The other big news today is that Schumer and Manchin reached a deal on a climate and drug pricing reconciliation bill. The bill is brillinatly titled “The Inflation Reduction Act of 2022” to address Manchin’s reasons for nixing similar bills in the past, not that there was a rational reason to assume lowering drug prices and transitioning away from fossil fuels was going to fuel inflation. Negotiating with Manchin must be a bit like herding cats.

Anyway, this would be a good bill to pass. As I understand it, it provides $369 billion to transition away from fossil fuels, allows Medicare to negotiate prescription drug prices, and extends critical Affordable Care Act subsidies for three years. It also includes a 15 percent minimum corporate tax on companies of $1 billion or larger.

Of course, nobody trusts Manchin until this thing is passed, and I don’t believe anyone has heard from the Senate’s other free radical, Kyrsten Sinema (D-Rabbit Hole), yet. “While Sinema may not want to personally kill this heaven-sent deal herself, it would be surprising if she doesn’t take at least a pound of flesh in concessions to show her corporate friends she is still a major player,” Ed Kilgore writes.

This proposal also has to pass in the House, of course, where Josh Gottheimer (D-the 1 Percent) and his merry band of blue dog “centrists” are always ready to kill any part of the Democratic Party agenda, just because they can.

One interesting part of the story is that apparently the Dems put one over on Mitch McConnell. Per Josh Marshall:

While Senator Schumer and the White House were trying to revive some skinny version of the BBB and climate legislation with Joe Manchin Senator McConnell tried to scuttle those talks with a threat. He would pull GOP support from the China competition/CHIPs bill if the Democrats did not drop those negotiations. As it happened, Manchin scuttled the deal so the threat became moot. Then the CHIPs bill passed the Senate yesterday and then within like an hour – voila – the Manchin deal was back and somehow finalized. Senate Republicans were clearly pissed but the bill had already passed the Senate.

The “chips” bill has passed the House and can be signed by President Biden. It is intended to boost domestic production of semiconductor chips so that the U.S. is less reliant on other countries to keep our computers going. I take it that some House Republicans who had planned to vote for it changed their minds when the Schumer-Manchin deal was announced, but it passed anyway.

Susan Collins (R-Ozone Layer) said that the surprise announcement of the Schumer-Manchin deal could doom bipartisan efforts on a bill to protect same sex marriage. That makes no sense whatsoever to me, either. It’s like everyone in the Senate is a 12-year-old.

In other legislative news, a bill “aimed at protecting veterans exposed to toxic materials during their service was shut down yesterday in the Senate, in a 55 to 42 vote that failed to meet the 60-vote threshold necessary to advance the legislation.” Here is a list of the Republicans who voted against it. Chuck Schumer’s was the only Democratic vote against it, and I understand he cast that vote as part of a procedural maneuver that might allow reviving it at some other time.

The headlines this morning told us that GDP shrunk and we must be in a recession. But some disagree. I think perhaps it can’t be a very bad recession if the experts can’t agree we’re in one.

On the “we’re in a recession” side: Everybody on Fox News, I’m sure.

On the other side: Paul Krugman —

There’s a pretty good chance the Bureau of Economic Analysis, which produces the numbers on gross domestic product and other macroeconomic data, will declare on Thursday, preliminarily, that real G.D.P. shrank in the second quarter of 2022. Since it has already announced that real G.D.P. shrank in the first quarter, there will be a lot of breathless commentary to the effect that we’re officially in a recession.

But we won’t be. That’s not how recessions are defined; more important, it’s not how they should be defined. It’s possible that the people who actually decide whether we’re in a recession — more about them in a minute — will eventually declare that a recession began in the United States in the first half of this year, although that’s unlikely given other economic data. But they won’t base their decision solely on whether we’ve had two successive quarters of falling real G.D.P.

Then there’s a bunch of nerdy economic stuff, and then he says the more accurate measure of the beginning of a recession is a rising unemployment rate.

The Sahm Rule, developed by Claudia Sahm, a former Fed economist currently at the Jain Family Institute, tries to identify the start of recessions by looking for significant increases in the unemployment rate.

According to the Sahm Rule, we are not in a recession. A guy named Kevin Dugan at New York Magazine says something similar —

The question of whether the U.S. is currently in a recession has taken on greater urgency since the first quarter saw a decline in gross domestic product and the following three months were a period of rising inflation. Powell seemed to not take that much stock in the negative GDP print and noted that those numbers change all the time. And Claudia Sahm — who, as an economist at the Fed, came up with a widely followed recession indicator that looks at rising unemployment — wrote that the negative growth has a lot to do with retailers’ imports and the weird effects on the supply chain from the pandemic rather than anything to do with the health of the economy.

Here’s Claudia Sahm herself.

I agree with @TheStalwart.

I’m done weighing in on “are we in a recession?” debate. Go look at the labor market; walk around and see all the “help wanted signs.” I turned down multiple press requests yesterday on the topic. And I will turn down the rest. https://t.co/QQqm7PZ5hf pic.twitter.com/Qso1abyYKA

— Claudia Sahm (@Claudia_Sahm) July 26, 2022

Unemployment rates are going down, not up. Therefore, there is no recession. Whether it’s a good idea for the Fed to continue to crank up interest rates to slow inflation is another question. Back to Krugman:

The U.S. economy is not currently in a recession. No, two quarters of negative growth aren’t, whatever you may have heard, the “official” or “technical” definition of a recession; that determination is made by a committee that has always relied on several indicators, especially job growth. And as Jerome Powell, the chair of the Federal Reserve, noted yesterday, the labor market still looks strong.

That said, the U.S. economy is definitely slowing, basically because the Fed is deliberately engineering a slowdown to bring inflation down. And it’s possible that this slowdown will eventually be severe and broad-based enough to get the R-label. In fact, on this question I think I’m a bit more pessimistic than the consensus; I think the odds are at least 50-50 that history will say that we experienced a mild recession in late 2022 or early 2023, one that caused a modest rise in the unemployment rate. But what’s in a name?

The real question is whether a moderate slowdown, whether or not it gets called a recession, will be sufficient to control inflation. And the news on that front has been fairly encouraging lately.

Overall inflation is at a 16-month low, he says, although it is too soon to declare victory. I suspect food prices are going to remain high because of the hot, dry summer here in farm country. Crops are burning up in some places, and with the war in Ukraine wheat is going to be way scarce globally. There’s nothing the Federal Reserve can do about that.