This week in Bidenomics: Inflation kills the Democrats’ momentum
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CPI print came in hotter
This week in Bidenomics: Inflation kills the Democrats’ momentum
President Biden and his fellow Democrats had the wind at their backs as summer ended. Gasoline prices were plunging, the job market remained strong and there was hope inflation might soon subside. Consumer confidence was ticking up, and with it, Biden’s approval rating.
That rally is over. For the last two months, inflation has proven to be more stubborn than anybody would like, leaving Biden stuck explaining declining living standards as voters head into the midterm elections.
Inflation peaked at 9% in June, as oil and gas prices spiked. Then energy prices fell, fueling hope that overall inflation would drop by similar margins.
It didn’t. Inflation for September came in at 8.2%, a huge disappointment to politicians, investors and consumers hoping inflation might be under 8% by now, or even under 7%. The Federal Reserve has been jacking up interest rates since March, to make borrowing more costly, bring down demand and get prices under control. So far, there’s nothing to show for it. Meanwhile, mortgage rates are soaring. The stock market is short-circuiting. The odds of the Fed causing a recession may now be 50-50 or worse.
Persistent inflation leaves Congressional Democrats running for reelection with a weak pitch to voters. Republicans, by contrast, can claim that two years of Democratic control have wrought the worst inflation since the end of Jimmy Carter’s presidency. Biden isn’t responsible for most of the price hikes, but that probably won’t matter to voters who are in a pretty foul mood and are usually inclined to blame the incumbents.
The drop in gas prices since June has correlated with a rise in Biden’s approval rating. Gas prices hit $5 per gallon in June but have since fallen back to around $3.90. Biden’s approval rating bottomed at 38% in July and has since popped up to around 43%. For Biden, so far, so good.
But gas prices hit a floor in mid September and don’t seem likely to fall much further, given that global oil markets remain tight. For Democrats to have a shot at keeping control of Congress in the midterms, Biden’s approval rating probably needs to be at or above 50%. Barring some extraordinary development, there’s no way he’s going to get close to 50% with inflation still stalking the economy.
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