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Confusion Revealed

Good bailout story by the CS Monitor

September 29, 2008

During Friday’s debates, moderator Jim Lehrer pressed the candidates to identifying which of their social programs they would cut, given the bailout plan that everybody thought was slated for approval this week. Seems like a logical enough question, and one that we here at CJR have wondered about ourselves. Unfortunately, it turns out to be a faulty premise, according to an informative piece in the Christian Science Monitor.

So, why doesn’t a $700 billion program mean $700 billion less for a new president to spend? The answer lies in accounting conventions that are often misunderstood – and, critics would add, not well suited to the nation’s current financial crisis.

“People will find it hard to believe, but the bailout will have very little impact on the budget or the deficit,” says Peter Morici, a business professor at the University of Maryland and the former chief economist at the US International Grade Commission.

Despite the gigantic price tag, the cost of the bailout—which would result from possible, but not inevitable, losses in the government’s buy-up of the mortgages—would be negligible and spread over several years to minimize the impact.

Let’s have more pieces like this. Let’s have the press step back from the fevered frenzy on Capitol Hill and the campaign trail rhetoric. Let’s have more neutral language, less panic, more explanation, less jargon. In a way, the press needs to assume almost a teaching role, explaining how we got here and what it means going forward, using concrete examples, moving between the micro and macro.

This piece underscores the complexity of the financial situation and how difficult it is to understand for journalists and readers alike. Take this analysis of public opinion polls on the bailout.

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When, in a Rasmussen poll, the plan was referred to as an “economic rescue plan,” it was received negatively. But explain that “the government is potentially investing billions to try and keep financial institutions and markets secure,” as the Pew did, and the results are reversed.

On the one hand, these opposing opinions reveal the importance for neutrality when gauging public opinion. But on the other, if phrasing alone can have such a strong impact on the results, it means that the public—and, apparently, the House of Representatives—is still mightily unclear about the bailout and the financial crisis that necessitated it.

Katia Bachko is on staff at The New Yorker.