Inflation is improving, gradually, and gasoline prices have plunged during the last four months. Those trends seem to be going in the right direction for Democrats as they defend control of Congress in the Nov. 8 midterm elections.
Yet Republicans have the momentum, and Democrats seem likely to lose control of the House, with the Senate a toss-up. Polls show that social issues such as the Supreme Court’s overturn of the Roe v. Wade abortion protections over the summer have faded as a voter concern, taking some of the air out of Democratic hopes. Economic concerns, as is usually the case, trump all others. That, of course, is bad for Democrats, since they’re in charge of the federal government and the lead suspect when something goes wrong.
The irony for Democrats is that voters seems to be getting more concerned about inflation as price hikes moderate. The overall inflation rate peaked at 9% in June and has since fallen back to 8.2%. Economists expect inflation to keep trending down, as supply chain jam-ups ease and wholesale prices for some goods and services decline. Gasoline prices, probably the most visible proxy for broader inflation, have fallen from a high of $5.02 per 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 worried about price hikes—and angrier at incumbent Democrats. In August, for instance, a Quinnipiac poll found that 27% said inflation was the most urgent problem in the nation. By October, that had risen to 36%.
New Census Bureau data might help explain what’s going on. Since the onset of the COVID pandemic in 2020, the Census has been conducting large-scale household surveys to gauge how families are holding up. Here’s a snapshot of how families are dealing with inflation:
A year ago, 25% of households said they had trouble paying for household expenses within the past week. The inflation rate then: 6.2%
In June, when inflation peaked at 9%, 36% of respondents said they had trouble paying for household expenses. In the latest survey, from mid-October, that had risen to 38%—even though inflation had ticked down to 8.2%.
This suggests 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 are somewhat or very concerned about price hikes in the next six months. The Census didn’t ask that question during the other two time periods, so it’s not clear if that’s getting better or worse. But 78% seems very high, and it would explain the profound gloom pervading the country.
Inflation may also be causing more pain the longer it lasts, like a cumulative drain rather than a one-time inconvenience. Americans have been increasingly relying on credit cards and savings, including various types of stimulus payments from the 2020 and 2021 COVID relief laws, to pay their bills. In the latest Census survey, 61% reported using credit cards or savings to meet their ordinary spending needs, up from 54% in June and 47% one year ago. Economic fragility is getting worse, not better.
Two demographic groups Democrats thought they could count on in the midterms are struggling a bit more than the nation as a whole, on average. Forty percent of women, and 45% of Hispanics, struggle to pay household expenses, and both are worse off than a year ago. Democrats expected a strong showing among women because of the Roe overturn, but it now seems possible that women might favor Republicans, simply because of dissatisfaction with the economy. Dems have also tended to take the Hispanic vote for granted, because of their more tolerant views on immigration. But Hispanics struggle with inflation like everybody else and may end up voting their pocketbooks, as well.
Many aspects of the economy have been consistently improving for the last 12 months. Employment continues to grow, for instance, and overall output is up. Inflation, however, is a giant asterisk. Wages are growing about three percentage points less than inflation, with means the typical paycheck buys less. Food prices, up 13% year-over-year, have become an acute source of pain, even with retreating gas prices. Americans have grown somewhat accustomed to gas prices jumping around, but a lasting spike in food prices may be more of a shock, both financially and psychologically.
If there’s any good news for Democrats, it might arrive during the next election cycle. Inflation has proven far more stubborn than just about any policymaker thought it would be a year ago. But the Federal Reserve is now on the case, with sharp interest rate hikes this year that seem destined to tame inflation eventually. We now know there’s a lag, perhaps a lengthy 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’s safe to stop worrying about it.