The Washington fantasy world

An odd atmosphere has descended on Washington, D.C. At the precise moment the government announced that the economy shrank for the second consecutive quarter — the popular definition of a recession — Washington pundits began talking about what a great week 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. One, 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 slammed the 16 Republicans in the Senate and 24 in the House who voted for it. But

Biden, with unanimous Democratic support in both chambers, said it “will make cars cheaper, appliances cheaper and computers cheaper,” as well as “create high-paying manufacturing jobs.” The White House portrayed it as a win-win.

The second big thing for Biden was that Capitol Hill Democrats appeared to unify behind a kinda, sorta slimmed-down version of Biden’s ill-fated Build Back Better agenda — this time, one that focuses mostly on climate, health care and tax increases, instead of everything, as the original bill did. At somewhere between $400 billion and $700 billion, it’s as big a spending bill as Democrats could get past Sen. Joe Manchin of West Virginia, their most moderate member.

On the other hand, it’s unclear whether it will have the support of the other Senate moderate, Arizona’s Kyrsten Sinema. And remember, in a 50-50 Senate, with all Republicans opposed — and they will oppose this one — Democrats will have to corral all 50 of their senators to pass the bill with Vice President Kamala Harris breaking the 50-50 tie. So it is not a done deal yet.

Here’s what party leaders thought was very, very clever. They named the bill the Inflation Reduction Act. After all, the polls show, and everyone just knows, that a 9.1% annual rate of inflation is the most pressing concern on voters’ minds. It is by far the most important issue for this November’s midterm elections, and Republicans were just killing Democrats on it. So Democrats decided to claim that their new spending bill, containing expensive measures they have long wanted to pass, is a bold inflation-fighting step.

The name alone appeared to transform Biden White House officials, who until now seemed powerless to deal with raging inflation, into tough-minded inflation fighters. In the past, officials didn’t much 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, as something the Biden White House is fighting and fighting and fighting. When one reporter called the bill the “reconciliation” bill, referring to the Senate parliamentary maneuver that will have to be used to pass it, Jean-pierre responded, “We like to call it the Inflation Reduction Act.”

But here’s the thing. The Inflation Reduction Act is not about reducing inflation. It will not reduce inflation in any significant way. As a matter of fact, the best-informed debate at the moment seems to be about whether it will have zero effect on inflation or actually make inflation worse.

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

But, of course, reducing inflation is not the point. Saying the bill will reduce inflation is the point. “The word ‘inflation’ or variations show up no fewer than 11 times in Sen. Machin’s statement announcing the outline of his agreement with Leader Schumer,” notes the National Taxpayers Union Foundation. Beyond repeating the bill’s name, Biden seems to be mostly ignoring 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 about rebates for sustainable choices, tax credits for electric vehicles, investments in environmental justice. All while lowering 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 vice president’s vote — even if all that happens, it would be nice to think the Inflation Reduction Act would actually reduce inflation, wouldn’t it? In reality, that appears to be entirely irrelevant.

Why? Because before the bill has even passed — and, of course, it still hasn’t — the media declarations of a Biden comeback began. First came the assertions that the recession might not really be a recession at all. The night before the GDP numbers came out, Politico announced that the figure would be “possibly inaccurate and certain to be revised.” The next day, Politico declared a Biden victory: “Somehow, someway, Joe Biden is back in the game. After enduring a brutal year, Biden is suddenly on the verge of a turnaround that, the White House believes, could salvage his summer — and alter the trajectory of his presidency.”

Remember — this was the week the U.S. economy slipped into recession. The New York Times published a story headlined, “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 substantially re-engineered significant parts of the American economy.” That assessment was based in part on the passage of the semiconductor bill and the possible-but-not-assured passage of the Inflation Reduction Act.

A few days later, Biden would score a genuine success with the U.S. killing of al-qaida leader and 9/11 planner Ayman al-zawahiri, for which he received deserved and bipartisan praise. But much of Washington was already eager to declare him the Comeback Kid. Inflation is being fought! The semiconductor bill! Manchin on board! Recession — NOT! If it seems strangely detached from your own experiences and priorities, well, you’re probably like millions of other Americans, at least those outside Washington.