How Much Will the Economy Move Between Now and Election Day?
We are just about at the mid-year point of what has been a turbulent year for the economy. As I have written about recently, the stock market continues to hit all-time highs, while Americans are feeling as pessimistic about the economy and their own personal finances as they have at virtually any time in history (or at least over the last 60 years).
Gas prices rose this spring over 60% due to the Iran War, and although the average price per gallon is down about 60 cents in the past month thanks to rumors of a ceasefire (and, indeed, the subsequent signing of a ceasefire deal this past Thursday), Americans are fed up with prices at the pump. Gas prices are not only a highly visible marker of how the economy directly impacts people, but the actual mathematical impact of high prices ripples through to many different areas of family budgets because it raises the costs on all manner of other goods and services that have an oil component to them (which is virtually everything).
This is an important election year. Voters are complex. They care about many different things with varying levels of intensity. To some, immigration is the most important topic. To others, it is the environment, or healthcare, or any one of dozens of other topics. The American electorate is diverse and complicated.
But there is one issue that overarches most everything else. As James Carville famously said in 1992, “It’s the economy, stupid.” The economy consistently polls as the top issue on Americans’ minds. And even voters who may care about something such as, say, public education, often care about the economy at least on par if not still more so than any other topic. So when looking at electoral prospects, it’s pretty important to bore down on voters’ views on the economy. And that’s bad news right now for President Trump and his fellow Republicans.
Headwinds and Downdrafts
Putting a pin in the conversation about how Americans’ views on the economy may impact the 2026 mid-term elections, it’s worth a primer on mid-term elections in general. The party of the president in power almost always does poorly in the mid-terms, sometimes staggeringly so. Since World War II, the president’s party has lost an average of roughly 25 seats in the U.S. House of Representatives during midterm elections. The Senate often follows a similar pattern, though the results can vary depending on which seats happen to be up for election in a given cycle and how Democratic or Republican those particular states sway.
Some of the most notable examples of mid-term routes have become political landmarks and have represented significant inflection points for the country. In 1994 during the presidency of Bill Clinton, Republicans led by Newt Gingrich and his “Contract with America” gained 54 House seats and captured control of Congress for the first time in four decades. In 2010, amid voter frustration over the economy and backlash to the Affordable Care Act, Republicans picked up 63 House seats during Barack Obama’s first term, one of the largest midterm swings in modern history. More recently, Democrats gained 41 House seats in 2018 during Donald Trump’s first presidency. Given how many seats in both houses of Congress are relatively safe (i.e., it’s hard for a Democrat to win in extremely conservative districts, and vice versa), swings of 40 or more seats in one election are pretty significant.
There have been exceptions, but they are rare. Following the September 11th terrorist attacks, Republicans actually gained seats in the 2002 midterms as President George W. Bush enjoyed exceptionally high approval ratings, albeit temporarily so. In 1998, Democrats actually gained seats during Clinton’s second term as voters reacted negatively to impeachment proceedings, which they perceived to be ineptly led and overreaching in scope. Even these exceptions, however, reinforce the broader rule: midterm elections are typically a referendum on the party that occupies the White House. In the 1998 midterms, voters put their weight behind Clinton; in 2002, they did so for Bush. But more often than not, voters punish the party of the president, regardless of which party he happens to represent.
Why this pattern? It’s largely just because of how the political pendulum swings. Whichever party wins the presidency enters that first two-year period with high expectations, which are often hard to meet. Voters are more inclined to disappointment than appreciation after the emotional high of a presidential victory. Moreover, voters may just get tired of that party’s leadership after two years, plus there is the opposition party bombarding the president and their party with a negative onslaught of relentless attacks, which, fair or unfair, impact voter opinions and lead to negative sentiments. The opposition is often more motivated than the party-in-power, which not only leads to more relentless attacks, but more motivated voters come November of the mid-term cycle. Some of the president’s voters may become complacent and just stay home, dampening electoral support for his allies.
I think there is also a case to be made that voters just tend to like divided government. Americans are naturally skeptical of too much centralized power, and so they use their votes to put more power in the opposite party of the president if things get too out of balance.
Looking Ahead to November 2026
That historical backdrop creates a challenging environment for Republicans heading into 2026. You could almost strip out any policy decisions, any ebbs and flows in the economic numbers, and ignore worldwide events that may or may not occur this year, and Republicans are in trouble simply because they face the same political gravity that has pulled down presidents of both parties for decades. For that reason alone, it sets up as a bad year for Republicans.
And yet, 2026 could be potentially really bad for Republicans, and that’s because of the voters’ aforementioned views on the economy (as well as some other key issues, which I’ll touch on later). As noted above, the University of Michigan Consumer Sentiment reading hit an all-time low in May (it improved modestly in June, which is largely attributable to a modest drop in gas prices).
Polling numbers are tough for Trump on the economy right now, particularly as this had previously been an area of strength for him. A PBS/NPR/Marist poll found just 33% of Americans approve of President Trump’s handling of the economy. Just 29% of Americans say the economy is good, per CBS polling. Even Fox News polling has Trump underwater on the economy, with just 31% of Americans approving his handling of the issue. According to the Fox News poll, 44% of Americans say they are falling behind financially, while just 12% say they are getting ahead.
It’s inflation (including gas prices), frustrations with the Iran War, and even anxieties about AI’s impact on the workforce that have Americans feeling anxious, and that is bad news for the people at the top.
So What?
Republicans hold a slim 220-215 majority in the U.S. House of Representatives, which means Democrats just need to flip three seats to take back control of the House. Various prediction models show Democrats picking up anywhere from two to 25 seats, depending on how strongly historical variables are factored in. On generic ballots, Democrats are currently outpacing Republicans by about 7%.
Real elections, of course, take place between actual candidates running on a mix of local and national issues, so take the generic ballot statistic with a grain of sale. Candidate quality race-by-race matters a lot, too. But it’s safe to say Democrats should be favored to at least gain ground, however, and probably take back control of the House of Representatives.
On the Senate side, Republicans currently have a 53-45 majority, with two Independents who caucus with the Democrats. Control of the Senate is expected to narrowly stay with Republicans, although anything can happen (the Democrats’ path to regain control runs straight through Maine, by the way, with the insurgent and complicated Graham Platner taking on long-time incumbent Susan Collins).
Needless to say, control of Congress matters for a whole bunch of reasons, including how easy or difficult it becomes for the president to press through his agenda. A House or Senate (or both) in the hands of the Democrats not only provides a stronger check and balance on President Trump, but it could open up the possibility of investigations and more, including even impeachment hearings. That’s all beyond the scope of the article today, but you get a sense of the gravity on why all of this matters.
What Might Happen
At the time of this writing, there just over four months until Election Day. If everyone knows the economy is the top issue, and the stakes are as high as they can get, it begs the question of what President Trump and his Republican allies might do (or even can do) to bolster the economy or at least make people feel less anxious about it in the next 135 days.
For starters, you can make a clear case that the signing of a temporary ceasefire to bring about the end of the Iran War was done in direct response to Americans’ disdain for this conflict and the impact on the price at the pump (not to mention the loss of American lives and resources…military, monetary, and otherwise). Things went very badly for President Trump in terms of his approval rating immediately when the Iran War began, and things got progressively worse. Ending the war is perhaps an attempt to stop the bleeding, politically speaking. The Iran War was popular with very few people.
Gas prices are the most obvious area for action, as they impact so much of what people are feeling and experiencing in the economy. Beyond ending the Iran War aside (or attempting to), other actions that could be done include opening up the country’s strategic reserves, although that takes some time and the impacts are not necessarily immediate, or increasing oil production, but, again, that takes some time.
Interest rates would be another area to look at, which the president perhaps tried to do by choosing Kevin Warsh to lead the Fed. Unfortunately for President Trump, Warsh did not lead the Fed into an interest rate cut at his first meeting this past week, and instead the Fed seemed to signal that interest rate hikes may be necessary later this year in order to help quell inflation, which at 4.2% is now running at its hottest rate since April 2023.
A third thing Trump could do, which would require a pretty hard pivot from his previous stances, is to soften his language and implementation strategies on tariffs. Not only have tariffs actually increased the cost of some goods and services, they are wildly unpopular with American businesses and consumers, so softening his position may at least signal to voters there is a better path ahead on this front.
What Is Likely to Happen
There is a difference between taking steps to actually improve the economy (which is difficult to do in such a short period of time), and taking steps to improve voters’ perception of the economy. On the latter point, simply avoiding self-inflicted challenges like major trade disputes, a prolonged negotiation on Iran, sudden (and erratic) policy reversals, and avoiding political fights over shutdowns and the debt ceiling would probably go a long way. But some of the Trump appeal (to his base, at least) is that he doesn’t shy away from these things; it’s part of his core appeal.
Other policy moves (including some of what is noted above), don’t generally come together in mere months. Tax policy, for example, or infrastructure investments that would have positive economic ripples through the economy, sometimes take a president’s entire term to formulate, let alone implement.
What much of this will come down to, therefore, is public relations rather than true economic policy moves. Can Trump spin this economic ball in enough positive ways that voters don’t punish his party come November. The problem with spin on the economy, however, is that millions of Americans are actually living it day-to-day in ways that President Trump and many of his allies simply do not see or relate to.
One possible advantage Trump and the Republicans have is that fewer and fewer districts are true toss-ups. Even as compared to the examples of 1994 and 2010 noted at the outset, districts have become more starkly partisan, and therefore less likely to flip in a general election. A Blue Wave of 50 seats thirty years ago may be a more muted shift of, say, 20 seats today because fewer districts are actually prone to swing in any given cycle. If anything, some districts today will swing from a moderate Republican to a more conservative one in the primary, who then wins in November, or a more moderate Democrat getting taken out by a more progressive one in the primary.
But time will tell. The political gravity that puts Republicans at a steep disadvantage this year plus the economic woes felt by voters set up pretty squarely for some kind of Blue Wave this November, for sure. That said, elections are not won in June, and the candidates themselves and local conditions in each respective race matter too. So there is a long way to go between now and November.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.