The Pocketbook Midterms
The high cost of living, reflected in prices at the gas station and grocery store, continues to be the dominant issue for voters. The inflation situation is even worse when it comes to diesel fuel.
Most consumers don’t buy diesel, but truckers and railroads do. Since almost all goods move by truck or rail, high diesel costs are passed through to the price of almost everything.
The employment outlook is another concern for voters. Unemployment is not rising sharply, but new job creation has been weak. This burden falls mostly on younger workers just entering the workforce.
The combination of fewer new jobs, high housing prices and student loan debt helps explain why younger voters are gravitating to communist political movements like the Democratic Socialists of America (DSA). Whether DSA candidates can appeal to the wider electorate is an open question.
The wars in Ukraine and Iran are both unpopular, but they are not a driving force behind voter preferences. It’s true that the war in Iran is highly unpopular when you poll that issue separately. But it does not tend to drive voter decisions. Those decisions are driven by inflation and the job situation.
Trump’s low job approval rating on specific policy issues will also not be decisive in the outcome of the midterm elections. Trump dominates the news cycle, but he is not on the ballot. Trump will be a lame duck the day after the midterms, albeit a newsworthy lame duck.
Instead, voters will focus on inflation and jobs, consider the candidates on the ballot, including the benefits of incumbency, and make decisions based on party loyalty and who will do a better job.
It’s true that Republicans have not managed inflation well, but voters will ask if Democrats would do better, especially after the worst inflation in four decades, in 2022, when Democrats were in charge.
With that as background, we continue to rate the Senate as a hold for the Republicans. The Senate is currently under Republican control, with 53 Republicans, 45 Democrats and two independents who caucus with the Democrats. There are 35 seats up for election in 2026.
If Democrats hold all 13 seats they currently control that are up for election and flip four Republican seats to the Democrat side, then Democrats will control the Senate with a 51-seat caucus as of January 2027.
Democrats are eyeing Republican-held seats in North Carolina and Alaska.
But hopes of picking up Republican seats in Texas, Maine, Kansas and Iowa are mostly wishful thinking. Those states lean Republican except for Maine, where Republican incumbent Susan Collins has repeatedly survived difficult reelection campaigns and is now seeking a sixth term.
At the same time, Democrats are in danger of losing two of their own existing seats in Michigan and New Hampshire.
Their Michigan candidate, Abdul El-Sayed, is a progressive whose views on Israel have generated considerable controversy. And the Republican candidate in New Hampshire is former Sen. John Sununu, part of the Sununu family dynasty and a well-known figure in New Hampshire politics.
If we assume the Democrats get two pickups, North Carolina and Alaska, and lose one existing seat, New Hampshire, the new Senate will still be controlled by Republicans with a 52–48 majority. Repeated claims of a Democrat path to control are mostly the result of media propaganda and biased polling.
The House of Representatives is far more difficult to forecast, although we will be offering a final forecast in late October ahead of the election. There are 435 voting seats in the House. All 435 are up for election in 2026.
The House is currently controlled by Republicans. As of Sept. 24, Republicans hold 218 seats, Democrats hold 214, there is one independent and there are two vacancies. When all 435 seats are filled, control requires 218 seats.
If the Democrats can hold their existing seats and gain enough Republican-held or vacant seats, they would control the House in January. Based on historic patterns, the Democrats hope to do much better than that and perhaps gain more than 20 seats, putting them firmly in control of the House.
Due to more scientific forms of gerrymandering and courts’ unwillingness to interfere with that process, there are fewer seats that are competitive than in times past. Only a relatively small number of seats are considered genuinely in play in this election cycle.
Many of the most competitive seats are currently held by Republicans. Those Republican seats are the Democrats’ prime targets as they try to take control of the House.
At the same time, most vulnerable Republican incumbents are running in districts Trump carried in 2024. Some of those margins were thin, but they still offer Republicans a path to retaining control.
On form, the Democrats could take control of the House by perhaps 15 seats. That’s a narrower margin than many forecasts but still enough to gain control. But that is by no means a foregone conclusion.
Steps to lower diesel and gasoline prices, combined with lower prices for drugs and health care, could go a long way toward alleviating voter concerns and allow Republicans to hold onto the House by just a few votes.
The greatest factor in Republicans’ favor might not be that they’re doing a great job, but that voters think Democrats would do even worse.
That’s why you’ll be hearing a lot about DSA and communists taking over between now and Election Day.
All the best,
Jim Rickards
Editor, Strategic Intelligence