D.C. Dispatch March 29, 2005

Like economics itself, economic journalism is a dismal, foggy realm where the hapless news consumer is constantly bumping into weird conditionals and subjunctives.

Gas Bubble

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A lot of what we do in the news business is glorified busywork. This is not always obvious. In fact, some journalists spend their days digging for actual facts and reporting them in stories that advance the march of civilization. Thanks to those heroic souls, the rest of us get to hold on to a few shreds of dignity.

But when the economy is in the news, and particularly when Federal Reserve Board Chairman Alan Greenspan is jiggering interest rates, the shocking busywork reality becomes painfully clear. As this week began, the Fed was widely expected to raise interest rates. With millions of homeowners fretting about whether there's a housing bubble, and whether the Fed might pop it by taking rates upward, this story has a gigantic natural audience.

Shortly before the Fed's decision was announced, I checked online to see how it was being framed. Many Web sites were offering an Associated Press wire story, headlined "Fed Likely to Raise Rate a Quarter-Point," that began:

While mortgage rates and other interest rates are expected to keep rising this year, those increases are likely to continue at a gradual pace unless inflation becomes a threat. But with oil prices surging to record highs, the worry about out-of-control inflation remains very real. Analysts said if policy makers at the Federal Reserve grow concerned that inflation is becoming a problem, they are likely to start pushing up interest rates at a much more rapid clip.

Got that? Like economics itself, economic journalism is a dismal, foggy realm where the hapless news consumer is constantly bumping into weird conditionals and subjunctives. Even when there's authentic news to report—the rate hike—the fog barely lifts. After the Fed's decision was announced, the first story I saw on Google News reported it this way:

A nod to rising inflation pressures from the Federal Reserve sent U.S. rate futures tumbling on Tuesday as dealers looked for the Fed's program of U.S. interest-rate hikes to continue unabated. Although the Federal Open Market Committee, which raised official benchmark rates a quarter percentage point as expected, maintained its pledge for 'measured' rate increases, it also noted potential for rising prices and appeared ready to get more aggressive if necessary.

This was a Reuters story, and based on the insider language (what are "rate futures," anyway?), one can guess it was written for an elite minority of market professionals who understand such things. The second story I saw, on the MarketWatch.com Web site, delivered a much cleaner version: "The Federal Reserve raised interest rates as expected Tuesday and said it is getting more worried about inflation."

The real problem is the nonstop stream of gassy speculation that predominates in economic coverage and does little except fill empty space and airtime. This is especially true in coverage of the hot housing market, now such a popular topic it's hard to avoid. Barely a week goes by when some major news outlet isn't playing around with the numbers, placing odds on which cities will have a bubble and which won't.

Still, the tone suggests that even if there is a housing bubble and it bursts, with the help of your friends in the media, you'll find a way to be spared. The sunny, you-can-get-rich voice that the personal-finance magazines perfected long ago has spread far and wide. "Got a million dollars to spare?" CNBC asked in an online story I read this week. "Despite fears that the real estate market is a bubble that's ready to burst, there are some U.S. cities where home prices are still 'undervalued' and a million dollars can still get you a very plush pad."

The bubble story has such popular appeal, it's crossed over from the economics and personal-finance categories to general interest, and even the op-ed pages. Last month, Michael Kinsley of the Los Angeles Times wrote a fun bubble column that began:

Pop! That is the sound of the real estate bubble bursting. And it's a good thing. It is obvious to me that today's real estate prices are a speculative bubble that is about to burst. Of course, this has been obvious to me for about three decades, and I've been wrong almost all of that time. Nevertheless. One piece of evidence is the Dinner Party Index. The boom is over when more people are bored by real estate anecdotes ... than have got new ones. Another reason the value of your house is about to plunge is that the Los Angeles Times, The New York Times, and The Washington Post all say that it isn't.

This isn't completely fair to the mainstream media. What the big news outlets really do is play both sides against the middle, reporting that while there might just possibly be a bubble—in some regions—there also are very convincing arguments that there might not be. Thus covering their prognosticating posteriors. The classic dodge is the question mark: "Can Anything Stop the Housing Market?" asked The Washington Post in a January headline. "Will the Market Stay Strong, or Will It Fold?" wondered a New York Times headline last fall.

In its April issue, Money magazine even offers a little Bubble Watch feature with cute exclamatory arguments for each side: "It's A Bubble!" ("Prices can't soar like this forever"), and "No, It's Not!" ("The boom has lots of room").

Take your pick, but bear in mind that it doesn't really matter to us news folk how you choose. This is cotton-candy journalism, devoid of substance. We're just keeping busy.

William Powers is a columnist for National Journal, a weekly magazine covering politics and government published in Washington, D.C.