Fuel for Republicans?
Republicans could get a boost heading into the midterms from gasoline prices. Prices have fallen more than 35 cents from their $3 a gallon peak in early August and could fall another 35 cents in the weeks ahead because of the recent plunge in oil prices.
High gasoline prices have been a key factor behind the low approval ratings voters give President Bush and the Republican Congress on the economy. Democrats have also used high oil prices to paint the Republicans as the friends of Big Oil.
The price of gasoline is “one leg of a three-legged stool that is upside down and jabbing Republicans in the butt,†says Glen Bolger, a partner at Republican polling firm Public Opinion Strategies. The other two are health care costs and stagnant wages. The drop in gas prices is “certainly happening at the right time. There’s 56 days left [before the election]. If it continues to drop, that can only redound to our favor.â€
Administration officials have already started touting the turnaround. Edward Lazear, chairman of Bush’s Council of Economic Advisers, said in a speech Tuesday that wages, unadjusted for inflation, have started to pickup recently in a lagged response to big gains in worker output per hour (productivity). But workers haven’t enjoyed the benefits, he said, because “recent large and unanticipated increases in energy prices have consumed much of this strong nominal wage growth.†Then he noted: “With recent declines in gasoline prices, however, there is the prospect of substantial real wage growth in the rest of 2006.â€
Inflation data aren’t getting the attention now that jobs stats did in 2004. Nonetheless, the GOP could benefit from fortuitous timing on inflation data. The bulk of the recent decline in gasoline prices will show up in the September inflation report. In the same month, the 12-month inflation rate will no longer contain the huge increase in gasoline prices that followed Hurricane Katrina in September 2005. Based on some calculations from Goldman Sachs, that could show the inflation rate plummeting to 2.4%, the lowest in over two years, from 4.3% as recently as June. That report is to be released on Oct. 18, three weeks before the election. A few months after the election, the inflation rate will probably jump back up, because it will no longer be held down by a big drop in gasoline prices in November, 2005.
Still, Democrats maintain the decline will be too little, too late to make a difference. Geoffrey Garin, president of Hart Research Associates, notes that prices have moved sharply up and down for the last year without dislodging gasoline prices as an issue from voters’ minds. “The public’s been pretty badly scarred over the course of the last year and it will take longer than the two months left in this election cycle for the scars to go away.†— Greg Ip
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