“Ben Bernanke likes to say there are no atheists in fox holes, well General Bernanke just called in from the fox hole and said we want a nuclear strike. It’s that radical and we’re going ‘is it really that bad?’” — John Cochrane, finance professor, University of Chicago.
Some 200 economists — including three Nobel Prize winners — have opened the door to a fundamental PR lesson that explains why the Congressional $700 billion bailout package collapsed in a 205-228-1 vote earlier today. It also is a fascinating exercise of how framing in messages and emphasis is a potentially powerful force in mass communication.
As I noted in a Twitter post on this blog Sept. 25, economists had put forth a petition — an economic “write-in” — urging Congress to reject the bailout package on the basis that President Bush and White House officials prematurely and needlessly hyped the problem. The economists cited “three fatal pitfalls” and I quote in detail:
1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America’s dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.
Astute PR and marketing people saw likewise the follies of a pitch. B. L. Ochman had a great post on Sept. 21. She opened her usual spot-on analysis with the following:
“I’m no financial expert, but it seems to me that the Wall St bailout that’s going to cost taxpayers (that’s you and me) $700 billion dollars is little more than a marketing pitch. You can’t kid a kidder, and you can’t market to a marketer. I know spin when I hear it.”
Spin had a major impact as well on polling for this issue. Rare is the event where members of Congress — just five weeks before a national election — must go on record for extremely momentous legislation. What had become increasingly evident in the last few days is that polls suggested the constituencies of many legislators were deeply and broadly opposed to the bailout package in its current form. And, many legislators were hearing it as well from voters in their respective districts.
Critical in this analysis though is how the essential question was framed. Rasmussen Reports polled Sept. 26 and found that just 24 percent of 1,000 likely voters favor the bailout while 50% were opposed. The question as it was administered read as follows: “Do you favor or oppose the economic rescue plan now being negotiated by Congress and the Bush Administration?”
Nate Silver, whose web site is a mastery of electoral projections, notes the distinguishing nuances in the wording of the questions. He argues that “rescue” is a comparatively neutral term — although one still with negative connotations — to “bailout. ” He adds that little in terms of additional explanatory detail is included.
Follow that up with the next question in the survey: “In reacting to the current financial problems on Wall Street, what worries you more—that the federal government will do too much or that the federal government will not do enough?” The responses cut this way: too much, 60%; not enough, 28%. No surprises here given the first question.
Let’s go to a differently framed survey treatment, this one by the Pew Research Center taken Sept. 23, albeit it earlier in the timeline for this particular event. This is among the most prominent examples of a survey where public support of the bailout was viewed as generally positive. The results were almost completely reversed in magnitude of sentiment: 57% in favor and just 30% opposed. But note the difference in wording of the principal question:
“As you may know, the government is potentially investing billions to try and keep financial institutions and markets secure. Do you think this is the right thing or the wrong thing for the government to be doing?”
Two important differences immediately leap out: the use of the generally affirming term “secure,” and the significant omission about the use and recipient of the emergency bailout funds.
And, those are just two examples of the endless ways in which polling questions about this complex, arcane issue can be framed. I agree with Silver that the best way to read the poll results is to conclude that there remains an unresolved high degree of public skepticism and uncertainty on this issue.
The 110-page bill that emerged from the original three-page proposal did nothing to assuage skepticism nor uncertainty. Anyone could access the legislation online and quickly discover, even without the benefit of an economics degree, that none of the three pitfalls addressed earlier had been rectified.
White House officials, of course, did not accept nor acknowledge this extraordinary petition. Cochrane in interviews, along with those of his colleague at Northwestern University — Kellogg School of Management Associate Professor Paola Sapienza — has said the markets could hold their own as Congress works out the problems with the package — and certainly well in advance of the Nov. 4 elections.
Timing always dictates the appropriate, most effective PR message and there is the exceptional opportunity with this bill to hold legislators — especially so close to the election — accountable for the transparency of the vague pleasant-sounding language they often use as cover especially during campaigns. David Sirota, a writer well known for his economic populism, puts it well:
“So, in short, I don’t think there’s anything wrong with this bill being ‘politicized’ by coming down the pike right before an election – in fact, I think it’s a good thing because the election – and the fear of being thrown out of office forces our politicians to at least consider what the public wants. I mean, really – would we rather have this decision made after the election, when the public can be completely ignored?”
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