Sen. Rand Paul on US Debt, ICE, and the Future of the DHS

Republican Senator Rand Paul of Kentucky speaks with Bloomberg's Joe Mathieu from the Capitol about the costs of war, ICE masking in cities, and the future of the Department of Homeland Security. President Donald Trump’s efforts to stabilize prices at the pump underscore the unique role oil and gasoline play in the economy — and American voters’ perceptions of it.

Trump’s war with Iran has fueled one of the biggest spikes in gasoline prices in recent decades, lifting pump prices to the highest levels he’s seen as president. The surge threatens to ripple through the economy, from factories and farms all the way to the ballot box.

The president seemed to try to appease markets Monday by signaling a quick end to what he called the “excursion” in Iran, a distinct pivot from recent days in which administration officials indicated the conflict was just beginning.

He said he’s determined to keep “energy and oil flowing to the world,” promising to lift oil sanctions, dispatch the US Navy to escort tankers through the Strait of Hormuz and hit Iran with “harder” bombing if it disrupted crude flows. Although Trump has spent months gushing about low gasoline prices, the war has erased the president’s success on the issue. Prices at the pump have climbed from $2.98 a gallon before the US and Israel began strikes on Iran to $3.54, according to the latest figures from AAA. Global oil prices are up more than 20%.

That risks compounding persistent voter anxieties about affordability ahead of the November midterm elections that will determine whether Republicans keep control of Congress.

Read More: Inflation Is Down, But Americans Feel an Affordability Squeeze

Any prolonged spike that pushes up shipping costs, airfares and fertilizer prices threatens not only to stoke anger among voters but also wipe out the boost Trump was counting on from larger tax refunds and business tax breaks in his signature second term legislation.

In the short term, tax refunds supercharged by the law could help offset higher gasoline costs. However, Bloomberg Economics estimates if oil endures at $83 per barrel for much of this year, that would be enough to erase the average American household’s gains from the tax refunds. Global benchmark Brent crude was fluctuating around $89 on Tuesday.

‘Small Price to Pay’

Trump and top administration officials have maintained that higher prices are temporary and will ebb once the war subsides, even as they search for short-term fixes to blunt climbing costs and the president vows to waive oil-related sanctions on some countries.

“In the long run oil supplies will be dramatically more secure,” Trump predicted Monday, as he threatened “harder” attacks on electricity production and other important targets if Iran attempts to stop the global oil supply. Indeed, Trump’s comments seemed to at least partially soothe markets, with oil futures whipsawing below $90 a barrel on Monday after surging above $119 over the weekend.  The president also has downplayed the problem, saying Monday that overall, prices have climbed less than he expected. And he’s appealed to Americans for patience, saying in a social media post on Sunday that the short-term increase is “a very small price to pay” for safety and peace.

Still, it’s a dangerous gamble. The cost of gasoline plays an outsize role in consumer sentiment and inflation expectations because it’s a common and very visible expense, with prices posted at every filling station and many motorists filling up weekly.

Some Republicans are sounding the alarm. Senator Rand Paul told Fox Business on Tuesday that “high oil prices will be a problem” for fellow Republicans in the midterms, and if they remain elevated due to the war, then “I think you’re going to see a disastrous election.”

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