US Economy Strains Under Inflation, Debt as Midterms Loom

(MENAFN) Soaring energy costs, surging housing expenses and stubbornly high interest rates are squeezing American households just weeks before pivotal midterm elections that will determine control of Congress.

The Nov. 3 vote is unfolding against a backdrop of mounting financial pressure, with economic anxiety poised to shape how voters cast their ballots.

Fuel prices stand out as the clearest signal of economic strain. Volatility in Middle East oil markets and geopolitical tensions have pushed energy costs sharply higher. Gasoline averaged $4.32 a gallon nationwide as of Sept. 14 — a 35.9% jump from $3.18 the previous year, according to the American Automobile Association (AAA).

Diesel fuel hit a record $6.23 a gallon, a 68.7% year-over-year spike, with prices topping $8 a gallon in California. Diesel, essential to trucking, shipping and farming, sold for under $4 a gallon before Russia's invasion of Ukraine.

Inflation data reflects the squeeze: the consumer price index climbed 0.4% in August and 3.4% year-over-year, driven largely by fuel costs, while core inflation — which strips out volatile food and energy prices — rose 0.3% for the month. Wholesale inflation ran even hotter, with the producer price index up 0.4% monthly and 5.4% annually, exceeding economists' forecasts.
Investors are bracing for another rate hike. According to CME Group, markets are pricing in a 25-basis-point increase from the Federal Reserve when its two-day policy meeting opens Tuesday.

Housing costs are compounding the pain. The average rate on a 30-year fixed mortgage climbed to 6.85% in early September — its highest level since June 2025 — according to the Mortgage Bankers Association (MBA). Refinancing activity sank to a 16-month low as a result.
With mortgage rates nearing 7%, first-time buyers have been largely priced out of the market, while current homeowners are clinging to their lower-rate loans rather than sell — a dynamic that continues to push rents higher nationwide.

Government finances are also under strain. The yield on the 10-year Treasury note surged to 5.03%, its highest point since July 2007, even after the Treasury Department doubled its bond buyback program from a $2 billion cap to at least $4 billion per operation in an effort to shore up market liquidity.

National debt crossed the $40 trillion mark for the first time on Aug. 18 — an increase of nearly $4 trillion since President Donald Trump returned to office in January 2025. Net interest payments on that debt topped $1 trillion in the first 11 months of the fiscal year alone, fueled by elevated rates and persistent deficits.

With roughly 50 days remaining before the midterms, Trump floated a proposal to pay every American adult $5,000 if Republicans win control of both the House and Senate. The pledge drew enthusiastic support from conservative backers but was sharply criticized by liberal-leaning outlets. Financial analysts warned the estimated $1.2 trillion plan would balloon the federal deficit and could face significant legal challenges, characterizing it as an effort to effectively purchase votes.

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