Midterm elections may hinge on Trump’s incompetence

The Federal Reserve raised its benchmark interest rate by a quarter point Wednesday to a range of 3.75% to 4%, delivering an anti-inflation jolt to an economy already strained by a six-month war with Iran, record fuel costs and a national debt that has eclipsed $40 trillion.

The timing, seven weeks before the Nov. 3 midterm elections, complicates an already difficult environment for Republican candidates defending narrow majorities in Congress, as President Donald Trump insisted that the balloting is a referendum on his creeping tyranny.

The Fed’s unanimous decision marks its first rate increase since July 2023 and reflects a central bank determined to combat inflation that has remained stubbornly above its 2% target for more than five years.

The consumer price index rose 3.4% in August from a year earlier, with gasoline prices surging 27.4% over the same period.

“Inflation remains elevated,” the Federal Open Market Committee said in a statement, adding that the move “will support a timelier return to the Committee’s 2 percent goal.”

All three incumbent Republican congressmen in New Jersey face a strong chance that they will be defeated in November.

A war without end

The rate hike lands amid an illegal and unprovoked war with Iran that the White House said would last weeks but has now entered its seventh month.

The House voted 220-204 on Tuesday to pass a war powers resolution directing President Donald Trump to remove U.S. forces from hostilities — the third such rebuke from the chamber.

Seven Republicans joined Democrats in supporting the measure.

Rep. Zach Nunn of Iowa said in a statement that “with the negotiating window closed, sustained combat operations now require congressional authorization,” adding, “I will not support another open-ended war”.

The Congressional Budget Office reported Tuesday that the war has cost $38 billion and is rising by $3 billion per month.

Rep. Gregory Meeks, the ranking Democrat on the House Foreign Affairs Committee, cited “higher gas prices and mortgage rates, inflation, billions of dollars in government spending, and U.S. military casualties” as the conflict’s toll.

Nineteen U.S. service members have been killed and more than 750 wounded since strikes began Feb. 28.

Vice President JD Vance told reporters earlier this month that the conflict is “not a war” and declined to offer a timeline for its conclusion, saying, “When will the Iranians stop shooting at ships? I think the reality is I don’t know the answer to that question”.

Trump told reporters during a visit to Ireland on Sunday that he expects the war to end “right after the midterms,” adding that “gasoline’s going to drop like a rock”.

Pain at the pump

Drivers are already paying record prices for this time of year. The national average for regular gasoline stood at $4.22 per gallon this week, the highest ever recorded for September, while diesel averaged $5.94 and was approaching $6. In California, diesel prices were nearing $8 per gallon.

The increases trace directly to the conflict. Iranian disruptions to shipping in the Strait of Hormuz, combined with Ukrainian strikes on Russian refining capacity and Houthi attacks on Saudi infrastructure, have pushed Brent crude above $100 per barrel.

An analysis by Brown University’s Watson Institute found that U.S. consumers are bearing an additional $100 billion in energy costs — roughly $1 million every two minutes — since the war began, amounting to about $760 per household.

Diesel’s surge is particularly concerning because it powers trucking, farming and deliveries, meaning higher costs will filter into the price of goods across the economy.

$40 trillion and climbing

The national debt surpassed $40 trillion for the first time last month, according to Treasury Department data, doubling since 2017. The debt has grown by approximately $11.6 trillion during Trump’s two terms, driven by tax cuts, pandemic borrowing and rising interest costs.

The Fed’s rate hike makes that debt more expensive to service. As short-term Treasury bills mature and are refinanced at higher rates, interest payments — already the third-largest federal expense — will consume a growing share of the budget.

The nonpartisan Committee for a Responsible Federal Budget estimated Trump’s first-term tax cuts added $8.4 trillion to the debt, while his second-term tax and immigration law added another $4.7 trillion, according to the Congressional Budget Office.

Midterm stakes

The confluence of war, inflation and debt has dragged down Trump’s approval ratings and endangered Republican prospects in November, when control of both chambers of Congress is at stake.

Delaware held the final state primary Tuesday, with Sen. Chris Coons easily winning the Democratic nomination as he seeks reelection. The general election is Nov. 3.

Fed Chair Kevin Warsh, who took office in May, has emphasized his commitment to price stability even as Trump has repeatedly called for lower rates to stimulate growth. The central bank’s independence will face further scrutiny as the election approaches.

The Fed’s next policy meeting is scheduled for November, after voters have cast their ballots.