ACTION ALERT:

Sept. 28, 1999

(Note: Click here to read Stossel's response to this report.)

On September 19, ABC broadcast a one-hour news special titled "Is America # One?" by ABC News correspondent John Stossel. By comparing the economies of Hong Kong, the United States and India, Stossel attempts to show that laissez-faire economic policy is "what makes a country work well for its people." The program was filled with so many factual inaccuracies, Limbaughesque distortions and unsubstantiated claims that it calls into question whether ABC News applied any sort of journalistic standards to the broadcast.

The following is just a sampling of some of Stossel's erroneous claims:

• One of Stossel's main sources on Hong Kong claims that Hong Kong is "the only government in the world that makes a surplus, a big surplus."

As anyone who pays attention to Washington politics knows, the U.S. government has been running a federal budget surplus for more than a year; it amounted to $70 billion last year. Other countries with budget surpluses last year included the United Kingdom, Canada, Australia, Denmark, Finland, Iceland, Ireland, New Zealand, Norway and Sweden.

• Another major Stossel source, Dinesh D'Souza of the American Enterprise Institute, claims that compared to other countries, the United States is "a very mobile society in which lots of people who start out at the bottom can find a place at least in the middle, and some will rise to the top."

D'Souza is identified as an "author and research scholar at the American Enterprise Institute." But viewers are not told that D'Souza is neither an economist nor a writer who has ever specialized in economics.

In fact, a 1996 study by the Organization for Economic Cooperation and Development (OECD) compared earnings mobility in eight countries. Measuring mobility by how often workers in the bottom fifth of earnings ended up in the upper three-fifths, the United States came in last. The country that came in first was Denmark, a nation with an elaborate social welfare system.

• Stossel says at one point that the alternative to a "free society" is "stagnation, and often poverty. Consider China, now mired in Third world poverty. They were once the leader of the world."

Actually, China's economy is anything but "stagnant." As the Treasury Department's Lawrence Summers said in a speech last year, "China has been the fastest growing economy in history since [economic] reform began in 1980." While China has adopted some aspects of market economics, a large proportion of its business firms are still owned by the government.

• In order to refute the only on-camera source who is given significant time to disagree with his thesis—progressive talkshow host Jim Hightower—Stossel claims that "the Federal Reserve's wage data that's often cited doesn't count things like commissions salespeople make, retirement contributions, medical insurance. When you include them, average American compensation's risen 20 percent."

This statement contains multiple inaccuracies. First, the Federal Reserve does not collect wage data. The "often cited" wage data Stossel apparently has in mind—showing that wages for ordinary workers have fallen—come from the Labor Department's Bureau of Labor Statistics. The data Stossel cites purporting to show that compensation has "risen 20 percent"—he does not say since when—most likely come from the Commerce Department's National Income and Product Accounts (NIPA).

The NIPA data measure the total amount of compensation—including payroll taxes, health, pension, and other non-wage benefits—earned in the economy as a whole. While that figure can be divided by the total number of workers to obtain a statistical average, this cannot be used as a gauge of ordinary worker's compensation, since the average is inflated by very high salaries and benefits for a small number of top-paid workers.

Stossel is "confusing what happens to the typical worker and an overall average," explains economist Dean Baker, senior research fellow at the Preamble Center. "Suppose Bill Gates got his billions of dollars as wage income. That would raise the average. But obviously that doesn't help the typical worker."

A median value for hourly workers' compensation—the wages and benefits received by workers at the 50th percentile—is a much more accurate gauge of what "the average American" earns, and can be estimated by combining data from the BLS and the NIPA. By this estimate, inflation-adjusted median hourly compensation fell from $13.66 in 1989 to $13.08 in 1997, a decline of 4.2 percent. This is actually a steeper decline than for wages alone over the same period.

• In one of the program's most dishonest moments, Stossel misrepresents the views of University of Texas economist James Galbraith to bolster one of his points.

  Stossel reports that European economies are damaged by laws that guarantee things like paid parental leaves and long vacations. "Many economists who once argued that we could learn from Europe, like James Galbraith, have now changed their minds," says Stossel.

This comment is followed by a soundbite from an interview with Professor James Galbraith, a prominent liberal economist. In the soundbite, Galbraith says: "There might be a moment for the Europeans to learn from us, rather than for us to be studying them."

But Stossel took Galbraith's words out of context, making it appear as if he agreed with Stossel's views. "My point is quite different from the one Stossel makes in the lead-in," Galbraith told FAIR. He explained that he had actually told Stossel that "Europe could, in short, benefit from adopting some of the continent-wide transfer mechanisms, such as Social Security, that we have long enjoyed in the United States."

In fact, Galbraith recently co-drafted an economists' statement opposing plans by the German government to cut social spending. It declared:

"As American economists and social scientists, we oppose the plans recently announced by the German government to restructure and deregulate the German economy along lines alleged to be 'the American model.'… Germany is today in the grip of an ideology of free markets, deregulation and privatization that originated here. But as that ideology was the source of American failures in the 1980s, and not of our recent successes, many Americans have abandoned it."

Far from espousing Stossel's view that European countries would benefit from adopting American-style free-market policies, Professor Galbraith has long been publicly outspoken in opposing it-—yet ABC viewers would have no way of knowing that.

• Stossel claims that poor Americans enjoy the same access to medical care as the wealthy:

  "Our system does sometimes fail poor people, but the truth is that when someone is denied care, it makes headlines because it's so unusual. Most of the time, even the poorest person going to the emergency room gets the same high-tech, cutting edge treatment that lures foreign leaders like Jordan's King Hussein to American hospitals."

"It's simply not true that people can get access to care," counters Steffie Woolhandler, associate professor of medicine at Harvard Medical School, and co-founder Physicians for a National Health Program. "According to a federal survey, there were 945,000 people in a single year who needed and couldn't get emergency care in this country." The same survey, conducted in 1987 by the Department of Health and Human Services, found that almost two-thirds of those giving a reason for not obtaining medical care cited "high costs or lack of insurance" (American Journal of Public Health, 3/1995).

Given that 43 million Americans are uninsured, Woolhandler told FAIR, we shouldn't be surprised at these numbers. "We have a system that denies healthcare to millions and millions of people every year. These stories don't make the headlines."

• In one of the most startling scenes in the broadcast, Stossel travels to a food pantry in the South Bronx run by a local nun. He interrogates the people lined up to receive food about whether they own VCRs or microwaves. Stossel asserts:

  "No one says some Americans aren't suffering, but poverty in America is nothing compared to the misery and hunger you see in India, and most of the world. These people in the South Bronx aren't here because they've been going without food. They come because the food is free."

In fact, the Census Bureau's 1995 Food Security survey classified 13.8 percent of Americans as either hungry or "food insecure." Food insecurity is defined as having a "limited or uncertain availability of nutritionally adequate and safe foods or limited or uncertain ability to acquire acceptable foods in socially acceptable ways." (For example, 81 percent of respondents in households classified as "food insecure" said that sometimes in the past 12 months the food they bought "just didn't last" and they "didn't have money to get more.")

Stossel has long been a passionate believer in free-market economics; in 1994, he told the Oregonian newspaper (10/26/94): "Markets are magical and the best protectors of the consumer. It is my job to explain the beauties of the free market." "Is America # One?" makes it clear that Stossel does indeed think it's his job to promote an ideology, and that he is willing to sacrifice factual accuracy, misrepresent sources and abandon other journalistic standards to achieve that goal.

ABC News, apparently, is willing to make that same sacrifice.

ACTION: Contact ABC News and ask them if Stossel's reports are subject to a different standard than the rest of the network's news broadcasts. Point out the factual errors in this most recent report, many of which are listed above.

Contact:
ABC News
47 W. 66th Street
New York, NY 10023

Phone: 212-456-7777 (ABC News general number)
            212-456-7301 (John Stossel)

Fax: 212-456-4297

E-mail: netaudr@abc.com(ABC News)
            stossel@abc.com (John Stossel)