Economic Pressures and Debt Burden Are on the Agenda Before the Midterm Elections in the USA

Midterm elections that will directly determine the balance in Congress will be held on November 3. The latest macroeconomic data released before the elections show that households face simultaneous pressure on both basic expenditure items and long-term borrowing costs.

Despite the administration's steps to reduce inflation and control price increases, the rigidity in the markets and the climb in financial indicators constitute the main axis of the election process.

The fact that diesel prices, which were below 4 dollars at the beginning of the Russia-Ukraine War, exceeded 6 dollars across the country and gasoline remains above 4 dollars, pushes up costs in a wide range of areas, from the supply chain to market shelves.

While mortgage interest rates approaching 7 percent stand out as a major obstacle to home financing, the rise in bond interest increases the pressure on financial markets.

Upward pressure on energy costs continues

The first and most visible indicator that draws attention in the economy is the extraordinary price increases on the fuel front. The ongoing tension in the Middle East and fluctuations in oil prices keep concerns about energy costs alive in the USA.

According to American Automobile Association (AAA) data, the average price of gasoline across the country increased to $4.32 per gallon as of September 14. It is noteworthy that gasoline prices, which were an average of 3.18 dollars per gallon in the same period last year, increased by 35.9 percent on an annual basis.

Historical peaks are also seen in diesel, which is the main fuel of the transportation, logistics and agricultural sectors. According to AAA data, the average gallon price of diesel in the USA reached a record level of $6.23 on September 14.

It is calculated that the price of diesel, which was an average of $3.69 per gallon in the same period last year, increased by 68.7 percent on an annual basis. The average price of diesel exceeded $8 in the state of California.

The rise in fuel prices not only increases the costs of transportation companies, but also increases costs at every stage in the supply chain, from field to factory, from warehouses to market shelves, and is reflected in consumer prices.

Inflation remains above target

While fuel expenses are among the first items that shake the budget of Americans, they increase the risks of inflation. The latest data released in the USA show that inflation continues to remain above the target of the US Federal Reserve (Fed).

The Consumer Price Index (CPI) in the country increased by 0.4 percent on a monthly basis and 3.4 percent on an annual basis in August. Core inflation, which does not include variable energy and food prices, was above expectations with 0.3 percent monthly.

While gasoline prices increased by 3.9 percent on a monthly basis in August, they accounted for more than one-third of the monthly increase in inflation. Gasoline prices increased by 27.4 percent on an annual basis.

The energy index increased by 2.1 percent monthly and 16.3 percent annually in August. Producer inflation in the USA also accelerated in August. The Producer Price Index (PPI) in the country increased by 0.4 percent on a monthly basis in August, within expectations, and by 5.4 percent on an annual basis, above expectations.

Data indicating that the labor market in the country is strong and inflation is above the target strengthened the expectations for an interest rate increase.

According to CME Group data, as of September 14, markets priced the probability of the Fed to increase the policy rate by 25 basis points at its meeting on September 15-16 as over 90 percent.

The 7 percent mortgage threshold in the housing sector has been approached

Another critical pressure element in the economy is experienced directly in the housing and mortgage markets. According to Mortgage Bankers Association (MBA) data, the average interest rate for a 30-year mortgage in the USA increased to 6.85 percent in the week ending September 4, reaching its highest level since June 2025. Refinancing applications fell to the lowest level since May 2025.

In his assessment of the issue, MBA Vice President Joel Kan stated that mortgage interest rates have increased as investor concerns about inflation and the federal budget deficit continue.

Mortgage interest rates approaching 7 percent cause young families and middle-income groups who plan to own a home for the first time to completely withdraw from the market.

Existing homeowners avoid moving and selling their properties in order not to lose their old low-interest loans.

While the high financing costs for house purchases shift the demand to rental houses, rent increases continue unabated.

This situation, which occurs on both the sale and rental side, brings housing costs to a level that is difficult for households to cover.

The bond market has reached peaks in recent years

On the bond markets front, the level of borrowing costs is also noteworthy. Due to the intense interest rate pressure and sales wave in the markets, US long-term bond interest rates are testing their highest levels in recent years, despite the efforts of the economic management.

The US 10-year Treasury bond interest hit its highest level since July 2007 at 5.03 percent today.

The US Treasury Department announced last month that it would at least double the size of repurchase operations for long-term bonds in order to support market liquidity.

In the statement, it was noted that the current maximum amount of 2 billion dollars per operation would be increased to at least 4 billion dollars.

The efforts of the US Treasury, which started to increase the limit in repurchase operations last week, were not enough to curb the rise in long-term bond interest rates.

Debt increased by nearly $4 trillion during Trump's second term

As of August 18, the total public debt of the USA exceeded the level of 40 trillion dollars for the first time in history.

On the date in question, the amount of debt held by the public was over 32 trillion 265 billion dollars, while intra-governmental debts reached 7 trillion 781 billion dollars.

In January 2025, when US President Donald Trump took office for the second time, the US public debt was at the level of 36.2 trillion dollars.

The fact that the Fed kept interest rates high as part of the fight against inflation increased the interest bill paid by the Treasury on the bonds it issued.

While large-scale tax cuts suppressed public revenues, the continuity in defense and social program expenditures made structural budget deficits permanent.

According to the Treasury Department's latest budget data, in the 11 months of the 2026 fiscal year, which started in October 2025, the net interest expense of the country's public debt also exceeded $1 trillion.

Trump's $5,000 election promise

As we enter the last 50 days of the election calendar, this emerging economic picture directly affects the political equation on the field.

While the opposition wing brings the current situation to the election arenas as a direct result of economic policies, the management wing emphasizes the impact of the global conjuncture and external shocks.

US President Trump states that if the Republicans win in the elections in the House of Representatives and the Senate, every adult will be paid 5 thousand dollars.

While the promise in question provokes criticism in the liberal media, it is evaluated positively in the conservative media.

Liberal media channels criticizing Trump's policies state that, if implemented, such a step would cause an additional deficit of more than 1.2 trillion dollars in the budget, which would harm the economy.

Some analysts state that such an economic promise would amount to "electoral bribery" and that it is legally controversial.