A policy win and an economic hit mark turbulent weeks for Biden


President Biden scored some unexpected policy victories last Wednesday, just hours after emerging from his Covid-19 isolation: Democratic senators announced a shocking breakthrough on his pause climate agenda, was on the cusp of a multi-billion dollar law to subsidize computer chip makers become law, And a way to make some prescription drugs cheaper gained momentum,

But it all came to the news the very next day that the economy shrank for a second. straight quarter, Biden and his top aides have spent the past few days arguing that the country is not entering a recession, pointing to strong economic indicators such as job growth and low unemployment, but that have prompted Republicans to call out “Biden”. recession” did not stop it from reducing.

Now the question becomes whether his run-off legislative victory — especially if Democrats manage to pass their health care, climate and clean energy bill, which includes a hugely popular measure to get Medicare to negotiate the prices of certain drugs — for Biden to stave off high inflation. The approval rating of the one who helped the drowning would be enough to help.

This question will help define the last two years of his tenure. Democrats are at risk of losing their narrow Senate and House majority in November’s midterm elections, and operatives on both sides say the president’s popularity will be a major factor. If Democrats lose the House, as many analysts expect, Biden could face multiple scrutiny. If he loses the Senate, Biden will struggle to confirm judges and other appointments. Democrats think they have a one-time opportunity to pass an ambitious climate agenda, because they hold unified control over Washington and don’t know when it will happen again.

Still, action in Congress has the potential to turn the narrative of his presidency. Until recently, Biden was widely seen to have missed out on his promise that he could bring the parties together to pass bills that would help Americans. But in his first two years, he has pushed through a coronavirus relief measure, an infrastructure law, a modest gun-control law, a seminal law and now, possibly, a climate and prescription drugs package.

Yet several economists said the package, called the Inflation Reduction Act of 2022, would have a modest impact on inflation in the near term. And he expressed doubts that voters will feel more confident about Biden’s leadership as he has passed several bills at a time when they grapple with the everyday costs of food and other items.

The package will “help with inflation” and make it a little easier for the Federal Reserve, “but the biggest and most important forces in the economy are beyond the control of the president or Congress to do anything,” said Jason Furman, who is the president. Barack Obama’s top economic adviser, said on Friday.

Not that it won’t matter, Furman said, but it won’t with the midterm election. Over time, legislation passed last week matters far more than any economic data, said Furman, who is now a professor of economics at Harvard. “The problem is that may not be true on a two-month time scale.”

Politically speaking, Democrats said their bill at least allows them to show they are trying to help voters. White House officials said their goal is to create a stark contrast with Republicans, a mission they say has now become much easier.

A White House official, who spoke on condition of anonymity to discuss internal affairs, stressed that the administration was “careful not to count the chickens before they are caught”, noting that the economic bill Still to be pushed through Congress, which Democrats are aiming for using a parliamentary process called reconciliation. The thin Democratic majority in the Senate—the chamber is split 50-50, with Vice President Harris casting tiebreaking votes—means every Democratic vote is needed, and Sen. Kirsten Cinema (D-Ariz.) has yet to say so. whether she supports. bill.

Republicans said the economic package would do little to assuage voters. “Americans know Democrats cannot be trusted,” Senate Minority Leader Mitch McConnell (R-Ky.) said Thursday on the Senate floor. “They know it every time they fill up their gas tank, every time they check out at the supermarket, every time a parent is up late at their kitchen table trying to figure out What bills can they pay this month?

Republicans plan to frame the economic package as a tax hike, as it includes a provision to ensure that large corporations pay the minimum tax. “The Democrats who once robbed American families with inflation are now looking to rob the country a second time, through huge job-killing tax increases,” McConnell said.

Democrats, for their part, plan to highlight many Republican votes against both the semiconductor bill and another popular measure that would help military veterans exposed to toxic burn pits. Measures that provide aid to veterans usually have broad bipartisan support, and White House officials felt Republicans gave them a political gift by opposing such a popular bill.

“This week has shown that the president and congressional Democrats have plans to reduce costs for middle-class families,” White House spokesman Andrew Bates said Saturday. “What are the plans for congressional Republicans? Only extreme views that would prolong inflation, end Medicare in five years and raise taxes on nearly 100 million working people.” That’s an agenda outlined by Sen. Rick Scott (R-Fla.) Although he has denied that his plan will have consequences.

Even as many Democrats believe the White House may have little choice but to insist that the country is not in a recession, it is hardly politically desirable ground. Instead of prosecuting either the economy or the president’s record, some in the party argue that Democrats should focus on the message that Republicans are extremists.

Republicans are increasingly out of step with most Americans on hot-button issues such as abortion and gun control, these Democrats said, and Republicans have not presented their plans for tackling inflation and high gas prices, which have led to the recent It’s fallen a lot in weeks.

“Arguing whether or not we are in a recession is not an economic argument. The economic argument you make has to be relevant to people’s lives,” said Joel Benson, a Democratic strategist and former Obama pollster. Make sure you are the party that is fighting for working class and middle-class Americans, and remains the Republican Party that gives tax breaks to corporations and the super-rich.”

Presidents have little control over the economy, most economists said, even though the issue has historically played the biggest role in whether voters approve of the work the president is doing. Both Republican and Democratic presidents have blamed the bad economic news on their predecessors or an alternative political party, taking credit for any positive indicators.

Republicans have attacked Biden over rising fuel prices throughout the year, and in June gas exceeded $5 a gallon for the first time. as prices drop recent weeksBiden and his representatives have repeatedly touted the fallout and pointed to additional funding that would save Americans, but so far the message hasn’t inspired voters.

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

“If you’re debating the definition of recession, or you’re explaining, you’re losing. They’re in a really bad place,” said Douglas Holtz-Eakin, 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. I think it’s going to be more important to people than the definition of a recession or this piece of paper that talks about inflation.” But something is going to happen.”

The Inflation Reduction Act of 2022, as the package including climate action, prescription drug negotiations and a minimum corporate tax is officially called, is much smaller than the transformational $3 trillion bill Biden initially sought that some Democrats sought. Compare New Deal. But it would still represent one of the most consequential pieces of economic policy in recent history.

It would allow Medicare to negotiate the price of certain drugs, out-of-pocket prescription costs for seniors at $2,000 per year, and penalize drugmakers for raising prices above the rate of inflation, allowing it to It would become the most important drug pricing law since 2003.

More than 90 percent of Americans polled by the Kaiser Family Foundation in March said Medicare provisions have broad bipartisan support, allowing the federal government to negotiate. pharmaceutical companies Getting lower prices on Medicare prescription drugs should be a “critical priority” or “top priority” for Congress. The measure would extend the Affordable Care Act subsidies by three years, to avoid premium hikes just before the November midterm elections.

The bill also includes the largest investment in fighting climate change in US history, aimed at promoting clean-energy technology, even though it was Sen. Joe Manchin III (DW.VA) who provided some support for fossil fuels. . To cover its costs, the bill looks to strengthen the Internal Revenue Service in pursuing tax cheats, in addition to a minimum tax targeting profitable companies that pay nothing to the federal government. And it raises more than $300 billion that can be used to reduce the federal deficit.

Biden and other White House officials have repeatedly cited economists who have said the bill would help reduce inflation. They rely heavily on comments from Larry Summers, a former Treasury secretary who had been warning about inflation for a year and helped to calm Manchin’s concerns. Summers said the bill “is a significant step forward on inflation.”

Still, some economists have said that the effects on inflation will take years. Stephen Miran, who served as a senior Treasury official, said drug pricing and climate provisions will appeal to the Democratic base, but with troubled voters about how they will afford their bills in the coming weeks and months. May not make a significant dent with worried voters. department in the Trump administration and is the founder of Emberwave Partners, an investment fund.

“I think everyone knows that President Biden and the Democrats are concerned about inflation,” Mirran said. “They talk about it enough. But I don’t think many people are convinced they’re doing anything worthwhile to stop inflation.”

Miran said the “Inflation Reduction Act” would do a good job of consolidating President Biden’s own coalition behind him, but he was very likely to support him anyway. “With respect to the real political problem, which is middle class families dealing with record inflation, I don’t think it’s going to move the needle.”

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