The Good, the Bad & the Ugly
CBS’s ‘Early Show’ makes unexpected realization about tax rebates; Networks disregard positives of airline merger; Soros praised as a ‘prophet’ by NY Times.
 

April 16, 2008

The Good
     The average American will receive more than a $2,000 tax refund this year, a statistic that left CBS “The Early Show” host Harry Smith “stunned” on the April 11 broadcast.

     “I am stunned to know what the average refund is,” Smith said. “$2,200 [in 2007], that’s too much, right?”

     “It is too much,” said Money magazine senior writer Janice Revell.

      She explained that the checks actually represent an interest-free loan between the government and taxpayers.

      “When you get your refund it feels like this big windfall, you’ve won the lottery, but in essence what you’ve done is you’ve loaned your money, interest-free, to Uncle Sam for the year,” Revell said. “It just makes no sense.”

      But Revell wasn’t suggesting Americans get too much of their money back. She was suggesting they’re giving too much to the government in the first place.

      She said that when tax refunds get to be more than $500, a taxpayer should adjust his withholdings by filling out a new W-4 form with his human resources department.

      Revell also told viewers to spend 10 percent of what they get back as a way to “treat yourself,” but use the rest to reduce credit card debt, invest in retirement and build an emergency fund.

The Bad
     Operating under the assumption that what's good for business is bad for consumers forces the media to give Americans a narrow view of the world.

     All three network newscasts on April 14 reported the Delta Air Lines (NYSE:DAL) and Northwest Airlines (NYSE:NWA) merger as if it were a conspiracy to bilk air travelers out of more money.

     "It's an unsettled time in the skies – planes grounded, flights cancelled, spiraling ticket prices," ABC correspondent Lisa Stark said on the April 14 "World News with Charles Gibson." "And now, things could get even more complicated. Delta operates 1,500 flights a day with hubs in Atlanta, Cincinnati, New York and Salt Lake City. Northwest - some 1,200 flights a day with hubs in Detroit, Minneapolis and Memphis. Put the two together, and passengers could take a hit."

     The "hit" passengers are going to take, she reported, is that there will be less capacity, which will decrease the supply of available seats and could cause the price to increase.

     But there are other factors involved with airfares that the report ignored. Consolidation won't necessarily decrease supply, just distribute it differently. According to "World News," two of the hub cities – Memphis and Cincinnati – could be de-hubbed after the merger.

     However, that isn't necessarily a bad thing. When American Airlines (NYSE:AMR) and TWA merged in 2001, it opened up some of the St. Louis market to Southwest Airlines (NYSE:LUV), and that actually caused airfares to decrease. Currently, the Cincinnati market has the highest average airfare in the country because of Delta’s ability to control the airport's fare structure with little competition from other airlines.

     The other two networks were also critical of the merger deal. "NBC Nightly News" assumed the merger would cause fares to increase because of supply. "CBS Evening News" trotted out a Democratic pro-union congressman who opposed the merger.

The Ugly
     When George Soros’s name is mentioned, many words may come to mind, depending on your worldview. If you’re the doom-and-gloom crowd at The New York Times, then it’s the word “prophet.”

     The April 11 Times headlined a profile on Soros “The Face of a Prophet.”

     Soros recently released a new book in which he predicted impending financial doom. According to the Times profile, the economy is in “the biggest financial crisis of my lifetime.”

     Soros’s lifetime includes the Great Depression – he was born in Hungary in 1930, less than a year after the October 1929 stock market crash set the U.S. depression in motion – so he is predicting a bigger crisis than the Great Depression.

     The profile made it clear that while Soros has displayed genius as a hedge fund manager, his track record on economic predictions isn’t so impressive. “In 1998,” reported Louise Story for the Times, “he published a book predicting a global economic collapse that never came.”