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Home Publications Blogs Beat the Press Wall Street Journal Tries to Build Fiscal Cliff Hysteria

Wall Street Journal Tries to Build Fiscal Cliff Hysteria

Monday, 31 December 2012 09:13

A WSJ article told readers that the "fiscal cliff" has already caused damage to the economy. The piece began:

"The damage may already be done.

"Even if lawmakers manage to avoid most of the $500 billion in tax increases and spending cuts set to take effect this week, the risks to the U.S. economy have risen as consumers and investors recoil from Washington's latest budget spectacle."

That ain't what the data show. The piece trumpets the plunge in consumer confidence in December, while noting in passing:

"The research group (the Conference Board) said Americans' outlook for the economy 'plummeted' despite a positive view about current economic conditions."

Of course it is only the current conditions index that bears any relation to consumer spending. The expectations index is driven primarily by news reporting, like hysterical accounts of the implications of the fiscal cliff. It has virtually no relationship to spending.

Contrary to the implication of this piece, the Commerce Department reported that investment in capital goods, excluding aircraft, was up 2.7 percent in December and 3.2 percent in November, suggesting little concern about the fiscal cliff. While the stock market has been down somewhat in recent weeks, short-term fluctuations in the market have almost no meaning for the economy.

In short, we should all appreciate the WSJ's efforts to hype the fiscal cliff, but they should place them on the fiction page.

Comments (4)Add Comment
written by JSeydl, December 31, 2012 10:49
We should also send this note to Brad Delong. He's been claiming that the months leading up to the fiscal cliff have already reduced GDP by some not insignificant amount.
written by David, December 31, 2012 11:38
written by xteeth, January 01, 2013 6:55
I wish you would talk more about the disconnect between Wall Street and business - you know, the kind where people actually work for a living and take showers after work rather than before work. Major business no longer even uses the market for anything other than giving stock options to CEO's. Even IPO's are pretty much gone.
I'm with xteeth - excellent comment & suggestion
written by watermelonpunch, January 02, 2013 2:46
This is related to my thoughts about the whole fiscal cliff hysteria, and then the reports that the holiday spending was muted under "consumer malaise", and some speculated that perhaps consumers were not buying xmas gifts because of the fiscal cliff worries.

The fact is that people bought less for the holidays... is likely because more & more of the population is now in the kind of workplaces where people "take showers after work rather than before work"... and make a lot less money doing it.

I can't roll my eyes enough. People who are working in factories - many don't even understand what the fiscal cliff is about - or that it even might relate to them. My suspicion is that they think it only relates to bankers & stock traders and people who they believe have nothing to do with their lives. (And increasingly it doesn't!!! Except when there's a crash that busts the economy!)
They're not deciding about whether they can afford to buy their daughter a Barbie or not based on the stock market, or whatever they're deciding on in Congress... they're basing that purchase on whether they've got their rent paid & if they can pay all the bills & buy food.
I dare anyone to find some ordinary working class person who decided not to buy some toy for their kid for Christmas based upon fiscal cliff concerns!!! That's a laugh.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.