Not All Economic News Coverage Is Created Equal

Every month, the University of Michigan surveys a minimum of 500 consumers on their attitudes on the economy. The survey includes questions on business conditions, the labor market and personal finances.

What constitutes the basis for consumer attitudes is not the purview of Michigan's Survey of Consumers. Consumers get their intelligence on the economy from personal experience (I lost my job), from the world around them (my neighbor lost his job) and from the media (lots of folks lost their jobs).

Consumer confidence, in turn, influences the willingness to spend. (Whether confidence leads or is contemporaneous with spending is a subject economists continue to debate.) For that reason, how the economy is portrayed in the media can have a very real impact on consumer attitudes and behavior.

What if the media are letting -- shock, shock -- political bias infiltrate its coverage of economic statistics?

In a new paper entitled, ``Is Newspaper Coverage of Economic Events Politically Biased?'' economists Kevin Hassett and John Lott of the American Enterprise Institute, a conservative Washington think tank, find just that.

``American newspapers tend to give more positive news coverage to the same economic news when Democrats are in the presidency than Republicans,'' Hassett and Lott said in their paper.

Quantifying Bias

Members of both parties are forever accusing the media of bias -- toward the opposite side. A proliferation of web logs has joined media watchdog groups, such as Fairness and Accuracy in Reporting and the Media Research Center, purporting to document media bias, both liberal and conservative. All of them are subjective in their analysis.

Hassett and Lott set out to perform a systematic, statistical study of the issue of bias as it relates to economic coverage. They examined media coverage of four economic data series -- gross domestic product, employment, durable goods orders and retail sales -- from 1991 to 2004. They looked at the headlines from all 389 newspapers in the Lexis/Nexis database that directly or indirectly allude to the economic data released that day or the day before.

The economists chose headlines because they ``create the strongest image of the news in readers' minds'' and are easy to classify as positive, negative or neutral.

Democratic Preferences

Most importantly, Hassett and Lott had to account for the different performance of the economy under George H.W. Bush, Bill Clinton and George W. Bush. To do that, they used regression analysis to control for the economic data, which means they removed the difference in coverage that could be explained by the difference in the economic data.

What the authors found was ``a much higher probability that something will be called bad news if there's a Republican in the White House, and it's statistically significant,'' said Hassett, who is AEI's director of economic policy studies.

The study found that overall ``Republicans receive between 9.6 and 14.7 percentage points less positive coverage than the Democrats,'' with coverage of some indicators (GDP growth) showing a greater and more consistent bias than others (retail sales).

The same reported change in quarterly GDP growth, for example, that generated 44 percent positive headlines under Clinton produced only 28 percent under Republicans, Hassett said.

Get Me Rewrite!

Hassett and Lott tested for other variables -- an election year, the party in control of Congress -- but found that only the president's party seemed to influence the degree to which coverage of the economy was positive or negative. Even the president's popularity has no statistical effect on the coverage.

Stephen Hess, distinguished research professor of media and public affairs at George Washington University and a senior fellow emeritus at the Brookings Institution, was a discussant on the paper when it was presented at the AEI yesterday.

``It was quite a good paper on what news headlines do,'' Hess said. ``But the headline is inaccurate'' because the conclusions are based on a study of ``news headlines,'' not newspaper coverage.

``Someone else writes the headline,'' he said. ``Often the headline isn't accurate and the story is, and vice versa.''

Hess suggested a better way to study economic news bias would be to limit the sample and focus on the leads.

Influence Peddling

``There are 12 news organizations at the Fed and Treasury, and everyone else gets their news from them,'' Hess said.

Studying leads from these organizations would provide a complementary study of economic news bias, he said.

Hassett and Lott also considered the effect economic news has on the public. Not surprisingly, they found that people's perceptions are affected by the tone of the coverage.

That would explain the failure of the improving economy to resonate with the public on a consistent basis in various opinion polls.

``Writing about the economy really does influence what people believe,'' Hassett says.