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Wrong At The Times

By INVESTOR’S BUSINESS DAILY | Posted Tuesday, August 21, 2007

Media Bias: There they go again. A major media outlet makes a claim about the economy it can’t back up. We’re starting to think maybe this isn’t an accident.

In this case, the culprit is the New York Times. In its Tuesday edition, it makes the claim that Americans “had to make ends meet with less money than at the peak of the last economic expansion.”

As evidence, it cites the data from 2000 to 2005. Sure enough, real household income in 2000 was $55,714, while in 2005 it was $55,238, a decline of 1%.

“The fact that average incomes remained lower in 2005 than five years earlier,” the Times piece intones, “helps explain why so many Americans report feeling economic stress despite overall growth in the economy.”

Case closed? Hardly.

This is a classic example of statistical bait and switch. Our suspicions were raised with the Times’ selection of that first year — 2000. Wasn’t that the peak year in the Internet boom? The year before the 2001 recession, which was already underway the very day that President Bush stepped into office in January 2001?

You pick a record year for income — one that included, by the way, massive amounts of one-time capital gains from the stock market — then compare it with income several years later and, of course, growth will appear to be weak.

That’s only one bit of numbers legerdemain the Times used.

It also chooses “household” income as its gauge. A useful measure, but with caveats.For instance, the average household in 2000 had 2.62 people in it; in 2005, according to Census forecasts, the average household had 2.57 people. That’s a decline of about 2%.

So, all things equal, incomes should be 2% less than they were in 2000, based on the Times report’s use of household data.

Instead, they were down just 1%. Thus, adjusted for household size, incomes using the income measure of the Times actually rose 1%, after inflation.

By the way, there are far better income measures than those used by the Times. They show something quite different.

Let’s take real personal disposable income — a measure of what people actually take home after taxes, which is highly relevant given President Bush’s big tax cuts. Instead of the deceptive household measure, let’s look at per person income.

When you do, you see that, in real terms, disposable personal income rose 7.7% from $25,469 in 2000 to $27,436 in 2005. By the way, move that out to 2006, and real incomes grew 10%.

Lest you think we’re cherry picking here, we’ll take one other standard measure of national income growth: real per-capita GDP, the number economists prefer when making cross-country comparisons.

In this case, per-capita GDP grew 6.6%, from $34,755 in 2000 to $37,052 in 2005. Again, add in 2006 data, and the gain was 8.6% since 2000.

One more telling statistic: During the period the New York Times heralds as one of low growth, personal consumption rose sharply. From 2000 to 2005, per person spending rose a solid 10.1%, fueled by tax cuts, low unemployment, a housing boom and record stock prices. That’s after inflation, mind you. And, yet again, extend it out to 2006 and the real spending gain is a hefty 12.6%. A big gain.

What about the claim Americans are “feeling economic stress”?

Strange, but just last week a new Harris Poll showed that 94% of Americans remain “satisfied” with their lives. Sound like a country stressed out over the economy to you?

Sure, we all have financial worries. That’s part of life. But using data in a deceptive way to portray things as bad when they’re not isn’t just wrong; it’s dishonest.

The Times’ distemper when it comes to anything related to President Bush is well known. Sadly, this is just another in a long line of tendentious economic reporting by a once-great newspaper.

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