Katherine Newman on the Economic Downturn; Big Bucks for Political Ads

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Headlines worldwide on the economic turndown seem to focus on the big players — banks, countries, corporations and markets — not individuals. Sociologist Katherine Newman delves into how Americans are faring in response to this financial crisis. Also, correspondent Rick Karr follows the money trail on the campaign trail.


BILL MOYERS: Welcome to the JOURNAL.

Let’s first connect some dots in the week’s news. In Washington, two public interest groups — The Center for Public Integrity and the Fund for Independence in Journalism — finished a report they have been working on for months. It’s an old story but with new math. They went through the record and counted every false statement made by the Bush administration in the run-up to the invasion of Iraq and even six months after we were at war. How many?

If you guessed 935, you are right on the button. That’s at least the number of times the president and seven of his top officials, including Condoleeza Rice, said Saddam Hussein was a national security threat.

On at least 532 separate occasions those officials told us unequivocally that Iraq had links to Al Quaeda or weapons of mass destruction, or both. Remember when this alarm went off?

CONDOLEEZA RICE: There will always be some uncertainty about how quickly he can acquire nuclear weapons. But we don’t want the smoking gun to be a mushroom cloud.

BILL MOYERS: It was one of the most smoothly orchestrated and successful propaganda campaigns in our history, and it was one big lie. The war it produced still has no end in sight, five years later.

Now as this report was released in Washington, Secretary Rice was attending a gathering far away in Davos, Switzerland, where the masters of the universe gather every year to assess how they’re doing in running the world. Condoleeza Rice delivered what was described as a ‘bold’ speech, painting one of those rosy scenarios that so endeared her to the nation’s press five years ago:

CONDOLEEZA RICE: The US economy is resilient, its structure is sound, and its long-term economic fundamentals are healthy.

Well, I can assure you that America has no permanent enemies.

Diplomacy, if properly practiced, is not just talking for the sake of talking.

Diplomacy can make possible a world in which old enemies can become, if not friends, then no longer adversaries.

BILL MOYERS: Set aside for a moment that Ms. Rice was a key enabler in dismissing diplomacy in favor of an unprovoked attack on another country. Instead, consider what was happening in the real world far below the lofty gated community of Davos where she was speaking to the powerful and privileged.

In Iraq, continuing carnage testifies to the foresight of Bush, Cheney, Rumsfeld and Rice. As insurgents gunned down another eight soldiers. One GI lost his life while riding on a specially designed vehicle the military was counting on to resist the most lethal weapon in the war. One hundred pro-American Iraqi militia have been assassinated in the last month.

In Afghanistan, the totalitarian Taliban is on the move once again. But NATO troops aren’t their only target. Attacks against students and teachers have tripled. Over a hundred have been killed outright as hundreds of thousands more have been frightened out of even attending classes. Many of those teenage boys are joining the Taliban.

In Kabul, which Rice and company assured us would see the flowering of democracy in this ancient land of tribal feuds, the Afghan court — intended to be the crown jewel of the American regency — has just sentenced a young journalism student to death for downloading from the internet a document said to offend Islam. Some democracy.

And in nearby Pakistan, Benazir Bhutto was assassinated soon after being personally urged by Condoleeza Rice to return and run for office. The dictator Pervez Musharref, who also spoke in Davos, recently set up an operation to counter what he calls “western propaganda.” Some ally.

Meanwhile, far from the Midas-like luster of Davos, the impoverished people of Gaza …caught between Hamas and Israel…almost out of food …their homes, hospitals, and generators cut off from fuel… did what desperate people long to do they took matters into their own hands, bursting through the wall and making their way into Egypt, on foot, by car, or in donkey carts, seeking food and supplies.

There, reality is survival.

But it was here at home that Rice’s romanticized view of the world, so eloquently detailed to the swells in Davos, grated jarringly against facts on the ground.

While media focused on the wild gyrations of the world’s stock markets, most Americans weren’t checking their portfolios. They were watching their pocketbooks shrink. New reports reveal that the average wage for most workers has been stagnant since 2000.

New York’s multibillionaire mayor Michael Bloomberg could have been in Davos but he remained at home, tending to reality:

MAYOR MICHAEL BLOOMBERG: We’re the ones on the front lines of the economy, and we’ve gotta lot to be worried about: The stock market has already given up more than the entirety of the gains it made last year, in just three weeks.Housing starts in all our city are in average at a 16-year low.

BILL MOYERS: Bloomberg had a message for those who had gone awol from the front lines of leadership:

MAYOR MICHAEL BLOOMBERG: Now we can’t borrow our way out of this. The jig is up. It’s time to start getting our house in order once and for all, which I believe starts with a simple idea: Making decisions based on the business cycle instead of the election calendar.

BILL MOYERS: So with so much reality lying all around us, at home and abroad, how to explain Secretary Rice’s rhetorical flight of fancy in Davos? Is denial simply the ballast to which she clings in order to survive in a world that melts away her every premise every day? Or is it simply another reflection of the congenital defect of an administration determined from the start, as one of them famously said, to create a reality of their own, contrary to all the evidence.

I wonder if anyone in the cozy circles at Davos had the gumption to ask Secretary Rice about that report published this week by the Center for Public Integrity and the Fund for Independence in Journalism.

You’ll find a link to it on our site at pbs.org. Forward it to a friend at Davos.

BILL MOYERS: As Congress and the White House on Thursday were announcing the proposed stimulus plan, the Chicago based company, Methode Electronics, announced that it’s cutting 700 jobs in its Illinois plants. Meanwhile, it’s opened a new plant in Shanghai, China. Talk about a slap in the face for working Americans. So with news like that, and after a week of wild gyrations on Wall Street, fears of a deep economic meltdown, the Feds rate cut, more falling home prices, and the bursting of dreams as well as bubbles, it’s time to welcome back Katherine Newman. She was here some weeks again to discuss her new book, THE MISSING CLASS, just one of several she’s written about how regular people live their lives and cope from paycheck to paycheck. She teaches at Princeton University, where she also directions the Institute for International and Regional Studies. Good to see you again.

KATHERINE NEWMAN: Good to be back.

BILL MOYERS: What do you make of all this bad news?

KATHERINE NEWMAN: Well, it’s a bad news situation out there for millions of Americans who are really going to worry about their futures and their children’s futures. I think the world’s looking like a shakier place, and the country’s looking like it’s not in control of its destiny in ways that people had hoped would be true. And I think they’ll be pleased to hear that Congress and the president have found some way to cooperate with one another. But I think a lot of people will be left out and left in the cold, especially in– in places like the Midwest.

BILL MOYERS: What do you think of this new stimulus plan? I mean, the fine print is still out. But are you encouraged, or are you skeptical?

KATHERINE NEWMAN: I’m more encouraged than I thought I would be, because it provides rebates for people lower down the income spectrum that I thought it would. But I am very concerned about the long term unemployed, which is rising, not only in general, but as a proportion of the unemployed. And that’s one of the disappointments of the stimulus package, because not only do those people really need the money, but they would spend it quickly if they had it. And so, the stimulus effect is going to be absent for that group of people.

BILL MOYERS: Do you think we’re forgetting in this country, what work really means to people? I mean, yes, it means a paycheck, but it means more than that, doesn’t it?

KATHERINE NEWMAN: I think that we need to remember that work anchors people in the social world we live in. It is a lot more than a paycheck. It’s their identity; it’s their sense of purpose. And that’s been true, you know, more or less from the birth of the country. And since the great depression, we’ve recognized how important it is for people to be able to do for themselves. They do sometimes need the support of government to make that possible. And that’s why I think if we could invest more in public employment, and if some of the stimulus package ends up creating jobs to help create the sort of infrastructure that we need to repair the roads, repair the schools– we’ve got a lot of unfinished business out there. And the American people are willing to go to work and finish that business, if given a chance.

BILL MOYERS: Michael Huckabee, the Republican candidate, was quoted this morning as saying, look, if we borrow all this money, this $150 billion for the stimulus, from China, people will spend it on things that are made in China, sneakers and gadgets and things like that. But if we borrow the money from China to build highways in Florida, where he’s campaigning, then the money will stay here. It will be spent on things in Florida. What do you think about that?

KATHERINE NEWMAN: Well, I think people would probably still spend money on things produced in China. But I think if we built more infrastructure, we would see a greater long term benefit from the money we’re investing, because we will improve our roads, our schools. And you know, that’s exactly what Franklin Roosevelt thought. And that’s why he put millions of Americans to work pretty quickly, actually, building the early precursors to the federal highway system, building Penn Station and all the beautiful railroad stations that we have in between. So I think putting people back to work in– and producing things that we can make use of here in the U.S., is a very valuable thing to do. And that’s why, actually, candidates on both sides, John Edwards on the Democratic side, Huckabee on the Republican side, have talked a little bit about public employment and public investment in infrastructure as one solution. The problem with it is, it takes time to ramp that up. And I think what the economists are calling for is a quick shot in the arm. And it takes a little while to ramp those things up.

BILL MOYERS: Even as we speak, the U.S. Conference of Mayors is meeting, holding its regular meeting in Washington, D.C. And I saw a report that the mayors estimate that 1.4 million homes will be foreclosed in this year. What’s the effect of this?

KATHERINE NEWMAN: The effect is devastating, of course, to the families who lose their one most valuable asset, their home. It’s also devastating for millions more who are now sitting in homes that are a lot less valuable than they were before, because they don’t really—it’s like, their bank accounts have been emptied by about a third, because the equity they had is falling as the value of their homes has declined. And that means they won’t have as much that they can borrow for all these purposes, like medical insurance, like college education, like protecting themselves in old age. Because that asset isn’t worth what it was worth before.

BILL MOYERS: Now, what does it mean when you’re– the mortgage on your house is worth more than the value of your house?

KATHERINE NEWMAN: It means you are in deep trouble. And if the houses around you go into foreclosure, and your neighborhood starts to look seedy because nobody’s living in those houses– if the banks won’t lend so that people can move through the housing market– it’s like paralysis out there. And it will be years before we recover from this, years.

BILL MOYERS: The taxi driver this morning told me that houses– two houses on his block are being foreclosed. And he’s got two kids in college, you know. If he loses the ability to borrow against that house, he’s going to be in trouble paying their college tuition, right?

KATHERINE NEWMAN: That’s exactly right. So I think we worry about whether the nation is in control of itself internationally, we worry about whether there’s anything we can do to protect ourselves individually. We worry about whether the next generation is going to have any chance to follow in our footsteps. And you add all this up, and it’s a big headache out there.

BILL MOYERS: Are people going into debt merely because they’re spending too much money?

KATHERINE NEWMAN: The biggest source of bankruptcy, the biggest pressure leading to bankruptcy is actually medical expenses. So this is not what we would call–

BILL MOYERS: Wait a minute.

KATHERINE NEWMAN: –out there buying Cadillacs.

BILL MOYERS: More people are going into bankruptcy because they can’t afford their medical bill?

KATHERINE NEWMAN: That is the biggest push toward bankruptcy for most people who file. It’s an unexpected and very high medical cost. And this is something we don’t really appreciate. We often think, oh, well, they’ve been on a spending spree they couldn’t afford. But it’s a spending spree with taking care of a spouse who is ill, or, you know, a ruptured appendix. Well, that’s not really a very discretionary expense. You sort of have to do that. And that is a really important reason why we’re seeing a lot of people reach bankruptcy. The foreclosure crisis, of course, is not helping matters.

BILL MOYERS: I read a story just this morning from the REUTERS NEWS SERVICE, a reporter based in Philadelphia who said that the poor in Philadelphia– and I think this is true nationwide– are still recovering from the recession six years ago. So he said there’s something unusual about the fact that there’s more poverty now as this downturn occurs, than there was at the last recession.

KATHERINE NEWMAN: That’s true. There’s some really unusual features to this downturn. One is that poverty remained high. The other is that the long term unemployed are a larger proportion of the people who are unemployed, than they were before.

BILL MOYERS: And aren’t more of them college graduates? That’s a new factor, isn’t it?

KATHERINE NEWMAN: That is something that I find very worrying. So if we think of education as protective of the individual out in the labor market, which it is, of course– if you are college educated, you ‘re better off than someone who isn’t. But the proportion of long term unemployed who college graduates has jumped up. So it’s not as protective as it once was. It’s lasting longer, it’s lasting longer into the business cycle, long term unemployment. And that is a real worry. Because the longer you stay out of work, the harder it is to find another job, the more devastating the consequences for your family. And that, I think, is a real worry for all of us.

BILL MOYERS: As you talk, I’m reminded of reading a story just yesterday, about five Wall Street banks that paid out record bonuses, $39 billion, five banks, three of them having just recorded record losses. And these are companies, banks that are– have been stimulating this bubble, this speculation. They win even when they lose. Is there a moral component here? Is there a moral factor at work in what we’re talking about?

KATHERINE NEWMAN: I think this issue of inequality, which sounds like an arcane concept that only people in the universities worry about, is going to hit home with people when they see those kinds of headlines. They’re going to want to know why the pain isn’t broadly shared, why it is that some people seem to be even profiting off the pain of others. It’s not fair. And fairness is actually a concept that Americans care about. They don’t mind if people at the top share in prosperity, but if we’re going to hit this downturn and only the little guy suffers, yeah, we’re going to hear again that in the ballot box and every other way that Americans can express themselves.

BILL MOYERS: What does it say to this– and I know this sometimes sounds to people, naïve– but what does this say to that old sense of, you know, we, the people, the solidarity of the country?

KATHERINE NEWMAN: Well, the question is, who’s “we”? Is the “we” really the inclusive “we” that it– that once was? You know, when prosperity was growing after World War II, when we had really a long, long period of shared prosperity, everybody was doing better. We now see these projections that kind of fan us out into haves at the top and have-nots at the bottom.

BILL MOYERS: And the gap’s getting definitely bigger.

KATHERINE NEWMAN: And the gap’s getting much larger than it was before. And the remedies that affect some people positively and leave others out in the cold, like the long term unemployed.

BILL MOYERS: You remain optimistic about the capacity of the American people to handle crises like this. What are you looking for that would give you the most encouragement?

KATHERINE NEWMAN: The American people have never been fond of the idea that someone else needs to rescue them. They want a chance. They don’t need a guarantee. They want a chance. But if the see the chance start to slip through their hands, if they see that the next generation won’t have the kind of credentials it needs because they can’t go to college, or if they’re heavily burdened by debt when they finish college, their ability to compete will be impeded. And so, what most of us want to see is that we have the tools. Just give us the tool, or give us the opportunity to gain the tools for ourselves, and we will try and take care of the rest. But absent those tools and absent the kind of security that we need to hold on to the assets we have, when we feel like we’re falling in an elevator that’s got no back stop to it, and that, I think, will be very frightening.

BILL MOYERS: Katherine Newman, thank you very much for returning to The Journal.

KATHERINE NEWMAN: It’s my pleasure, Bill.

BILL MOYERS: Despite all the economic woes, you have surely noticed by now that we are in the middle of the most expensive political campaign in American history. And we still have nine months to go. At the outset last year the former chair of the Federal Election Commission called it a high-stakes poker game. To get in, he said, a really promising presidential candidate needed an ante of at least one hundred million dollars. More than half of that – more than 50 cents on the dollar — goes to buy ad time on television. That would be a big windfall for your local television station. Except that in most cases, it’s not your local station, or even your local economy, that keeps the money. The profits from selling the public airwaves for private gain are sucked up the food chain to the folks at the top — those mega-media conglomerates that now control most of the airwaves. No matter who wins in November, big media can’t lose — just like the house in a Las Vegas poker game. Here’s our report by producer Peter Meryash and correspondent Rick Karr.

RICK KARR: Political advertising is about to set a new record: two and a half billion dollars. That’s how much analysts predict will be spent on political TV ads before November’s election by candidates, from the White House to the state house by the groups that support them and by groups that oppose them.

That’s two thirds more than they spent in two thousand four – which set the previous record.

The Presidential race will account for at least a third of the total – some eight hundred million dollars. And that can buy a lot of ads. Before the Iowa caucuses, for example if you’d watched every single ad that the candidates ran – all 50,000 or so of them, back-to-back – it would’ve taken more than 15 days. In New Hampshire on the night before the primary the state’s biggest TV station – WMUR in Manchester – aired 34 political ads in just ninety minutes. In the run-up to the primary, the station reportedly earned $11,000,000… from political ads.

BROOKS JACKSON:The 30-second ad definitely is the dominant form of political communication in the United States today as it has been for many years. And as I expect it will continue to be for some time to come.

RICK KARR: Brooks Jackson is a veteran journalist who runs a web site called factcheck.org. which evaluates the claims that politicians make as they campaign.

As a voter– if I see nothing but 30-second spots for the presidential candidates, what kind of picture do I get? How accurate is that picture of what these candidates stand for?

BROOKS JACKSON:If all you know about candidates in an election is what you see in your ads, you are going to cast a very poorly informed vote. Because those ads quite frequently are– based on information that’s selective, or twisted and, sometimes just downright false and made up.

RICK KARR: Political consultants will tell you that TV ads are essential because a candidate can’t run an old-fashioned door-to-door campaign from coast-to-coast. And given this year’s compressed primary schedule and the twenty-four states voting together on Super Tuesday the only way for candidates to reach the masses and keep control of their messages is with TV ads.

MEREDITH MCGEHEE: After Iowa and New Hampshire, I think we’re kind of in a ready, set, go. We are going to see, because of the way the primaries are set up, huge amounts of money spent on advertising, because, there’s just no way. There’s no way physically or otherwise that these candidates can be in all these states. They’re gonna have to run in these states on television.

RICK KARR: So who really profits from the two and a half billion dollars that they’ll bring in through this campaign? The biggest beneficiaries will be media conglomerates which have been buying up more and more local TV stations. Take New Hampshire as an example: More than half of the stations that serve the state are owned by conglomerates – media giants such as News Corp., which owns 35 stations nationwide CBS, which owns 39 Sinclair, with forty-six and one you may never have heard of: Ion Media, which owns 57 television stations coast to coast.

Even though those conglomerates broadcast to New Hampshire, not one has its headquarters there. The state’s biggest TV presence – the conglomerate Hearst-Argyle, which owns three stations that broadcast there – is run from corporate headquarters in Midtown Manhattan.

Campaign reform advocate Meredith McGehee says that’s a big change from the days when most stations were owned by local businesspeople.

MEREDITH MCGEHEE: When you talk to station managers off the record, not on the record, they’ll say the way the system works now is, a number comes down from the suits in New York or wherever, to say, “Here is your number for the fourth quarter of 2008. Meet it. Either get it with ads, get it through the politicians. I don’t care how you get it. Make it, or we’ll find somebody who will.”

RICK KARR: And they do ‘make it’ thanks to political ads and the cash bonanza they bring in. So much so . that corporate bosses at media conglomerates are bragging about how good campaign spots are for the bottom line: In its 2006 annual report, Hearst-Argyle, for example, wrote “We expect that our stations will benefit significantly from the 2008 election cycle.” “Political revenue” got its own line in that report. And other media conglomerates have made similar claims. CBS President Les Moonves reportedly told investors last December, “We like the fact that there are a number of candidates with a lot of money behind them”.

Now, you might wonder, “What’s the big deal? These are corporations, after all – aren’t they supposed to maximize profits?” The answer is yes, but – because broadcasters aren’t like other businesses. The airwaves that we use are owned by the public.

Think of it this way: when a company drills for oil on public land it owes the public a royalty – a percentage of whatever it earns. Broadcasters don’t have to pay for the licenses that give them the right to use the public airwaves but in exchange for those licenses, they ARE supposed to give something back to the public.

MEREDITH MCGEHEE: What they’re supposed to do is fulfill these public interest obligations. Insure that the public gets information it needs to be an informed and engaged electorate.

RICK KARR: But local TV stations have been doing a lousy job of that. Nearly two-thirds of Americans say they get most of their news from local TV. Yet when scholars studied how local TV news covered the 2004 campaign they found that the average political story was just 86 seconds long that stations spent more time reporting on weather, sports, and crime than they did on politics and that when they did report on campaigns, nearly half of all stories covered the “horse-race” – who was ahead and who was behind. That kind of reporting dominated the conglomerates’ newscasts in the run-up to the Iowa and New Hampshire votes this year.

BROOKS JACKSON:We saw the– you know, the futility of– horse race coverage in the period between– the Iowa caucuses and New Hampshire. When all the polls indicated it was going to be this– cakewalk for Obama.

I mean, the first amendment gives the press in this country, and that includes– broadcast outlets, terrific freedom, which is used to make a lot of money. But it’s there because– the voters need information to base a sound decision on. And I think in– too many cases broadcasters and cable outlets– are making– huge amounts of money from running these political ads. Which in many cases are false and misleading. And they’re putting very little of that money back into some reporting that would inform their viewers– about when they’re being scammed.

RICK KARR: Broadcasters can get away with reaping huge profits from the public airwaves without giving back to the public because Washington has abandoned its obligation to hold stations accountable to the public interest.

MEREDITH MCGEHEE: The failure is a failure public policy. It’s a failure at that Federal Communications Commission, and a failure in Congress. They are not getting for the American people a fair compensation for the value of these airwaves that are being used by the broadcasters. The American people are the ones that get robbed here.

RICK KARR: So in the end, what the public gets is a political campaign dominated by thirty-second sales pitches.

BROOKS JACKSON: What it does that is pernicious is it forces the candidates and their handlers and their media experts to compress– their message into a very small space, basically a bumper strip. And to try to make it as dramatic as possible so it’ll punch through all the competing advertising and all that noise and clutter on 100 cable channels out there, and grab people’s attention. And frequently– truth goes by the wayside. If you think commercial advertising is misleading, you gotta realize it’s the wild, wild West when it comes to political advertising.

BILL MOYERS: Those big conglomerates may be laughing all the way to bank with their loot, but clearly many of you are unhappy about what this means for democracy. Several studies have measured your frustration. Two-thirds of you simply do not trust the media’s campaign coverage. Eighty-eight percent say we focus too much on trivial issues. 77 percent of you want us to get more serious about just where the candidates stand on the issues. There is something to be done about this. Congress and the FCC could require the big media companies, on a rotating basis, to provide candidates free air time each week to debate face to face, no journalist playing middle man. These companies are fined for obscenities; why shouldn’t we ask them to give back some of the airwaves we’ve let them use for profit? Public broadcasting too – we’ve used our primetime to little to enable the candidates to speak freely, and hold each accountable. That would be a far better use of these airwaves than another series on the British monarchy. By the way, CBS, the network Murrow built, recently advertised a job opening for an internet reporter to cover the environment. The posting called for applicants who are ‘wicked smart, funny, irreverent and hip ….knowledge of the enviro beat is a big plus, but not a requirement.’ By now CBS has no doubt found out that anyone with those qualifications has already been snapped up by Jon Stewart and Comedy Central.

This transcript was entered on June 13, 2015.

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