Politics win, economic hit: Turbulent week reverses Biden’s trajectory

Suspension

President Biden scored a string of unexpected political victories just hours after emerging from COVID-19 isolation last Wednesday: Democratic Senators Announce an amazing hack on the long-stalled climate agenda. Billion-dollar bill to support computer chip manufacturers was It’s about to become law. and Action to make some prescription drugs cheaper acquired strength.

But it all hit the news the very next day it happened The economy contracted for the second consecutive quarter. Biden and his top aides have spent most of the past few days arguing that the country is not entering a recession, citing strong economic indicators such as job growth and low unemployment, but that hasn’t stopped Republicans from denouncing a “Biden recession.” “

Now the question is whether Biden Running Legislative Gains — in particular if Democrats can pass their healthcare, climate, and clean energy bill, which contains an all-too-common measure to allow Medicare to negotiate prices for some drugs — it would be enough for Biden to help beat the stubborn high inflation that helped sink his approval rates.

This question will help determine the last two years of Biden’s tenure. Democrats are in danger of losing their narrow majorities in the Senate and House of Representatives in the November midterm elections, and activists on both sides say the president’s popularity will be a major factor. If the Democrats lose the House, as many analysts expect, Biden will likely face several investigations; If they lose the Senate, Biden will struggle to confirm the appointments of judges and other appointees. Democrats feel they have a once-in-a-lifetime opportunity to pass an ambitious climate agenda given that they uniformly control Washington and don’t know when it will happen again.

However, the action in Congress has the potential to change the narrative of the Biden presidency. Until recently, Biden was widely seen as not keeping his promise that he could bring the parties together to pass bills that would help Americans. But in his first two years, he pushed for coronavirus relief measures, an infrastructure law, a modest gun control law, a semiconductor law — and now, perhaps, a climate and prescription drug package.

However, several economists said this package, called the Inflation Cut Act of 2022, will have a modest impact on inflation in the near term. They doubted that voters would feel more confident about Biden’s leadership as he passed so many bills when they struggled with the daily costs of food and other items.

The Democrats’ package will “help inflation and make [Federal Reserve’s] .

It’s not that it won’t make a difference — it just won’t happen mid-term, Forman said. “Over time, the legislation that passed this week, that I made progress on this week, is going to matter a lot, much more than any economic data this week,” said Furman, a Harvard economics professor. “The problem is that this may not be true in a two-month timescale.”

Politically, Democrats say their bill at least allows them to show they are trying to help voters. White House officials say their goal is to make a stark contrast to Republicans, a task they say is now much easier.

One White House official stressed that the administration was “careful not to count the chickens before they hatch,” given that the economic bill still had to be pushed through Congress, which is what Democrats are aiming for using a parliamentary process called reconciliation. The slim majority of the Democratic caucus in the Senate — the chamber split 50-50, with Vice President Harris casting a comma vote — means that every Democratic vote is required, and Senator Kirsten Senema (D-Arizona) has yet to say whether she supports the bill.

Republicans say the economic package will do little to appease voters regardless.

“Americans know that Democrats cannot be trusted,” Senate Minority Leader Mitch McConnell (R-Kentucky) said Thursday on the Senate floor. “They know it every time they fill up their tank, every time they check out at the supermarket, every time parents stay up late at their kitchen table trying to figure out what bills they can pay this month.”

Republicans plan to frame the economic package as a tax increase, because it includes a requirement to make sure large corporations pay minimal taxes. “Democrats who once robbed American families because of inflation now want to rob the country again, with massive job-killing tax increases,” McConnell said.

Democrats, for their part, plan to highlight the fact that many Republicans voted against the semiconductor bill and another popular measure that would help military veterans with toxic burns. Measures to provide assistance to veterans usually enjoy broad bipartisan support, and White House officials felt that Republicans had given them a political gift by opposing such a popular law.

“I have shown this week that the president and Democrats in Congress have a plan to cut costs for middle-class families,” White House spokesman Andrew Bates said on Saturday. “What is the plan of the Republicans in Congress? Just radical ideas that will prolong inflation and end Medicare within five years and raise taxes on nearly 100 million workers.” It was a reference to the agenda set by Senator Rick Scott (R-Fla), who heads the campaign arm of Republican senators, although he denies that his plan would have those consequences.

Even many Democrats privately concede that while the White House may have no choice but to stress that the country is not in a recession, that is hardly desirable politically. Rather than litigating the economy’s record or the president’s record, some in the party argue, Democrats should focus on the message that Republicans are extremists.

These Democrats say Republicans are increasingly falling back on most Americans on hot issues including abortion and gun control, and the GOP has not presented its own plan to deal with inflation and rising gas prices, which have fallen dramatically in recent weeks.

“Arguing whether or not we are in a recession is not the economic argument to make. The economic argument you make has to be relevant to people’s lives,” said Joel Benenson, a Democratic strategist and former Obama pollster. Prove that you’re the party fighting for working and middle-class Americans, and that Republicans are still the party giving tax breaks to corporations and the wealthy.”

Most economists say that presidents have little control over the economy, although historically the issue plays the largest role in whether voters approve of the job the president does. Both Republican and Democratic presidents have historically blamed bad economic news on their predecessors or the alternative political party, while taking credit for any positive indicators.

Republicans have hit Biden for high fuel prices all year, and gas topped $5 a gallon in June for the first time ever. With prices dropping in recent weeks, Biden and his deputies have repeatedly touted the rollback and indicated the extra money he would put in Americans’ pocketbooks, but so far that message doesn’t seem to move voters.

Economists say the measures needed to cool the economy and lower inflation – including the Federal Reserve raising interest rates – are painful for many voters.

“If you argue about or explain the definition of recession, you lose,” said Douglas Holtz-Eaken, a former director of the Congressional Budget Office who now runs the American Action Forum, a conservative think tank. The inflation picture is getting worse, not better. More important to people than the definition of a recession or this piece of paper that is supposed to do something about inflation.”

The Inflation Reduction Act of 2022 — as the package that includes climate action, drug and prescription negotiations and a minimum corporate tax is called — is much smaller than the $3 trillion transfer bill that Biden initially sought to liken some Democrats to the New Deal. But it will still represent one of the most important parts of economic policy in recent US history.

It would allow Medicare to negotiate the price of some drugs, set the costs of prescription drugs for older adults at $2,000 a year and penalize drug makers for rising prices above inflation, making it the most important drug pricing legislation since 2003.

Medicare provisions have broad bipartisan support, with more than 90 percent of Americans saying a Kaiser Family Foundation Poll Last March, allowing the government to negotiate with drug companies for a lower price for prescription drugs from Medicare should be a “high priority” or “top priority” for Congress.

The measure would also extend support for the Affordable Care Act by three years, while avoiding premium increases ahead of the November midterm elections.

The bill also includes the largest investment in the fight against climate change in US history, with the goal of promoting clean energy technology even while providing some of the support Senator Joe Manchin III (DW.Va) sought for fossil fuels. To cover its costs, the bill seeks to bolster the Internal Revenue Service’s ability to pursue tax fraud, as well as minimal taxes aimed at profitable businesses that pay nothing to the US government. It raises more than $300 billion that could be used to reduce the federal deficit.

Biden and other White House officials repeatedly cited economists who said the bill would help reduce inflation. They relied heavily on comments from Larry Summers, the former Treasury secretary who had been warning about inflation for a year and helped allay Mnuchin’s fears. Summers said the bill was an “important step forward on inflation.”

However, some economists said the bill’s effects on inflation would take years. Steven Miran, who served as a senior Treasury official, said drug prices and climate conditions would appeal to the Democrats’ base, but they might not make much of an impact with angry voters worried about how to pay their bills in the coming weeks and months. The department in the Trump administration is the co-founder of Amberwave Partners, an investment fund.

“I think everyone knows that President Biden and the Democrats are worried about inflation,” Miran said. “They talk about it enough. [But] I don’t think a lot of people are convinced that they are doing anything useful to stop inflation.”

Miran added that the inflation-reduction law “would do a good job of consolidating President Biden’s coalition behind him, but they are very likely to support him anyway.” “As for the real political problem, which is middle-class families dealing with record inflation, I don’t think that will make a difference.”