The President, Michael Belson, finds himself in a precarious situation when he is caught making advances on an underage girl inside the Oval Office, just days before the election. To divert the public's gaze from this scandal, Conrad Brean (Robert De Niro), an elite spin doctor, is summoned by presidential aide Winifred Ames (Anne Heche). Brean concocts an imaginative solution: he will fabricate a war in Albania, directing the media's attention away from the unfolding scandal.
To bring this fictional narrative to life, Brean reaches out to Hollywood producer Stanley Motss (Dustin Hoffman), tasking him with creating phony war footage and a catchy theme song, accompanied by a touching tale of an adorable orphan. Their ruse works initially, and the President's popularity rebounds as public interest shifts.
However, the CIA soon becomes aware of the charade and dispatches Agent Young (William H. Macy) to confront Brean. Brean manages to persuade Young that unmasking the deception would be detrimental to both parties. But as the CIA colludes with the President's political opponent, they announce that the war is real but nearing an end, causing the media to refocus on the President's scandal.
In a desperate bid to distract the public again, Motss creates a narrative around a hero—one whom they suggest has been left behind enemy lines. Driven by the notion that this hero has been "discarded like an old shoe," Brean and Motss manage to convince the Pentagon to attach a soldier named Schumann (Woody Harrelson) to their story, crafting a compelling POW narrative complete with T-shirts, patriotic songs, and orchestrated displays of support.
An impactful touch to their scheme involves folk singer Johnny Dean (Willie Nelson), who records a song called "Old Shoe." This tune is then aged artificially and sent to the Library of Congress, giving it an appearance of historical significance. Soon, pairs of shoes start appearing on power lines, symbolizing the burgeoning support for their fictional war effort.
As their elaborate hoax continues to expand, the public becomes enmeshed in the false realities constructed in the White House's basement with technology, actors, and staged events. To bolster their narrative, the team even liberates a mental patient with military credentials, simply because his last name is "Shoe," rallying national sentiment with catchy songs tied to his name.
Yet, when the time comes to secure Schumann, the team is horrified to discover that he is actually an insane criminal. Their efforts to return are thwarted by a plane crash, but they survive, thanks to an illegal alien farmer who gains citizenship in exchange for a compelling story. Tragically, Schumann perishes after a violent incident, prompting Motss to stage a lavish military funeral, claiming he died heroically in the line of duty.
Tensions escalate when, after witnessing a political program crediting the President's soaring poll numbers to a mundane campaign slogan, Motss grows frustrated. He believes his contributions are being overlooked and insists on recognition, despite Brean's warnings of the potential dangers involved. In a dramatic turn of events, Motss's refusal to retreat leads Brean to give the order that seals Motss's fate.
As the dust settles, a newsflash reports that Motss has succumbed to a heart attack. The President successfully wins re-election, while a foreign terrorist group takes credit for a recent act of violence, thus closing the curtain on the chaos spawned from a web of lies.
