THE FANTASTIC WORLD OF WASHINGTON. A strange atmosphere descended on Washington, D.C. Just as the government announced the economy had contracted for the second straight quarter, the popular definition of a recession, Washington pundits began talking about the beautiful week that President Joe Biden was having. And they meant it sincerely, not ironically.
Why was it such a great week? Two reasons, according to the new conventional wisdom. First, the Senate passed a bill providing billions in subsidies to the semiconductor industry. Conservatives denounced the measure as a pork-laden handout to big business and criticized the 16 Republicans in the Senate and 24 in the House who voted in favor. But Biden, with unanimous Democratic support in both chambers, said it will “make cars cheaper, appliances cheaper and computers cheaper” as well as “create well-paying manufacturing jobs.” The White House described it as a win-win.
The second big thing for Biden was that Capitol Hill Democrats seemed to be uniting behind a somewhat watered-down version of Biden’s ill-fated “Build Back Better” agenda — this time, which focuses primarily on climate, health care and tax increases, instead of everything, as the original bill did. Between $400 billion and $700 billion is such a large spending bill that Democrats could overtake Sen. Joe Manchin (D-WV), their most centrist member. On the other hand, it is unclear whether he will have the support of the other centrist in the Senate, Kyrsten Sinema (D-AZ). And remember, in a 50-50 Senate, with all Republicans opposed — and they will oppose this one — Democrats will have to rally their 50 senators to pass the bill with Vice President Kamala Harris breaking the bill. tied 50-50. So it’s not done yet.
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Here’s what party leaders found very, very clever. They named the bill the Reducing Inflation Act. After all, the polls show, and everyone knows it, that an annual inflation rate of 9.1% is the most pressing concern on the minds of voters. This is by far the most important issue for the November midterm elections, and the Republicans were just killing the Democrats on it. So the Democrats have decided to claim that their new spending bill, containing costly measures they have long wanted to pass, is a bold inflation-fighting measure.
The name alone seemed to transform Biden White House officials, who until now seemed powerless to deal with runaway inflation, have become hard-witted inflation fighters. In the past, officials didn’t really want to use the I word when speaking from the White House press room podium. But after the Senate Democratic deal, spokeswoman Karine Jean-Pierre just couldn’t stop saying “inflation,” over and over again, as something the White House Biden fights and fights and fights. When a journalist called the bill “reconciliation”, referring to the parliamentary maneuver of the Senate that will have to be used to pass it, Jean-Pierre replied: “We like to call it the law on the reduction of inflation”.
But here’s the thing – and you knew it was coming. The Inflation Reduction Act is not about reducing inflation. It will not reduce inflation significantly. In fact, the most informed debate right now seems to be whether this will have no effect on inflation or will actually make inflation worse.
A new assessment from the University of Pennsylvania’s Penn Wharton Budget Model found that the Cut Inflation Act “would very slightly increase inflation until 2024 and decrease inflation thereafter. These point estimates are statistically indistinguishable from zero, indicating low confidence in the impact of the legislation on inflation.” If you want the actual numbers, Penn Wharton estimated the bill would raise inflation by 0.05% through 2024, then lower inflation by 0.25% “by the end of the 2020s.” . Again, the estimates are “not statistically different from zero”.
But of course, reducing inflation is not the point. To say that the bill will reduce inflation is the point. “The word ‘inflation’ or variations thereof appear no less than 11 times in Senator Manchin’s statement announcing the outline of his agreement with Chief Schumer,” noted the National Taxpayers Union Foundation. Beyond repeating the bill’s name, Biden appears to be mostly ignoring the Inflation Reduction Act’s supposed inflation-fighting features. Friday, he tweeted“The Cut Inflation Act of 2022 invests billions in the climate crisis. I’m talking about rebates for sustainable choices, tax credits for electric vehicles, investments in environmental justice. All in reducing costs and creating thousands of clean energy jobs.” OK, but what about reducing inflation?
So even if Sinema is on board and Democrats can pass the bill on a 50-50 tie, plus the VP’s vote — even if all of that happens, it’d be nice to think the Cut Inflation Act would actually cut inflation, right? In reality, it seems totally irrelevant.
Why? ‘Cause even before the bill passed — and of course, it still isn’t — media claims of a Biden comeback have begun. First came claims that the recession might not be a recession at all. The day before the publication of the GDP figures, Politics announcement that the figure would be “possibly inaccurate and certain to be revised”. The next day, Policy declared a Biden victory: “One way or another, Joe Biden is back in the game. After enduring a brutal year, Biden is suddenly on the brink of a turnaround that the White House says could save his summer – and alter the trajectory of his presidency.”
Remember – this was the week the US economy went into recession. The New York Times published an article titled “The Wind Is at Biden’s Back for a Change. Will Voters Care?” And Axios touted “Biden’s success story”, arguing that the president has “slowly but dramatically redesigned significant parts of the American economy”. This assessment was based in part on the passage of the Semiconductor Bill and the possible, but not assured, passage of the Inflation Reduction Act.
The New Conventional Wisdom was all over the TV, of course. ABC’s Jonathan Karl introduced him to pollster and communications expert Frank Luntz this way: “Frank, you saw good news for Biden last week. He pushed through a major semiconductor bill. He has a deal with Manchin. Manchin is on board with Build Better, sort of. What do you think? Is Manchin just giving him a lifeline?”
And this is where the new conventional wisdom has run into a problem. “I don’t think it’s significant” Lutz replied. “Don’t you think that’s significant?” Carl replied. “I have a simple question,” Luntz said. He continued:
Are Americans better off today than they were two years ago? Are you nervous about filling up your gas tank? We know half of Americans can’t do it. One in five returned food when it came to checkout because they simply couldn’t afford it. It’s too much about Washington and not about the average person’s quality of life. I know that [Biden] likes to argue whether inflation was transitory, and now he’s arguing about a recession. That fact is that it sounds Orwellian. Don’t argue over words. If you can’t afford not only what you want but also what you need, that’s by definition a recession, and people are hurting right now.
Karl didn’t really struggle with what Luntz had just said. “So you’re saying it’s no big deal in terms of impacting the mid runs?” Carl asked. “This is a major bill.”
Luntz’s point could not have been better illustrated in this brief moment. And that’s the new vibe in Washington. Joe Biden is the Comeback Kid! Inflation is fought! The semiconductor bill! Manchin on board! Recession – NOT! If that seems oddly detached from your own experiences and priorities, well, you’re probably like millions of other Americans, at least those outside of Washington.
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