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Saturday, December 31, 2005

Updated 12/28/05

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CNN’s Dobbs Gives Hot Economy a Cold Shower
Business anchor’s appearance on CBS fraught with pessimistic myths.

By Ken Shepherd
Free Market Project

Dec. 06, 2005

     Brought on to issue “an economic reality check,” CNN’s resident pessimist Lou Dobbs poured cold water on the U.S. economy’s strong 4.3 percent economic growth in his December 6 interview with Hannah Storm of CBS’s “The Early Show.” Dobbs’s negative assessments, unchallenged by Storm, presented an unrealistic and gloomy picture of an American economy brimming with good numbers.

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Send this page to a friend! (click here)     Storm began her interview by noting 215,000 new jobs were added to the economy in November and asked Dobbs, “Is the economy strong? What’s the bottom line?”

     The CNN business anchor conceded the economy was strong, but still said it was plagued with “serious weaknesses,” among them an investor confidence index, which he noted had just rebounded from a two-year low. Focusing on that detail, he ignored the stock market’s strong numbers.

     Dobbs also skipped over the Conference Board’s Consumer Confidence Index, even though Storm asked him about it. The Board noted in its press release accompanying the November data that American consumers have a positive outlook not only on present conditions but future economic growth and job opportunities.

     Some other myths promoted by Dobbs:

  • Recent layoffs at General Motors point to a domestic manufacturing sector “which has frankly been decimated over the past five years.”

     While Detroit’s “Big Three” automakers are laying off workers in response to the weight of labor and pension costs, foreign automakers like Toyota, Nissan, and Hyundai, are steadily gaining market share, and creating jobs in the United States. The December 6 Wall Street Journal reported ongoing efforts by Toyota, Nissan, and Hyundai to open facilities in the United States, particularly Michigan, and to hire recent college graduates as engineers, while the December 6 Detroit News reported that Toyota is considering opening an engine plant in Michigan. Meanwhile, about an hour after Dobbs wrapped up his interview with Storm, the Bureau of Labor Statistics  released a third-quarter report on productivity, which showed strong gains for manufacturing productivity (3.4 percent) overall and a whopping 6.5 percent boost in productivity for durable goods, including but not limited to automobiles and heavy machinery.

  • Dobbs scoffed at analysts who say inflation is low: “economists love to throw out the core inflation – throw out the energy and food prices and come up with something called the core rate. In point of fact, all of us use energy and all of us are eating.”

     In point of fact, the Harvard graduate is insulting viewers by confusing the issue. Core inflation is defined as a “measure of inflation that excludes certain items which face volatile price movements,” because temporary price shocks “can diverge from the overall trend of inflation and give a false measure of inflation.” The sharp post-Hurricane Katrina spike in gas prices – which has since steadily declined – is one such example.

  • Dobbs cited a $700 billion trade deficit and a 4 trillion “trade debt” as something that the United States must “come to terms with.”

     The Cato Institute’s Daniel Griswold writing in the February 25 Financial Times documented how the trade deficit is an “accounting abstraction” which doesn’t correlate to job creation and economic growth. Asked Griswold, “If a rising trade deficit is responsible for ‘shipping jobs overseas,’ how do the critics of trade explain the fact that unemployment rises when the trade deficit shrinks and falls when it expands?”

     The Free Market Project recently published a comprehensive look at the Emmy-winning business anchor’s history of biased economic coverage.


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