The president is caught making advances on an underage girl inside the Oval Office less than two weeks before the election. Conrad Brean, a top spin doctor, is brought in by presidential aide Winifred Ames to take the public's attention away from the scandal. He decides to construct a fictional war in Albania, hoping the media will concentrate on this instead. Brean contacts Hollywood producer Stanley Motss to create the war, complete with a theme song and fake film footage of a fleeing orphan to arouse sympathy. The hoax is initially successful, with the president quickly gaining ground in the polls.
When the CIA learns of the plot, they send Agent Young to confront Brean about the hoax. Brean convinces Young that revealing the deception is against his and the CIA's best interests. But when the CIA — in collusion with the president's rival candidate — reports that the war has ended, the media begins to focus back on the president's sexual abuse scandal. To counter this, Motss invents a hero who was left behind enemy lines in Albania.
Inspired by the idea that he was "discarded like an old shoe", Brean and Motss ask the Pentagon to provide a special forces soldier with a matching name (a sergeant named "Schumann" is identified), around whom a POW narrative can be constructed. As part of the hoax, folk singer Johnny Dean records a song called "Old Shoe", which is pressed onto a 78 rpm record, prematurely aged so that listeners will think it was recorded years earlier, and sent to the Library of Congress to be "found". Soon, large numbers of old pairs of shoes begin appearing on phone and power lines, and a grassroots movement takes hold.
When the team goes to retrieve Schumann, they discover he is in fact a criminally insane Army convict. On the way back, their plane crashes en route to Andrews Air Force Base. The team survives and is rescued by a farmer, an illegal alien who is given expedited citizenship for a better story. However, Schumann is killed when he attempts to rape a gas station owner's daughter. Seizing the opportunity, Motss stages an elaborate military funeral for Schumann, claiming he died from wounds sustained during his rescue.
While watching a political talk show, Motss gets frustrated that the media are crediting the president's upsurge in the polls to the bland campaign slogan of "Don't change horses in mid-stream" rather than to Motss's hard work. Motss states he wants credit and will reveal his involvement, despite Brean's offer of an ambassadorship and the dire warning that he is "playing with his life". After Motss refuses to change his mind, Brean reluctantly orders his security staff to kill him. A newscast reports that Motss has died of a heart attack at home, the president has been successfully re-elected, and an Albanian terrorist organization has claimed responsibility for a recent bombing, suggesting the fake war is becoming a real one.
