Washington fantasy world

WASHINGTON FANTASY WORLD. A strange atmosphere has descended on Washington, DC. As the government announced that the economy shrank for the second quarter in a row, the popular definition of a recession, pundits in Washington started talking about what a great week President Joe Biden had. 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 legislation providing billions in subsidies for the semiconductor industry. Conservatives denounced the measure as giving big business the pork and condemned the 16 Republicans in the Senate and 24 in the House who voted for it. But Biden, with the unanimous support of Democrats in both chambers, said he would “make cars cheaper, appliances cheaper, computers cheaper,” as well as “create high-paying manufacturing jobs.” The White House portrayed it as a win-win.

Another big thing for Biden Democrats on Capitol Hill seemed to have rallied behind some sort of watered-down version of Biden’s ill-fated “Build Better” agenda — this time, one that focuses mostly on climate, health care and tax increases, instead of everything, as the original bill did. Somewhere between $400 billion and $700 billion, that’s about as much spending as Democrats could push through Sen. Joe Manchin (D-WV), their most centrist member. On the other hand, it is unclear whether he will have the support of another Senate centrist, Kirsten Sinema (D-AZ). And remember, in a 50-50 Senate, with all Republicans opposed — and they will oppose this — Democrats will have to rally all 50 of their senators to pass the bill, and Vice President Kamala Harris will break a 50-50 tie. So it’s not a done deal yet.

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Here’s what party leaders thought was very, very clever. They called the proposed law the Law on Reducing Inflation. After all, polls show, and everyone just knows, that a 9.1% annual inflation rate is voters’ most pressing concern. It’s by far the most important issue in the November midterm elections, and Republicans have been killing Democrats on it. So the Democrats decided to claim that their new spending bill, which contains expensive measures they have long wanted to pass, is a bold step in the fight against inflation.

The name itself seemed to transform Biden White House officials, who until now seemed powerless to deal with rampant inflation, have turned into die-hard anti-inflation fighters. In the past, officials have been reluctant to use the “I” word when speaking from the podium in the White House press room. But after the deal with the Senate Democrat, spokeswoman Karine Jean-Pierre just couldn’t stop saying “inflation,” over and over, as something the Biden White House is fighting and fighting and fighting. When a reporter called the bill a “reconciliation” bill, referring to the Senate’s parliamentary maneuvering that would have to be used to pass it, Jean-Pierre replied: “We like to call it the Inflation Reduction Act.”

But here’s the thing — and you knew this was coming. The Inflation Reduction Act is not about reducing inflation. It will not significantly reduce inflation. In fact, the best-informed debate right now seems to be whether it will have zero effect on inflation, or whether it will actually make inflation worse.

New assessment from the University of Pennsylvania’s Penn Wharton Budget Model found that the Inflation Reduction Act “would increase inflation very slightly through 2024 and reduce inflation thereafter. These estimates are not statistically different from zero, indicating low confidence that the Act will have any effect impact on inflation.” If you want real numbers, Penn Wharton estimated that the bill would increase inflation by 0.05% through 2024 and then reduce inflation by 0.25% “through the late 2020s.” Again, the estimates are “not statistically different from zero”.

But, of course, the point is not to reduce inflation. The point is to say that the bill will reduce inflation. “The word ‘inflation’ or variation appears at least 11 times in Senator Manchin’s statement announcing his draft agreement with Leader Schumer,” notes the National Taxpayers Union Foundation. Aside from repeating the bill’s name, Biden appears to largely ignore the supposedly inflation-fighting features of the Inflation Reduction Act. On Friday, he tweeted: “The Inflation Reduction Act of 2022 invests billions in the climate crisis. I’m talking sustainable choice rebates, electric vehicle tax credits, environmental justice investments. All while lowering costs and creating thousands of clean energy jobs.” OK, but what about reducing inflation?

And even if Sinema is on board and the Democrats can pass the bill on a 50-50 tie, plus the vice president’s vote — even if all that happens, it would be nice to think that the Inflation Reduction Act would actually reduce inflation, wouldn’t it? In reality, it seems completely irrelevant.

Why? Because before the bill even passed — and of course, it still hasn’t — media statements about Biden’s return began. First there were claims that the recession might not be a recession at all. The night before the GDP numbers came out, Politico announced that the figure would be “probably incorrect and will certainly be revised”. the next day, Politico declared win for Biden: “Somehow, somehow, Joe Biden is back in the game. After enduring brutal years, Biden is suddenly on the verge of a turnaround that the White House believes could save his summer — and change the trajectory of his presidency.”

Remember – this was the week the US economy went into recession. The The New York Times published a story titled “The Wind Is at Biden’s Back for a Change. Will Voters Care?” I Axios touted “Biden’s success story,” claiming the president had “slowly but significantly rebuilt significant parts of the American economy.” That estimate is based in part on the adoption of the Semiconductor Law and the possible, but not assured, passage of the Inflation Reduction Act.

The new conventional wisdom it was all over television, of course. ABC’s Jonathan Karl put it this way to interviewer and communications expert Frank Luntz: “Frank, you saw the good news for Biden last week. The big semiconductor bill passed. He has a deal with Manchin. Manchin is working with Build- om Back, better, sort of. What do you think? Is Manchin just bailing him out?”

And that’s where the new conventional wisdom hit a snag. “I don’t think this is significant,” Luntz replied. “You don’t think that’s significant?” Karl answered. “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 your gas tank? We know half of Americans can’t. One in five return food when they get to the till because they simply can’t afford it. This is too much about Washington, not about the quality of life for the average individual. I know that [Biden] he likes to argue whether inflation was fleeting, and now he’s arguing about recession. The fact is, this sounds Orwellian. Don’t fight over words. If you can’t afford not only what you want, but what you need, that is by definition a recession and people are suffering right now.

Karl didn’t quite get the hang of it with what Luntz just said. “So you’re saying it’s not a big deal in terms of halftime impact?” Karl asked. “This is a big bill.”

Luntz’s point could not have been better illustrated in that brief moment. And that is the new atmosphere in Washington. Joe Biden is a comeback kid! Fight against inflation! Bill for semiconductors! Manchin on board! Recession — NO! If that seems oddly disconnected 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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