Declining gas prices may not bolster support for Democrats ahead of midterms

Yahoo Finance columnist Rick Newman explains why cheaper prices at the pump doesn't necessarily spell success for the Democratic Party in the midterm elections.

Video transcript

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- There is one very prominent deflationary story in this economy. It's gas prices, falling for 53 straight days, now averaging $4.11 a gallon nationally. That's down $0.69 in a month. But on the flip side of the coin, it's still up $0.92 from this time last year.

Yahoo Finance senior columnist Rick Newman says no matter how you see it, not enough to save Democrats. Good to see you, Rick. Why do you say that?

RICK NEWMAN: Democrats are getting their hopes up. Things are suddenly going their way. They're getting a break on gas prices as you mentioned, I think we're going to see lower inflation numbers for the next few months at least.

But this probably will not translate into electoral success for Democrats in November. And this matters, of course, for all of our viewers because of what might-- whether the Biden agenda might go anywhere during the last two years of his presidency, whether he might get some of those corporate tax hikes he wants, for example. And it just looks like it's not going to happen.

And there just are technical factors working against the Democrats retaining control of Congress, especially the House. The odds of Democrats losing the House are probably around 80%. And even if gas prices come way down, and this really is not a problem for people anymore, a lot of Democrats are retiring more than Republicans.

And the way the electoral map just shakes out means Democrats are almost certainly going to lose the House in November. So things can still be going their way, and President Biden's approval rating might still improve. But I don't think it's going to change the outcome of the midterms.

- Well, Rick, is there anything that the Democrats can do, I guess, between now and then? We still have three months, and you're saying that maybe Biden's approval rating could increase just a bit. But as a party, though, is there anything that they can do to, I guess, improve the outlook for their party in just a couple of months?

RICK NEWMAN: Well, let's talk about the Senate for a minute. They might have-- there might be 50-50 odds, or maybe a little bit better than that, that Democrats do retain control of the Senate. And that's not nothing. That's important because of any cabinet nominees or ambassadorial nominees that have to be approved by the Senate.

That's important to Biden, even if he does not have control of the House, just to be able to get his appointees into place. And if Democrats can do anything, yes, they need to be talking up the things that are working-- now working in the economy. But probably, it would be get out the vote type stuff. You know, obviously, turnout in midterm elections is lower than it is in presidential elections.

Now, there's some speculation that we might see higher turnout than normal because of emotional issues, such as the Supreme Court overturning Roe v Wade, the abortion protections, some other things the Supreme Court did, basically lurching to the right. And I guess it's possible. I mean, look what happened in Kansas, which is a ruby red state that actually voted down that abortion ban, that amendment to the state constitution. So that suggests the public is on Democrats' side on some of these issues.

But they really would need massively high turnout to change the outlook for keeping control of the House. And it just seems very unlikely to happen. I'm not-- I don't mean to spell doom for Democrats. But this is-- people following the markets need to be planning for who's going to be controlling the political agenda next year. And we're probably going to have divided government.

- Yeah, it looks like Democrats are in pretty good shape in the Senate. Getting back to the economy, maybe the gas isn't a huge win for Democrats. But does at least the recessionary talking point for Republicans now appear to be off the table?

RICK NEWMAN: Yeah, there, I think you can look at this two ways. So as we've been discussing on our air all day long since the job report came out at 8:30 this morning, we are not in a recession. You cannot be in a recession if you're creating 528,000 jobs per month and the unemployment rate is at 3.5%. So that's the technical argument.

The problem for-- Democrats still have a big problem, though, which is that confidence is terrible. And confidence is not down because the people sit around when they get home from work at the dinner table, looking at the latest economic reports. That's not what normal people do. People still see food prices up.

As you just mentioned Dave, gas prices down from where they were six weeks ago, but still much higher than they were a year ago. People know that. You can't fool people into thinking gas prices are lower than they are. So the big thing that Democrats really need is, inflation needs to come way down.

You know, here's a data point. I mean, before COVID hit, the inflation rate was 2.5%. That's basically no inflation. And we now know that we've regained the jobs lost during the pandemic turndown, and now we have more jobs than ever.

But inflation is 9.1%, so we are not better off than we were before. A lot of people will say it doesn't matter how many jobs we have, 9.1% inflation is way too high, and we're not better off. So that is the demon that Democrats are battling.

- And the most recent polls certainly reflecting that. Rick Newman, have a great weekend. Thanks so much.

RICK NEWMAN: Thank you, guys.