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Media Ignore Contradiction between Obama's Middle Class Giveaways, Spending 'Freeze'

In an attempt to boost flagging approval ratings, President Barack Obama announced a series of initiatives aimed at helping out the middle class on Jan. 25, two days ahead of his State of the Union address.

The networks, which have protected him from public outrage for months, praised the initiative. NBC heralded the move, giving Obama credit for "getting the message" Jan. 25. CBS's Katie Couric said the same thing that night.

"Good evening, everyone. He got the message: it's the economy middle-class voters are most worried about. And with critical congressional elections coming up this year, President Obama today rolled out a series of proposals designed to show he's on the case," Couric said as she teased White House correspondent Chip Reid's story.

2faces_of_obamaOn Jan. 25, Obama announced several proposals targeting the middle class including:

* Double the child care tax credit for people making less than $85,000 per year.
* Expand tax credits for retirement savings
* $102.5 million spending on elder care
* Lowering the cap on federal student loan payments to 10 percent of income above a basic living allowance and the number of years payments must be made before loans will be forgiven. That would cost taxpayers $1 billion
* Require employers set up individual retirement accounts for workers if they don't offer retirement plans
* Add $1.6 billion to child-care funding assistance

All three evening newscasts failed to mention costs of those proposals on Jan 25, while national newspapers downplayed the price tag.

The New York Times called the proposals "modest initiatives" and described the elder care spending as a "pittance," while The Washington Post described the list as "relatively inexpensive initiatives to help middle-class families."

The network and print media included some political critics, but should have included reactions from economists about the so-called "modest" initiatives and their impact on the economy.

Business & Media Institute adviser and Hillsdale economics professor Gary Wolfram said, "It's definitely an attempt to see if the middle class will buy into proposals which may benefit them in the short run, but harm the economy in the short and long run. In the end, the middle class is going to be worse off under these things than if none of them pass."

Specifically, Wolfram said the student loan changes would bid up the price of college tuition and the employer mandate for individual retirement accounts would increase the cost of hiring (leading to fewer hires).

A Spending ‘Freeze' that Would ‘Barely' Dent the Deficit

In an apparent contradiction, Obama is reportedly going to propose a freeze on discretionary spending during this SOTU speech.

Reuter's said on Jan. 26 that "Obama is seeking a three-year freeze on some domestic programs in his 2011 budget that would save $250 billion by 2020."

According to The Washington Post, the spending freeze "would affect only about one-eighth of the nation's $3.5 trillion budget, the bulk of which is devoted to entitlement programs such as Social Security, Medicare and Medicaid."

Yet CBS "Morning News" said it would be a freeze on "most domestic spending." NBC's "Today" mentioned that (if passed) it would save $250 billion over 10 years. But neither program provided the context of how large the deficit really is. And the CBS "Early Show" touted it as a "big spending freeze."

This year the U.S. is facing a $1.35 trillion budget deficit in 2010 according to the Congressional Budget Office. The entire national debt is more than $12.3 trillion.

Daniel Mitchell, a CATO senior fellow and BMI adviser, wrote that "Many critics will correctly note that this is like going on a drunken binge in Vegas and then temporarily joining Alcoholics Anonymous. Others will point out that more than 80 percent of the budget has been exempted, which also is an accurate criticism."

Mitchell said the freeze would be "semi-meaningful" if it's a "genuine" spending freeze, rather than a make-believe one but that it is not clear yet, which the White House is proposing. CATO also has a graphic illustrating recent growth in discretionary spending and the proposed freeze on its blog.

Alison Fraser wondered if the freeze was a "fakeroo" on Jan. 26. She pointed out a potential problem with the freeze for Heritage Foundation's blog: The Foundry.

"If it applies to last year's supercharged spending on stimulus steroids baseline, it's no freeze at all, but a locking in of spending that was supposed to be temporary," Fraser wrote.

While the network evening reports Jan. 27 did make it clear that the freeze would have little impact on the enormous deficit, they didn't explain Fraser's point - that the freeze would come after a year of "supercharged" spending. The Washington Post explained that December spending bills already approved a 4.1 percent increase in "discretionary spending" and an 8.2 percent increase for federal agencies unrelated to defense.

The Post also acknowledged that "the freeze would shave no more than $15 billion off next year's budget - barely denting a deficit projected to exceed $1 trillion for the third year in a row."

The networks also failed to tell viewers that Obama's call for an across the board spending freeze is an about face from his 2008 campaign. He campaigned against such a spending freeze when Sen. John McCain proposed it in the first debate. Obama declared that it would be a "hatchet," when what was needed is a "scalpel."

What about Jobs?

With the national unemployment rate resting at an exorbitant 10 percent, Obama will also be focused on jobs during his SOTU speech. So far the media have allowed the president to continue to claim that his actions during the past year have "created or saved" million of jobs.

In last year's address (which was not called the State of the Union), Obama promised millions of jobs would be "saved or created" through his proposals. Despite a $787 billion stimulus package, and other spending packages and bailouts the national unemployment rate soared to 10 percent and only November 2009 saw the addition of new jobs - 4,000 of them.

Obama told ABC viewers Jan. 25 that the stimulus "created or saved" "several million" jobs, while his advisers and press secretary used three different numbers of the Jan. 24 Sunday talk shows.

In many cases the networks haven't held Obama accountable for rising unemployment. With the exception of a single CBS mention, the networks' job reports from Jan. 8-12 failed to inform their viewers that 2009 had the highest yearly job losses on record (more than 4.1 million). And when Katie Couric did address the historic nature of the job losses, she underreported the number of jobs lost in 2009 by 700,000.

Associated Press reported that the $20 billion in stimulus funds specifically designed to create jobs with infrastructure projects was a "failure" because it did not impact local unemployment rates. They also said it is "impossible to quantify exactly what effect the stimulus has had on job creation." So the administration can claim it created or saved any number of jobs because there will be no way to prove or disprove it.

But only one network story cited AP's findings.

Throughout 2009, the networks fell for Obama's created or saved rhetoric. NBC praised the "hope" generated in one community because of an $8.5 million spending on a bridge that would "create or save" 240 jobs. ABC touted a White House report claiming early success of the stimulus package twice in three days, repeating the phrase "save or create." The three broadcast networks even failed to hold Obama accountable for his own claim that the stimulus would stop unemployment from rising above 8 percent.

Surprisingly, on Jan. 25, 2010 CBS's Chip Reid made it clear that the proposals to "relieve" the middle class "are not designed to create jobs, but to ease the pain."

According to Wolfram, Reid was correct. Those proposals wouldn't create jobs. In fact, at least one of them would discourage hiring.

If Obama requires employers to set up individual retirement accounts for all employees, as the Jan. 26 Washington Post reported, the national unemployment rate may very well go even higher.

"If the purpose is to get the unemployment rate up to 12 percent, then this is a great idea," Wolfram said. "It will increase the cost of hiring people and fewer people will be hired. And more people will search for jobs."

What should be done? Wolfram offered a couple of suggestions for getting the national economy back on track. First, "establish rule of law."

"No one knows what the rules of the game are. Anything can happen. Obama can come up with a tax on banks one day, middle class benefits another day, and the next he could replace the Fed chairman," Wolfram said. The rules need to be consistent or businesses will just continue to wait things out.

Wolfram continued: "Unemployment is so high right now because you don't know if cap and trade is going to pass, raising electricity rates, or a health care bill that has an unknown cost, or that tomorrow you might have to create IRA's for anyone you hire. You're going to wait to hire until you figure out what's gonna happen."

Second, Wolfram said corporate tax rates need to be cut in half. The U.S. has a production problem, not a demand problem and currently it is too expensive to produce in the U.S. The Hillsdale professor admitted that this isn't a popular idea, but insisted that with the second highest corporate tax rate in the world it needs to be chopped in order to fix the lack of production.

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