Inflation is improving, gradually, and gasoline prices have plunged over the past four months. These trends appear to be heading in the right direction for Democrats as they defend control of Congress in the Nov. 8 midterm elections.
Still, Republicans have the momentum, and Democrats look likely to lose control of the House, with the Senate up in the air. Polls show that social issues such as the Supreme Court’s overturning of abortion protections Roe v. Wade over the summer has faded as a voter concern, taking some air from Democratic hopefuls. Economic concerns, as is usually the case, trump all others. This, of course, is bad for Democrats, as they are in charge of the federal government and the prime suspect when things go wrong.
The irony for Democrats is that voters seem increasingly concerned about inflation as price increases moderate. The headline inflation rate peaked at 9% in June and has since fallen to 8.2%. Economists expect inflation to continue to decline as supply chain bottlenecks ease and wholesale prices for some goods and services fall. Gasoline prices, probably the most visible proxy for broader inflation, have fallen from a peak of $5.02 a gallon in July to a much more manageable $3.80, on average.
Yet, instead of finding relief in these improving inflation trends, voters seem more concerned about rising prices and angrier with incumbent Democrats. In August, for example, a Quinnipiac poll found that 27% said inflation was the nation’s most pressing problem. By October, that figure had risen to 36%.
New data from the Census Bureau could help explain what’s going on. Since the start of the COVID pandemic in 2020, the census has been conducting large-scale household surveys to gauge family resilience. Here’s a look at how families cope with inflation:
A year ago, 25% of households said they had trouble paying household expenses in the past week. The inflation rate then: 6.2%
In June, when inflation peaked at 9%, 36% of respondents said they had trouble paying household expenses. In the latest survey, from mid-October, this figure had risen to 38%, even though inflation had fallen to 8.2%.
This suggests that at least two things are weighing on the wallets and psyches of American consumers. First, the longer inflation persists, the worse people expect it to get. In the October Census survey, 78% said they were somewhat or very concerned about price increases over the next six months. The Census didn’t ask this question in the other two time periods, so it’s unclear if it’s getting better or worse. But 78% seems very high, and that would explain the deep gloom in the country.
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Inflation can also cause more pain the longer it lasts, as a cumulative drain rather than a one-time inconvenience. Americans are increasingly relying on credit cards and savings, including various types of stimulus payments from the 2020 and 2021 COVID Relief Acts, to pay their bills. In the latest census survey, 61% said they use credit cards or savings to meet their ordinary spending needs, up from 54% in June and 47% a year ago. Economic fragility is getting worse, not better.
Two demographic groups that Democrats thought they could rely on in the medium term are struggling a little more than the nation as a whole, on average. Forty percent of women and 45% of Hispanics are struggling to pay household expenses, and both are worse off than a year ago. Democrats were expecting a strong showing from women due to Roe’s reversal, but it now seems possible that women will favor Republicans simply because of their dissatisfaction with the economy. Democrats have also tended to take the Hispanic vote for granted, due to their more tolerant views on immigration. But Hispanics are fighting inflation like everyone else and may also end up voting for their wallets.
Many aspects of the economy have steadily improved over the past 12 months. Employment continues to grow, for example, and overall production is on the rise. Inflation, however, is a giant asterisk. Wages rise about three percentage points less than inflation, which means the typical wage buys less. Food prices, up 13% year over year, have become an acute source of pain, even with lower gasoline prices. Americans have become somewhat accustomed to soaring gasoline prices, but a sustained spike in food prices could be more of a shock, both financially and psychologically.
If there is good news for Democrats, it could come in the next election cycle. Inflation has proven to be far more tenacious than any policymaker would have believed a year ago. But the Federal Reserve is now on the ball, with steep interest rate hikes this year that seem destined to tame inflation over time. We now know that there is a lag, perhaps a long one, between what the data shows and what consumers feel.
It could take another two years for inflation to fully recede and for voters to feel it is prudent to stop worrying about it.
Rick Newman is a senior columnist for Yahoo finance. Follow him on Twitter at @rickjnewman
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