The differences are huge: top "fifth" contains nearly a quarter of the U.S. population (24.3%), while the bottom "fifth" has only 14.8% of the population, a difference of 25 million people.

"It is not surprising that quintiles with more people and more wage earners have a larger share of total income," Rector and Hederman wrote in a response to the CBPP-EPI study. "The discrepancy in population will strongly distort the apparent distribution of income." Rector and Hederman also point out that the study ignored many types of cash and non-cash income, including Medicare and Medicaid benefits, food stamps and public housing, all of which effectively raise the incomes of low income families. Even though these are longstanding conservative criticisms of income studies (see the Heritage Foundation report "Income Inequality: How Census Data Misrepresent Income Distribution"), neither Knapp nor Rosten included these arguments in their stories.

Additionally, students should have been told that the study only examined pre-tax income, which ignores the fact that the current tax code is already designed to partially redistribute income from the rich to the poor. Those with the highest incomes face a top federal tax rate of nearly 40 percent, while the lowest-income workers typically pay no federal income tax. Indeed, many poor workers receive tax refunds that actually exceed the total amount withheld from their paychecks because of the Earned Income Tax Credit, which is aimed at boosting the incomes of low-wage workers. But even though the CBPP-EPI study failed to address the fact that the current tax code greatly reduces income inequality, Newsroom never told students.

Finally, the popular notion that undergirds the study (expressed by CNN's Haynes as "The rich get richer and the poor get poorer") is contravened by the fact that most workers' incomes fluctuate greatly over the course of their lives. Many Americans earn relatively little in their first jobs, but their paychecks increase as they acquire skills, experience and additional education. Then, later in life, high-wage workers usually see their incomes drop as they retire.

A recent report by Congress's Joint Economic Committee put it well: "Currently there are two models of the American economy, one static, and the other dynamic. The first portrays the United States as a caste system and misapplies the characteristics of a permanent income strata to those only temporarily moving through income brackets. The alternative view portrays a much more complex and interesting social reality in which the composition of income classes are in constant flux. According to this latter point of view, simplistic generalizations about actual persons and families (or 'the rich' and 'the poor') cannot be drawn from data on a conceptual artifice which does not exist as such in reality."

The CBPP-EPI study obviously appealed to those at CNN who believe that poor individuals are trapped in a rigid economic structure that allows little room for advancement. But both students and regular news viewers should have been told that there's more to the story than a flawed report by two liberal interest groups. When it came to covering the "income gap," CNN's Newsroom flunked as an educational tool.


Rich Noyes


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