A political victory and economic success marks a turbulent week for Biden

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President Biden scored some unexpected political victories just hours after emerging from his covid-19 isolation last Wednesday: Democratic senators announced a surprising advance on his stalled climate agenda. Multibillion-dollar legislation to subsidize computer chip makers was about to become law. And a move to make some prescription drugs cheaper gained momentum.

But all of that crashed into the news the day after the economy contracted for the second quarter in a row. Biden and his top aides have spent much of the past few days arguing that the country is not in recession, pointing to strong economic indicators like job growth and low unemployment, but that didn’t stop Republicans from denouncing the ” Biden’s Recession.”

The question now is whether his string of legislative victories, especially if Democrats manage to pass their health, climate and clean energy bill, which contains a popular measure to allow Medicare to negotiate the prices of some drugs, will be enough to Help Biden overcome the stubbornly high inflation that has helped sink his approval ratings.

This question will help define the last two years of his term. Democrats risk losing their narrow majorities in the Senate and House in November’s midterm elections, and operatives on both sides say the president’s popularity will be a big factor. If Democrats lose the House, as many analysts expect, Biden is likely to face numerous investigations. If they lose the Senate, Biden will struggle to confirm judges and other appointees. Democrats feel they have a once-in-a-lifetime chance to pass an ambitious climate agenda given that they have unified control of Washington, and they don’t know when it will happen again.

Still, action in Congress has the potential to change the narrative of his presidency. Until recently, Biden was widely seen as falling short of 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 bill, a modest gun control bill, a semiconductor bill and now, possibly, a prescription drug and climate package .

However, several economists said this package, called the Inflation Relief Act of 2022, will have a modest impact on inflation in the short term. And they expressed skepticism that voters would feel more confident in Biden’s leadership because he has passed a slew of bills as they struggle with the everyday costs of food and other items.

The package will “help with inflation” and make things a little easier for the Federal Reserve, “but by far the biggest and most important forces in the economy are well beyond the control of anything the president can do or Congress,” Jason Furman. , who was one of President Barack Obama’s top economic advisers, said Friday.

It’s not that it won’t make a difference, Furman said, it’s just that it won’t happen in the midterm elections. Over time, the legislation that passed last week will matter far more than any of the economic data, said Furman, now an economics professor at Harvard University. “The problem is that it 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 draw a sharp contrast with Republicans, a mission they say has now become considerably easier.

A White House official, who spoke on condition of anonymity to discuss internal matters, stressed that the administration was “being careful not to count the chickens before they hatch,” as the economic bill still it must be presented to Congress, which the Democrats want. to do so through a parliamentary process called reconciliation. The slim Democratic majority in the Senate — the chamber is split 50-50, with Vice President Harris casting tie-breaking votes — means all Democratic votes are needed, and Sen. Kyrsten Sinema (D-Ariz.) has yet to say whether supports the bill.

Republicans said the economic package will do little to placate voters regardless. “Americans know that Democrats can’t be trusted,” Senate Minority Leader Mitch McConnell (R-Ky.) said on the Senate floor Thursday. “They know it every time they fill up their gas tank, every time they go out to the grocery store, every time parents stay up late at the kitchen table trying to figure out which bills they can pay this month.”

Republicans plan to frame the economic package as a tax hike, as it includes a provision to make sure big corporations pay a minimum tax. “Democrats who have robbed American families once with inflation now want to rob the country a second time, through gigantic job-killing tax increases,” McConnell said.

Democrats, meanwhile, plan to point out that many Republicans are voting against both the semiconductor bill and another popular measure that would help military veterans who have been exposed to toxic photographers. Veterans relief measures typically have broad bipartisan support, and White House officials felt Republicans handed them a political gift by opposing such a popular bill.

“This week has shown that the president and Democrats in Congress have a plan to lower costs for middle-class families,” White House spokesman Andrew Bates said Saturday. “What’s the Republican plan in Congress? Just extreme ideas that would prolong inflation, end Medicare in five years, and raise taxes on nearly 100 million working people.” That was a reference to an agenda outlined by Sen. Rick Scott (R-Fla.), though he has denied that his plan would have those consequences.

Even many Democrats concede that while the White House may have little choice but to stress that the country is not in recession, that is not politically desirable ground. Instead of litigating the economy or the president’s record, some in the party argue, Democrats should focus on a message that Republicans are extremists.

Republicans are increasingly out of step with most Americans on hot-button issues like abortion and gun control, these Democrats said, and Republicans have failed to come up with their own plan to deal with inflation and high gas prices, which have fallen considerably in recent weeks.

“Discussing whether or not we are in recession is not the economic argument to make. The economic case you make has to be relevant to people’s lives,” said Joel Benenson, a Democratic strategist and former Obama pollster. “You have to make the case that you’re the party that fights for working-class Americans middle class, and the Republicans are still the 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 historically plays the biggest role in whether voters approve of a president’s job. Both Republican and Democratic presidents have blamed the bad economic news on their predecessors or the alternative political party, while taking credit for any positive indicators.

Republicans have hit Biden with rising fuel prices all year, and gas topped $5 a gallon in June for the first time. As prices have fallen in recent weeks, Biden and his lawmakers have repeatedly touted the drop and pointed to the extra money it will save Americans, but so far that message doesn’t seem to be moving voters.

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

“If you’re arguing about the definition of recession, or you’re explaining, you’re missing out. They’re just in a really bad place,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office who now heads the American Action Forum, a conservative think tank. “The inflation outlook is getting worse, not better. I think that’s going to be more important to people than the definition of a recession or this piece of paper that’s supposed to do something about inflation.”

The Inflation Reduction Act of 2022, as the package that includes climate action, prescription drug negotiations and the minimum corporate tax is officially called, is much smaller than the transformative $3 trillion bill that Biden initially sought that some Democrats compared to the 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 some drugs, cap out-of-pocket prescription costs for seniors at $2,000 a year, and penalize drugmakers for price increases above the rate of inflation, making it the most important drug pricing legislation since 2003.

The Medicare provisions have broad bipartisan support, with more than 90 percent of Americans saying in a March Kaiser Family Foundation poll that they would allow the federal government to negotiate with pharmaceutical companies getting a lower price on Medicare prescription drugs should be a “high priority” or a “top priority” for Congress. The measure would also extend Affordable Care Act subsidies for three years, preventing premium increases just before November’s midterm elections.

The bill also includes the largest investment in the fight against climate change in US history, aimed at boosting clean energy technology, although it offers some of the support that Sen. Joe Manchin III (DW.Va.) searched for fossil fuels. To cover its costs, the bill seeks to strengthen the Internal Revenue Service’s search for tax cheats, in addition to the minimum tax that targets profitable businesses 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 have leaned heavily on comments from Larry Summers, a former Treasury secretary who had been warning about inflation for a year and helped calm Manchin’s concerns. Summers said the bill was “a major step forward on inflation.”

Still, some economists have said the effects on inflation will take years. Drug prices and climate provisions will appeal to the Democratic base but may not significantly affect upset voters worried about how they will pay their bills in the coming weeks and months, said Stephen Miran, who served as a senior Treasury official . Department of the Trump administration and is the founder of Amberwave Partners, an investment fund.

“I think everybody knows that President Biden and the Democrats are concerned about inflation,” Miran said. “They talk about it enough. But I don’t think many people are convinced that it is doing anything meaningful to stop inflation.”

The Inflation Reduction Act “will do a good job of cementing President Biden’s own coalition behind it, but it’s very likely they’ll support it anyway,” Miran added. “Regarding the real policy problem, which is middle-class households suffering from record inflation, I don’t think that moves the needle.”

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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!