Secretary Hank Paulson and Fed Chairman Ben Bernanke learned a lesson from Media Relations 101 the hard way when they introduced a plan of action to stem the financial crises and did not suggest a catchy name for it. Left without a headline phrase, the media came up with its own: "Bailout." The negative connotations associated with "bailout" contributed to its initial defeat in the House of Representatives. Management professor Gerry Keim, who studies the relationship between business and government, uses the episode to talk about the importance of choosing words carefully when framing an issue. 10:22
Knowledge: You say rescue, I say bailout and Congress almost called the whole thing off. Gerry Keim is associate dean for the W. P. Carey MBA in the W. P. Carey School of Business. Here, he talks about how language played an important role in the public's perception of the $700 billion government plan to prop up the nation's financial sector.
Gerry Keim: The fact that the original plan to use $700 billion of taxpayer money to try and ease the credit crunch was labeled a "bailout" was very unfortunate. It's not that the administration chose that language, but I think by not having a better title that would be picked up by the media, the media went and used their own title. And the bailout had a very negative connotation among voters.
This was a very complicated issue, very hard to understand. Most of the cost of the credit crunch had not yet been felt by most of the voters back home. They were feeling the cost of a sluggish economy, people losing their jobs, people having trouble with rising mortgage interest rates if they had adjustable mortgages, but they really hadn't seen the consequences of this issue.
And so, it looked like a bailout for the fat cats on Wall Street. And in the House of Representatives, where all 435 except for the 20 or so who were retiring, were up for reelection, it is very tough to vote for something that appears to be a transfer of taxpayer money to fat cats. And so, the fact it was defeated the first time around is not surprising.
Since then, the message has changed in the sense that many of the voters back home have seen their investment portfolio shrink very drastically as the stock market is going down. And perhaps even more important, many of the business organizations -- like the association of small business known as NFID (National Federation of Independent Business), the Chamber of Commerce, banking groups, many other small business groups, automobile dealers … those folks who are businesses in those various industries -- have been alerting their members back in the district as to the importance of getting the bailout or some solution to the … to the credit crunch.
And so … all those small businesses have been conveying their concerns to their local member. In essence, now there is a growing interest among people who are likely to vote in supporting this plan. Particularly after the Senate passed it, I really quite frankly don't think the changes in the plan were all that significant in changing the reaction of voters back home. I think, it was much more an awareness that grew over time that here is what this issue was really all about. It was going to affect me on Main Street, even in small towns, and those people began communicating with their member and the member's office back in the district.
And so now there was a growing "market," if you will -- a political market of people who said, 'OK, this is probably something we ought to do, I want you to vote for this.' That made it much easier then for many of these same members who were scared to death few days earlier to vote for this, to vote for it without necessarily believing that they were going to take a big hit in the election just a few weeks down the road.Knowledge: I guess, one of the main things that happened too was when they voted it down in the house, the Dow dropped more than 700 points and [the] talk [was] about stark reality hitting Main Street.
Keim: Exactly, that's right. Anyone who has a retirement plan realized that their plan just took a big hit. Put that together with the very explicit lobbying efforts at the grassroots level to generate emails, phone calls, contacts, personal contacts by lots of small business people representing many different businesses to the members offices back in the district as well as sending emails to their Capitol Hill office.
This all of a sudden built a surge of interest among people who you knew were going to vote for or against you in the next election saying, this is some thing I want you to do. And that changed the vote very significantly.
Knowledge: Now early on, how much of this had to do with a failure by the executive branch to clearly articulate what was needed?
Keim: I think, a lot of it had to do with [the lack of clear articulation]. This was something that was done by basically two economists or an economist and a Wall Street investment banker, both very smart people in terms of their knowledge about capital markets and finance. But, I'm not sure they were as skilled as some of the other operatives in the executive branch might have been in terms of the importance of language and [packaging].
In media training 101, one of the first things you learn is when you are going to do an interview about your business, think of ways of describing the key messages in quotable quotes -- in language that the reporters will seize on and use in their writing or in their video or in their audio broadcast. And there were no quotable quotes associated with this initial three-page plan that was submitted to Congress by Secretary Paulson. And as a result, then, the media and others came up with the bailout language, and that of course is not positive language in anybody's mind.
Knowledge: Well, how much did it also hurt that President Bush used the same tone of fear, if you will, that was used for the Iraq War, that was used to push a stimulus package, that was used for the Patriot Act. How much of that was almost fear fatigue on the American public's point of view?
Keim: Well, it seems to me that it's hard to separate that out from the fact that President Bush just doesn't have a lot of credibility on almost any topic now. And I just don't think that whatever he said, whatever message the President had, I don't think it would generate much positive support. If the tone was the same as these other messages, probably even worse, unfortunately he has no political capital left to be an effective spokesperson here.
And I think, this is why they were letting Secretary Paulson take the lead. But, Paulson, again, was focused very much on the details of the issue and not on the framing of the issue. And in politics, perception is more important than reality, because perception is what people will make voting decisions on the basis of.
Knowledge: Well … talking about that, would it have made a difference if the President instead had come up and done the easels and the pie charts and that kind of thing to the American public? Would that have made a difference?
Keim: Well, I think, certainly [we needed] some effort to communicate to the person back home how this would be effective. And what we have learned is that more effective than easels and pie charts and statistics and data are personal interest anecdotes: to be able to talk about how Sally Jones or Jose Garcia or some other individual had been affected or would be affected by this credit crunch. To tell a personal story is often the most effective way to communicate these complicated issues in an election campaign.
Knowledge: So, speaking of an election campaign, would the language have been that important if we weren't in the middle of an election?
Keim: No, because far fewer people would have paid much attention to it. The fact is that we are in an election now and that the economy has been deteriorating. It is becoming an election issue, the politicians talk about it, more of the folks running for office talk about it more, it is more of a mainstream issue. So, you are absolutely right. Timing here, if this had been a year and a half ago, I think there would be less interest in it among many of the average voters.
Knowledge: So, going forward, now that we've seen just how dire the situation is, how important is it now to pick the right words? Or is the American public educated enough now?
Keim: Well, I think they are certainly sold on this initial package that has been signed by the President and quite frankly, I would expect there would be fairly widespread support for an additional stimulus package to try and increase demand, so that there is more sales, more jobs related to those sales. So, I think, the policies will be different, but the next thing probably is going to be a stimulus package of some sort. I think yes, there is much more support for that now. I mean, the market dropped again another what 350 points today (Monday, October 6) and was down as much as 750 or close to 800 at one point. That's gotten everyone's attention.
Everyone realizes this is a very serious situation. And so I think they will be more inclined to support effort. This is a time when people, even Conservatives and Republicans, look to the government to solve these problems, even though it may not be consistent with their political philosophy. In tough times like this, almost everyone traditionally has looked to the government to figure out a way to try to solve this problem.