I did my first TV interview at the beginning of 2008 shortly after being promoted.  At first it was stressful, and it took me a while to get used to it.  Now that I’m on the outside, I do an occasional interview on CNBC, Fox, or CNN.  Today I’d like to describe the mechanics of doing a TV news interview from the North Lawn of the White House.  Even though I had worked in the White House for more than five years before my first on-camera interview, I did not know any of this until I actually had to do it.

Today is Jobs Day:  the first Friday of the month, when the Labor Department releases the monthly employment report.  The employment report is generally the most important economic data point of the month, and the business news channels (CNBC, Bloomberg, and Fox Business) always cover it.  They always ask for someone from the Administration to comment on the data and what it means for the economy and the policy agenda.  I see the Vice President’s economic advisor, Jared Bernstein, is doing CNBC now.  In 2008, CEA Chairman Dr. Ed Lazear and I typically did this duty.

The jobs report is released at 8:30 AM on Friday.  As with all economic data releases, Administration officials are embargoed from talking about it publicly for one hour after the release.  This gives the markets time to process the data without the Administration’s viewpoint.

For each show broadcasting at 9:30 AM, a network producer negotiates with a staffer in the White House press shop.  For us it was Eryn Witcher, a top-notch professional with prior experience in TV news who now works as the communications director at Stanford’s Hoover Institute.  Eryn would negotiate with the producers and set Ed and/or me up with interviews.

Ed and I would talk the night before about the upcoming data and what we might say about it on the air.  We were among a handful of officials who got the data reports before they were released, so that we could advise the President.  Ed and his staff also used that data to prepare the daily “economic data memos” that the President received each morning.

We would generally watch the CNBC commentary immediately after the data release (at 8:30 AM sharp) to see if we had missed anything, and to take a temperature check on the initial market reaction and expert analysis.  We would generally be prepped by Ed’s chief of staff, Pierce Scranton, who had an uncanny ability to predict what questions we would be asked, and coached us on how to give a short effective answer.  If he wasn’t fighting other fires, Deputy Press Secretary Tony Fratto would also sit in the prep session.

A little after 9 AM someone would do my makeup in my office.  Around 9:15 Eryn and I (or Eryn and Ed) would walk out to the North Lawn.  You need a good TV tie (no busy patterns), straight collar (I was often scolded for button down collars), and American flag pin.  After a while I got my own earpiece that I would bring out with me, so I wouldn’t have to use the common one that everyone else uses.  It’s also nice to know you won’t lose the earpiece during the interview.

Each network has a TV camera set up in an area on the North Lawn next to the driveway from Pennsylvania Avenue to the West Wing entrance.  The networks semi-permanently set up shop there in 1998 during the Monica Lewinsky scandal, and the gravel-filled area became known as Pebble Beach.  It was refurbished during the Bush Administration with slate and the cameras and tripods are covered with heavy green canvas when they’re not being used.  It is now referred to as Stonehenge, to which it bears a vague resemblance.

The cameras are in a long line next to each other.  Each is set up so that the person on air has the north entrance to the White House residence in the background.  Because of the different camera positions, each has a slightly different angle on the White House.  On the night of a big Presidential speech from the White House, try quickly switching channels and you can see the different angles.

Here’s a diagram for CNBC (roughly).  As always, you can click on the picture for a larger view.

The West Wing is the square building in the lower-left (southwest) corner.  The residence is in the lower-right corner, and that’s Pennsylvania Avenue up top.

The blue box surrounds Stonehenge with all the TV cameras.  When you’re on CNBC you stand at the red dot, facing the camera at the orange dot.  The yellow line shows the camera angle, extended to capture the north entrance to the Residence in the background.

If you look closely, to the right (east) of the blue box you can see the driveway that heads south from the Northwest Appointment Gate to the West Wing entrance.  Visitors with appointments in the West Wing walk up this driveway, and you can occasionally see them passing behind someone being interviewed on TV (especially on the evening news broadcasts).  If they’re walking from left to right on your screen, they’re arriving at the West Wing.  Right to left, they’re leaving.

About 9:15 AM Eryn and I would walk out to Stonehenge.  We would greet the cameraman and a producer, and I’d get miked up.  All the producers I met were friendly and professional, and the cameraman are universally great.  I would stand at the red dot facing the camera.  My earpiece cord would clip to the back of my jacket collar.  The cameraman would connect an audio cable to that cord, and there’s a small box at about waist high with a volume dial.  He attaches a tiny microphone to my lapel and I’m all set.

The cameraman then adjusts the camera for the shot.  I’m generally looking at myself on a monitor below the camera:  tie is straight, flag pin is upright.  (Left and right are reversed from what you’re used to in a mirror.  That takes getting used to.)  Around 9:25, I’ll hear audio of the show in my earpiece, and then a voice:

Voice 1:  Mr. Hennessey, this is [Bob] at CNBC headquarters.  Can you hear me?

Me:  Yes I can, Bob.

Voice 1:  And you can hear the program?

Me:  Yes.

Voice 1:  Great.  Can you count to ten for me, please, so we can do an audio check?

Me:  1,2,3,4,5,6,7,…

Voice 1:  That’s perfect.  Thank you.

After another minute, another voice, the producer for my segment of the show.

Voice 2:  Mr. Hennessey, this is [Tom].  We’re going to a commercial break, and will be going to you in about 2 minutes.  You’ll be interviewed by [Erin / Mark / Erin & Mark].

Me:  Sounds great.  Thank you.

During my first few interviews, the substance wasn’t that difficult for me.  I had been prepping principals for interviews and writing talking points for more than 13
years, now I just had to do the talking.  The hard parts were the nerves and the physical mechanics:

• Look at the camera lens.  Don’t let your eyes wander.
• Smile.
• Try not to “um” and “you know” too much.
• Slow down.
• Relax.

Also, TV moves very quickly.  Long answers don’t work, so I had to train myself to make my point in one or two sentences, rather than four or five.  (That’s difficult for me.)  If you go on too long, you’ll start hearing the anchor trying to jump in and move things along.  And before you know it, you’re done.

After the interview, you unmike, thank the cameraman and producer, and you’re done.  If you have another interview, you move down the line and repeat.  If not, head inside, take off the makeup, and get feedback from your colleagues and friends who email that they saw you on TV.

I only did a few in-studio interviews, and guest hosted CNBC’s Squawk Box once.  I was blown away by the ability of the anchors to multitask, and how quickly they think and react.  While one of them is talking on camera, another is checking market news or data on their screen, or scanning email.  Their producers are talking to them in their earpieces, and they are talking on camera with each other and the guests.  The coordination, reaction times, ability to adapt and improvise, and teamwork among the anchors and their producers are amazing.  Beginning that day, and ever since I have developed tremendous respect for those business news anchors hosting live fast-moving discussions.  I have enough trouble doing a single five minute segment, and they do it for 2-3 hours five days a week.

Working in the West Wing: Doing a TV news interview on the North Lawn

© 2010 Keith Hennessey - Your guide to American economic policy

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I’d like to zoom out a bit and discuss how food prices interact with policy.

Let’s consider the following questions:

• How much are food prices increasing?
• Why are food prices increasing?
• What kind of effect is this having in the U.S., and what are we doing about it?
• What about overseas effects?
• What did the President announce today?
• Is the ethanol mandate contributing to the increase in food prices?

How much are food prices increasing?

Much of the increase in food prices worldwide is due to increases in grain prices.  Since March of last year:

• wheat prices are up 146%
• soybean prices are up 71%
• corn prices are up 41%
• and rice prices are up 29%.

Why are food prices increasing?

• Increased demand in “emerging markets” (like China) accounts for about 18% of the rise in food prices.  As people in poor countries get richer, they consume more meat.  Since it takes a lot of grain to produce a little meat, as the proportion of meat in diets increases, the demand for grains increases.
• Rising energy costs have increased the cost of growing food, accounting for up to another 18% of the increase.
• Bad weather has harmed wheat harvests, especially in Australia, China, and Eastern Europe.
• Dollar depreciation accounts for a portion of the increase in U.S. food prices.
• Increased biofuel production has increased the demand for corn, but accounts for only 3% of the overall increase in global food prices.

What kind of effect is this having in the U.S., and what are we doing about it?

Food price inflation in the U.S. is up 4.5% over the year that ended in March, only slightly faster than the overall inflation rate of 4.0% (CPI).  Certain staples are up by greater percentages:  milk is up 23% over the same period, bread is up 16%, and eggs are up 35%.

Obviously, this inflation hurts, and family budgets get squeezed.  On average, Americans spend about 14% of their total expenditures on food.  But grain price increases don’t affect American food prices as much as they do food prices in developing countries, because grain prices are a relatively small portion of total food expenditures in the U.S.  About half of all food dollars in the U.S. are spent dining out, and Americans eat more heavily processed food.  Service costs (waiters, chefs) and food processing costs account for a large proportion of U.S. food spending.

There are two big federal programs that spend money on food.  The U.S. government spends about $40 B a year on food stamps, helping about 28 million people this year.  The food stamp program automatically adjusts to food price increases.  In addition, the President’s budget proposes some changes to expand the food and vegetables component of food stamps, and to keep savings and combat pay from reducing eligibility for food stamps.  These proposed changes would increase spending by about another $½ billion over the next five years.

The Women, Infants, and Children (WIC) program will spend about $6 B this year on about 8.6 million people.  This year we have increased funding for WIC by more than 18%.  And in mid-April we transferred about $150 M from a reserve to account for higher costs in WIC.

What about overseas effects?

Let’s look at Mozambique as an example of a developing country, and compare it to the U.S.

• Americans spend on average 14% of their total expenditures on food.  In Mozambique, it’s 68% for those making under $1 a day.
• Food prices have increased 4.5% over the past year in the U.S., and 15.4% over the past year in Mozambique.
• The effect of one year of current food price inflation therefore means that an American has, on average, 0.5% less income to spend on other things.  But in Mozambique, one year of current food price inflation squeezes out 10% of their income.

This is why international food experts talk about a food crisis – poor countries are acutely affected by grain price increases.

What did the President announce today?

To address this problem, two weeks ago my administration announced that about $200 million in emergency food aid would be made available through a program at the Agriculture Department called the Emerson Trust.  But that’s just the beginning of our efforts.  I think more needs to be done, and so today I am calling on Congress to provide an additional $770 million to support food aid and development programs.  Together, this amounts to nearly $1 billion in new funds to bolster global food security.  And with other food security assistance programs already in place, we’re now projecting to spend nearly — that we will spend nearly $5 billion in 2008 and 2009 to fight global hunger.

This funding will keep our existing emergency food aid programs robust.  We have been the leader for providing food to those who are going without in the past, and we will continue to be the leader around the world.  It will also allow us to fund agricultural development programs that help farmers in developing countries increase their productivity.  And of course this will help reduce the number of people who need emergency food aid in the first place.

In addition, the President reiterated his call on Congress to support his proposal to allow U.S. dollars to be spent in poor countries to buy food from local farmers.  This makes U.S. taxpayer dollars go farther to help more people, and it helps develop local agricultural infrastructure.  (Teach a man to fish…)

Countries are moving in two different directions in response to higher food prices.  Some are moving in the right direction:  eliminating tariffs, permitting genetically modified foods, and increasing food assistance for their poor citizens.  Others are moving in the wrong direction, restricting exports and imposing price controls on specific goods.  These wrongheaded policies ultimately hurt the people who need the food, by restricting efficient trade and causing supply shortages.

Is the ethanol mandate contributing to the increase in food prices?

Right now it is not, because the price of oil is high, and other policies are supporting demand for ethanol.  I’ll explain.

• Increased global demand for biofuels is increasing the price of food, but only a little.  Our experts think about 3% of the global food price increase is a result of increased demand for biofuels.
• Two of three U.S. ethanol policies are contributing to that increase (the subsidy and the import tariff).
• But the mandate is not now big enough to affect ethanol demand, because oil prices, the ethanol subsidy, and the import tariff together produce more ethanol than the mandate requires.
• Given other ethanol policies and current market conditions, the ethanol mandate therefore is not affecting the price of corn or other food.

We have three domestic policies that affect ethanol supply and demand:  the 51¢/gallon tax credit (subsidy) for ethanol blended into fuel, the 54¢/gallon ethanol import tariff, and the renewable fuel standard (RFS) mandate.

Our experts tell us that, given today’s high oil prices, the current RFS mandate is not “binding”.  In other words, given the existence of the subsidy and the tariff, fuel blenders would be choosing to buy the same amount of ethanol as they are right now, even if the mandate did not exist.  As evidence, the mandate in law is for 9B gallons of ethanol to be blended into fuel this year.  But fuel blenders are blending about 9.15 B, more than this year’s mandate.  When oil is in the $110-$120 range, and ethanol is subsidized 51¢/gallon, you don’t need the government to tell you to buy ethanol, you do it because it’s cheaper than blending gasoline.  If the subsidy weren’t in place, it would be a different story:  the mandate probably would be binding and would be distorting fuel blending decisions.  And the mandate could bind in the future, if the price of oil drops substantially, or in future years as the mandate increases.  It could then affect the price of corn and other grains.  But the President’s action last year, which was to propose an increased mandate, is not increasing the amount of ethanol used this year, and therefore is not now increasing fuel or food prices.

Our experts believe that increased use of corn to produce biofuels in the United States accounts for about 19% of the increase in the global price of corn.  That’s 19% of the 41% increase in the price of corn over the last year, meaning that corn prices are about 8% higher in the U.S. as a result of increased domestic demand for ethanol.  Corn is obviously only one of many grains, and grains are a subset of food, and food spending also includes food processing costs and the service costs of a waiter and cook if you go out to eat.  When our experts combine all these factors, they conclude that increased worldwide use of biofuels has increased food prices by about 3%.

While increased demand for biofuels are responsible for some of the corn price increase, this does not mean that the increased RFS mandate is responsible for the 8% increase. Regular gasoline can contain up to 10% ethanol, and fuel blenders have to make a decision about how much ethanol to substitute for gasoline into a gallon of fuel (between zero and ten percent ethanol).  There are two reasons why a blender might substitute more ethanol in place of gasoline:

1. the RFS mandate in the law requires him to use more ethanol;
2. or ethanol is less expensive than gasoline.

Let’s look at $116 oil (this morning’s opening price).  That’s $116 for a barrel of West Texas Intermediate Crude (WTI), which is the really good stuff.  Refiners use a mix of good and not so good stuff, so that on average the price they pay for oil run through their refinery is about $6 a barrel less than the WTI price.  A barrel of oil contains 42 gallons, so crude oil costs 110 ÷ 42 = $2.62/gallon.  Add in refining, distribution, and marketing costs of roughly 50¢/gallon to turn oil in to gasoline (it varies a lot), to get about $3.12 per gallon of gasoline, before taxes.

Now let’s turn to ethanol.  Corn is currently trading for around $6/bushel.  Estimates vary, but the break-even price for corn, which is the price per bushel a blender would be willing to pay to produce a gallon of ethanol and just break even, is currently above this price.  This means that a fuel blender has an incentive to substitute ethanol for gasoline, no matter what the government tells him to do.  It’s rational for this fuel blender to go all the way up to 10% ethanol in the fuel he sells, the maximum that U.S. vehicles can tolerate without modification.

So yes, increased ethanol usage has made corn about 8% more expensive over the past year.  But it has not affected wheat prices, which have recorded the biggest grain price increase.  And the higher U.S. ethanol prices right now are driven not by the higher renewable fuels government mandate, but instead by market forces that are looking for alternatives to $100+ oil.  In contrast, the ethanol subsidy (51¢ per gallon) and the ethanol import tariff (54¢ per gallon) are subsidizing ethanol production relative to food production.  Note that these two policies have been in effect since long before the President took office.

Conclusions

• World grain prices are up.  Way up.  Especially for wheat.
• U.S. food prices are up, but by a lot less, because raw inputs account for much less of our total spending on food.
• More meat-eating in developing countries, higher energy costs, bad weather, the $, and increased demand for biofuels all contribute to higher food prices.
• Poor countries are more severely affected by grain price increases than rich countries like the U.S.
• The President’s recent and new proposals total almost $1 B of new money to bolster food security.  When combine with pre-existing plans, the U.S. will spend about $5 B this year and next to fight world hunger.
• Other nations can make the situation worse by raising protectionist barriers or imposing price controls.  Either can cause a supply shortage.
• Increased demand for biofuels is contributing to the higher price of corn and soybeans, and that is in part attributable to subsidies in U.S. law.  But the expanded ethanol mandate (“Renewable Fuel Standard”) has little to no effect on the current ethanol price, because the high world oil price creates a market incentive for fuel blenders to choose ethanol over gasoline.

Food prices & food aid

© 2010 Keith Hennessey - Your guide to American economic policy

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