The perfect storm with the economy and what it means for Democrats

With just five weeks until the midterm elections, the country is experiencing a perfect storm within the economy – involving surging inflation, rising interest rates, and a sinking stock market – that puts Democrats in an increasingly perilous political position.

In response to August's disappointing inflation report – which found that food, housing, and healthcare costs continue to rise last month – the Federal Reserve announced last week that it would hike interest rates by an additional .75 percent in an effort to cool off the economy, heightening the possibility of a recession and triggering fears of an economic downturn.

This sent the stock market – which Americans reasonably use to gauge the economy's health – falling to its lowest point since President Biden took office. The market is now down more than 20 percent for the year, and more than $9 trillion in wealth from U.S. households has been wiped out.

As a result, Gallup's Economic Confidence Index – which measures how well or poorly Americans rate current economic conditions – just hit one of its lowest points in 30 years. Eight-in-ten Americans rate the economy as "fair" or "poor" and more than two-thirds say the economy is getting worse.

Given the palpable strain of rising prices on all Americans and the visible deterioration of the stock market – and with it, the diminishment of Americans' retirement accounts and savings – it is becoming increasingly likely that voters' anxieties about the economy will result in a referendum on Democratic leadership in November.

For their part, Republicans are ramping up efforts to tie the worsening economy to Democratic policies. By refocusing the nation's attention on economic issues like inflation and the stock market in the final stretch of the campaign – and undercutting Democrats' attempts to elevate societal issues like abortion rights and democratic values – the GOP can blunt Democrats' post-Roe v. Wade political momentum.

This perfect storm is already producing an uptick in support for Republicans nationally. The GOP now leads Democrats in the generic ballot by 5-points, 51 percent to 46 percent, according to a new ABC/Washington Post poll.

The economy – and inflation in particular – is still by far the country's top priority for the upcoming midterm election. In that same vein, a recent New York Times/Siena poll found that a plurality (49 percent) of voters prioritize "economic issues such as jobs, taxes or the cost of living" compared with 31 percent who saw "societal issues such as abortion, guns or democracy" as more important.

Troublingly for Democrats, a majority (52 percent) of voters agree with Republicans on the economy, versus 38 percent who said they agreed with Democrats – a 14-point advantage for the GOP. Republicans also hold 19-point advantage over Democrats in terms of trust to handle inflation specifically, per the latest ABC News/Washington Post poll.

Regardless of how blameworthy we find President Biden and Democrats for this unrelenting inflation – which has been fueled by a combination of the Covid-19 pandemic, the war in Ukraine, and the multi-trillion-dollar pandemic relief packages passed under the last two administrations – their inability to develop a reassuring message on the economy and rising prices is their most glaring political failure.

Americans' attitudes toward Democrats' signature piece of legislation – misnamed the "Inflation Reduction Act" – are evidence of that. Only one-in-four Americans thought the law would actually live up to its name and reduce inflation, according to Morning Consult polling. Remarkably, a plurality of (one-in-three) thought it would make inflation worse.

Rising prices are causing financial hardship for the majority of Americans (56 percent), per a recent Gallup survey. Yet, after last month's disappointing CPI report was made public – which caused the Dow Jones Industrial Average to fall more than 1,200 points – President Biden chose to tout Democrats' recent spending bill, which reinforced to struggling American families how out-of-touch the party is on this issue.

While it is unlikely that the economy will significantly improve before the November midterm elections, things could take a turn for the worse.

The release of the Personal Consumption Expenditures Price Index (PCE) – the Fed's preferred inflation gauge – on Friday showed that inflation rose even more than anticipated in August, despite the Fed's attempts to slow the economy with interest rate hikes. This could prompt the Fed to impose an additional interest rate hike, which will again send the markets falling.

Another ominous development for Democrats is the recent uptick in gas prices, as the party's summer polling gains were directly correlated with the fall in gas prices from record highs.

Prices at the pump hit a low of $3.67 a gallon in mid-September and have since ticked up to a national average of $3.74. In that same period, President Biden's approval rating dropped five points, according to POLITICO/Morning Consult polling.

Over the summer, Democrats enjoyed a brief period where the national issues agenda was favorable to their party – gas prices were on the decline, there was cautious optimism that inflation had peaked, abortion rights were at the core of the political conversation, and the national media was focused on the investigations into Donald Trump.

However, the political winds are no longer blowing in their favor, and the country's metastasizing economic woes could very-well produce an unanticipatedly high number of Republican seat gains in the House and cost Democrats control of the Senate.

Douglas Schoen is a political consultant.