The Good, the Bad & the Ugly
Wall Street Journal finds new optimism on the economy; CBS blames gas prices for swimming pool crisis in Louisville; Lauer presses Exxon CEO to ‘justify’ doing business.

May 21, 2008

The Good
     You won’t hear this many other places, but the May 14 Wall Street Journal reported some economists are changing their minds about an economic recession.

      “A funny thing happened to the economy on its way to recession: It's taken a detour,” Kelly Evans and Justin Lahart wrote for the Journal. “That, at least, is the view of a growing number of economists – including some who not long ago were saying a recession was all but inevitable. They note that stock and credit markets have steadily improved since the Federal Reserve intervened to keep Bear Stearns Cos. from bankruptcy in early March, while a series of economic reports have been stronger than expected.”

      Wachovia (NYSE:WB) put the odds of a recession at 45 percent, down from its 90 percent forecast in April, according to the article.

      “We have tended to be more optimistic about the outlook and very reluctant to embrace the recession talk,” Wachovia senior economist Mark Vitner said in an e-mail to the Business & Media Institute.

    The article also suggested the 0.6 percent gross domestic product number released by the Commerce Dept. for the first quarter of 2008 might be revised higher.

The Bad
     If you thought gas prices had been blamed for everything already, CBS found another victim: kids without swimming pools.

     "When we arrived in Louisville [Ky.], we headed straight for the Breslin Park pool," CBS correspondent Nancy Cordes said on the May 15 "Evening News." "Half the city's public pools will be padlocked this summer leaving these little girls high and dry."

      Why will little girls be left without a place to swim? Because of high gas prices, which caused Louisville to make budgets cuts that included the pools, according to CBS.

      Cordes's "CBS Evening News" story was a part of its "Eye on the Road" series – an effort to show how people are affected by gas prices throughout the country. For the series two reporters have been driving across the country in opposite directions, one in a Toyota Prius and the other in a Ford Fusion.

      Despite the city of Louisville's 6-percent sales tax rate, the municipal government was forced to seek budget cuts, Cordes reported.

     "I thought it couldn't be true until I really came here and actually saw it, that it was – that it didn't have any water," said seven-year-old Lydia Kinloch.

     Cordes interviewed the mayor of Louisville, Jerry Abramson, a Democrat, whose solution to the fuel costs was to buy hybrid vehicles.

The Ugly
     NBC went on the attack against "Big Oil" again May 15, alleging oil companies are to blame for high prices and don't invest enough in exploration, all while ignoring the fact that crude oil accounts for most of the price of gasoline.

     "Gas prices hit yet another record high this morning and as you suffer, the oil giants are making billions," co-host Meredith Vieira teased at the top of the "Today" show. Well, with an introduction like that, viewers shouldn’t have expected balanced treatment.

     "Most analysts say prices at the pump will get even worse during the summer driving season," co-host Matt Lauer said, "but the oil companies are posting huge profits. ExxonMobil, the biggest U.S. oil and gas company, made a $10.9-billion profit in the first quarter of this year."

     Lauer demanded that ExxonMobil CEO Rex Tillerson explain "how [he] can justify the record profits [they're] making when people can't afford to put gas in their cars to go to work."

     Tillerson gave Lauer a little lesson in economics, explaining that oil company profits are so large not because of high profit margins, but because of high volume. For every $1 in revenue ($400 billion in 2007), Exxon makes a profit of 10 cents ($40 billion in 2007), placing it "about in the middle of most Fortune 500 companies, so we're not at the top in terms of profit per revenue; we're not at the bottom."

     The CEO also explained that Exxon's more than $5-billion annual investment in exploration would be bigger if the company had more access to exploration opportunities. "We have very, very robust exploration programs that span the globe. We would do more if we could gain access to more areas to apply our technology, let our geoscientists go to work," he said. "Certainly we have the financial capacity to do more. Much of what's driving the pace of what we're doing is access to those opportunities."

The Good, the Bad & the Ugly tracks the best and worst media coverage of business and economics. Readers are invited to submit suggestions or news tips to Staff Writer Jeff Poor at jpoor@mediaresearch.org.