A high-risk, potentially high-reward play here by Democrats, no?
According to Penn Wharton’s analysis of the new Manchin-ified version of Build Back Better, the bill will have very little effect on inflation. Short-term, it might even drive prices upward a tick. But it stands to reason that legislation that’ll infuse billions into the economy over 10 years probably won’t be a key driver of inflationary pressure over, say, the next six months.
If prices *do* drop near-term, though — and they might — it’ll be child’s play for Democrats to make the case, however disingenuously, that the Inflation Reduction Act was a deux ex machina that saved middle-class families from inflation. How does that play on Election Day?
That’s the high-reward part. The high-risk part is that if prices resume their upward trend, it’ll be child’s play for Republicans to call the bill a gigantic bust passed by idiots who just made a difficult problem worse. How does that play on Election Day?
Ed wrote last week about a YouGov poll showing voters skeptical on balance that the Inflation Reduction Act will actually reduce inflation. Some 36 percent of voters told YouGov they believe the bill will make inflation worse versus 12 percent who thought it will make inflation better.
A week later the numbers are even more lopsided, which means a plurality of Americans are already primed to endorse the GOP’s view of the bill. Big trouble ahead for Dems, then, if prices start ticking upward again before November.
YouGov poll: Do you think that this $369 billion climate and energy bill will increase or decrease inflation?
Increase/Decrease by Party:
— InteractivePolls (@IAPolls2022) August 10, 2022
Even Democrats aren’t buying their party’s spin, as more believe the bill will have no effect on inflation than that it’ll reduce it. Among independents, the split on increase/reduce is 41/7. Go figure that Americans are skeptical that plowing another $370 billion into the economy is apt to make it run cooler rather than hotter.
And go figure that the White House is already preparing some new spin in case prices start rising again before Election Day.
President Biden plans to go on offense against Republicans’ drumbeat about rising prices by arguing the GOP has repeatedly sided with special interests — “pushing an extreme MAGA agenda that costs families,” according to a White House memo shared first with Axios.
Why it matters: The GOP plans to try to make November’s midterms a “gas and groceries” election — all about inflation. Biden can’t undo the pain families have felt as everyday prices skyrocketed. So this is his inflation jujitsu — using Republicans’ force against them…
The memo — from White House communications director Kate Bedingfield and senior adviser Anita Dunn — argues that Biden’s wins have dealt blows to a parade of entrenched interests…
“This is the choice before the American people,” the memo concludes. “President Biden and Congressional Democrats taking on special interests for you and your family. Or Congressional Republicans’ extreme, MAGA agenda that serves the wealthiest, corporations and themselves.”
That smells like a descendant of the White House’s pitiful attempts to blame rising gas prices on greedy gas-station owners earlier this year. American voters don’t seriously believe the reason everything is ~10 percent more expensive than it was last year is due to collusive price-gouging, do they?
I’m guessing they understand by now that dropping $1.9 trillion in new economic stimulus last year in Biden’s COVID relief bill was a more important factor than corporate avarice. Which makes Democrats’ insistence on tacking on an additional $369 billion … perilous.
As for the experts, last week some 230 economists sent a letter to the House and Senate leadership warning that the Inflation Reduction Act will be a double whammy in making inflation worse. Not only will it mean more money sloshing around in a hot economy, the new corporate taxes in the bill may impair efforts to restore global supply chains. But all’s not lost for Biden: The economist who famously predicted rising inflation last year following passage of the COVID relief bill is bullish about the Inflation Reduction Act. Joe Manchin’s legislation really should help reduce prices, says Lawrence Summers:
The tendency of this bill will be to reduce inflation, because over time it reduces demand by bringing down budget deficits. I think the revenue estimates for the IRS enforcement effort — which is related to research that Natasha Sarin and I did at the Harvard Kennedy School — is substantially low. I think we will do significantly better on revenue. So number one: It will reduce deficits. Number two: We will augment the supply of key commodities, particularly in the energy sector, because of the subsidies and other support. And number three: We will bring down prices, particularly of pharmaceutical goods, by using the government’s purchasing power more effectively to procure at low costs. So, the net effect of this bill is going to be to reduce inflation, while at the same time doing very, very important things for the environment, very important things for fairness and access to health care, doing very important things in terms of strengthening the tax system by assuring that all who should pay, do pay.
That’s encouraging, but as I said above, if inflation rises near-term after the bill passes it’ll be laid squarely at the feet of the two Joes, Biden and Manchin, and their party in November. Fairly or not.
In fact, this same YouGov poll shows that Joe Manchin has lost considerable ground politically among voters since the bill was announced:
YouGov Poll: Joe Manchin Favorability before and after "Inflation Reduction Act"
BEFORE(July 20, RV)
AFTER (Aug 7-9, RV)
Indie: -26% pic.twitter.com/dT405k4iI2
— InteractivePolls (@IAPolls2022) August 11, 2022
No gain among Democrats, a drop among independents, and a steep drop among Republicans. I would have guessed that rescuing Build Back Better would rehabilitate Manchin to some degree among his own party, but it must be that his refusal to end the filibuster has poisoned the well. Liberals don’t think of him as the man who delivered the biggest climate-change package in a decade, it seems. They think of him as the guy who wouldn’t blow up the 60-vote rule so that they could pass voting rights or codify Roe at the federal level.
I don’t like his chances in 2024 in West Virginia.
I should note in closing that the Inflation Reduction Act *is* still popular on balance in YouGov’s new data, splitting 52/31 between those who support it at least somewhat and those who oppose it. It’s not a liability for Democrats yet and may even be an asset inasmuch as it’s gotten a few progressives excited to vote this fall. But the economic data in September and October will color the public’s impression of the bill by Election Day. Stay tuned.