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Senator Kyrsten Sinema leaves Democratic Party, registers as Independent

Yahoo Finance political columnist Rick Newman outlines how Arizona Senator Sinema's transition into an Independent lawmaker will impact Democrats' position in Congress, while also commenting on the Fed's inflation outlook.

Video Transcript

KYRSTEN SINEMA: Registering as an Independent, and showing up to work with the title of Independent, is a reflection of who I've always been. It's a reflection of who Arizona is. It's a reflection of the folks that I talk to at the grocery store, hear from at the park. It's who we are as a people. We don't line up to do what we're told.

- Senator Kyrsten Sinema breaking with the Democratic Party and registering as an independent, writing in an op ed for the "Arizona Republic" that she hopes to, quote, "work proudly with senators in both parties." Let's talk about what this means for Democrats. We want to bring in Yahoo! Finance's senior columnist Rick Newman. And Rick, I guess it's safe to say that this complicates things for the Democrats just a bit.

RICK NEWMAN: It does, although I'm not sure this is as big a deal outside the Beltway as it is inside the Beltway. So right now, you have-- Democrats are just outraged about this. How dare you is their attitude toward Kyrsten Sinema.

But on the other hand, she's talking the way a lot of voters actually think. I mean, if you look at voter affiliation polls by Gallup and others, there are more people who say they are Independent than who say they are either Republican or Democrat. Now, many of those Independents lean either Republican or Democrat, and I think it is safe to say that Sinema will continue to lean Democratic. She has said she is not becoming a Republican, and she doesn't plan to vote with Republicans. She just wants to become Independent and disassociate herself with the Democratic Party. If I were the Democrats, I think I might say, maybe she's got a point. Maybe there are too many extremists in the Democratic party, because there are a lot of voters who feel that way.

At any rate, there's not much legislation that's going to pass Congress or Democratic legislation anyway, because Republicans will control the House, and they'll be able to block it. So I'm not sure this means all that much for legislation during the next two years. But it's going to get very sticky come 2024, because she's up for re-election, and there's a huge question about whether the party will back her as a candidate or whether they will not back her at all. And that gets to millions of in funding and whether you could actually end up with three-way race in Arizona in the Senate race there in '24, which could actually tip it to a Republican. So it'll be very interesting in 2024.

- Well, then that makes me think maybe this is a step towards the Republican Party. I'm curious to think about that, because I saw Mitt Romney jump out immediately and tweet Kyrsten Sinema as a tremendous force in the Senate, and the country is better for it. Might she just keep going in that direction? Could Joe Manchin follow?

RICK NEWMAN: Oh, the Republicans would love to get her, without a doubt. I mean, if you think about it. So with Sinema as a Democrat, the Democratic Party has a now-- now that we're all settled with the midterms and what the next Congress is going to be-- they would have a 51-49 edge. And that's important for a lot of technical reasons in the Senate. So they gained a seat in the midterms.

But let's say she flipped and went over to Republicans. It would be 50-50. And by the way, Republicans have also invited Joe Manchin, the centrist Senator from West Virginia, to join the Republicans, in which case it would go 51-49 to the Republicans.

But as I said before, Dave, Sinema said she's not becoming a Republican. That's not her interest. And I think honestly, if her problem is she doesn't want to be associated with extremists in the Democratic party, you've got plenty of extremists in the Republican Party, too, on the other side that she may not want to be associated with.

So, you know, she's been an enigmatic Senator ever since she's been in Congress, and she's continuing to go her own way. So they're just going to have to deal with her.

- So President Biden dealing with Senator Sinema leaving the Democratic Party, also dealing with persistently high inflation, the thought that the economy is going to continue to soften, some risk there of recession-- lots of debate about whether or not we still have a chance of a soft landing. We just heard from Scott Sperling, our markets guest at the top, saying that we tend not to have soft landings, is there still a chance, though?

RICK NEWMAN: Yeah, I think there is actually a chance of a soft landing. And I'm just looking in at the small picture, not the big picture. But within the last couple of weeks the economic data has been pretty encouraging for President Biden.

So look, we all know that energy-- gasoline prices first-- way down from the $5 peak in June. They're now around $3.30. I mean, that's a remarkable fall. And some of that is going to show up in the inflation report for November that comes out next week, one day before the Fed announces what it's going to do on rates. But not all of that decline will show up in the November report, so that means some of it will carry forward into the December report.

Also, natural gas prices down from their peak over the summer. Rents are actually just now, within the last couple of months, starting to decline ever so slightly. So the inflation is going in the right direction for President Biden and for the Fed.

Now, the question is we don't know when inflation is going to-- where inflation is going to stop. We don't know how much softening there's going to be in the economy, and there's such a lag between the rate increases the Fed does today and its actual effect on the economy. I mean, it could be a six-month, 12 month lag.

So as our prior guest pointed out, almost every economic forecaster does think we're going to have some kind of recession in 2023. Will it be mild or worse than that? Who knows. But at the moment, things are actually going OK for Biden.

- Yeah, and he's got inflation 4% to 6% through the end of '23. Senior columnist Rick Newman, good to see you, man. Have a good weekend.

RICK NEWMAN: Bye, guys. You, too.