For many voters, the economy is key in choosing their president, but that enthusiasm also makes it an attractive target for distortion, misinformation, and oversimplification.
According to an AP-NORC poll conducted in September, nearly eight in 10 American voters say the economy is one of the most important issues in the upcoming presidential election. Sixty-six percent of voters say the economy is in very or somewhat bad shape, but six in 10 also say their personal finances are in good shape.
Millions of people have already voted through early voting and mail-in voting. However, those who are still undecided between the two main candidates, Democrat Kamala Harris and Republican Donald Trump, have until November 5 to review each candidate’s opinion on the state of the economy and related issues. To understand its track record, we have to jump through myths and hyperbole.
What is the state of inflation in the United States?
The most recent inflation cycle peaked at 9.1% in June 2022. Inflation has fallen significantly since then, with the Consumer Price Index, a measure of inflation, coming in at a more manageable 2.4% in September. Meanwhile, wage growth has outpaced inflation for more than a year. In September, the Federal Reserve cut its key interest rate by 0.5 percentage point for the first time in four years as inflation moved closer to its 2% target.
But because of the prices of food and other essentials, these macro numbers don’t make sense to everyone.
People look at the literal price of a product and think it’s more expensive than they think it is, so they think it’s not doing very well,” said Elise Gould, senior economist at the left-leaning Economic Policy Institute. say. But these prices are actually lower as a share of wages than they were four years ago. ”
This does not mean that the experience of many voters struggling to afford basic necessities is not real. Housing costs are extremely high, putting pressure on people’s household budgets. The Fed’s interest rate policy affected credit card interest rates and therefore people’s ability to shop.
Gould said that despite the positive news of slowing inflation, the lack of long-term wage increases prior to the latest hike is difficult for many Americans.
“We know that even in good circumstances, for the majority of people, having faced relatively slow wage growth over the past few decades, it may be difficult to feel like they are going to move forward. I know,” she said.
Was the unemployment rate higher under the Biden administration or the Trump administration?
The unemployment rate under Donald Trump was fairly low at 4.7% when he took office in 2017, and had been mostly on the decline until the pandemic began. It then rose to 14.8% in April 2020, before dropping sharply during the remainder of President Trump’s term, which ends in January 2021. During the last full month of Trump’s presidency, the unemployment rate was 6.7%.
The labor market has become much more active under President Joe Biden. In the month he and Harris were sworn in, the unemployment rate was 6.4%. However, it has since declined significantly, with the unemployment rate falling below 4% from February 2022 to April 2024. The economy continues to show strong job growth, with the unemployment rate in September at 4.1%.
Excluding the immediate economic impact of the recession and supply shocks during the president’s term, the performance of the Biden-Harris administration and the Trump administration shows that unemployment rates have remained fairly low. Overall, the unemployment rate has averaged 3.8% since 2022 and 4% from 2017 to 2019, before the pandemic hit the economy in 2020.
Labor force participation rates and employment-to-population ratios (measures of the number of people in the labor force and the number of employed workers to the working-age population) were high in the last employment statistics, indicating a healthy labor market.
Skanda Amarnath, executive director of Employ America, a left-leaning group focused on economic policy, said it’s also important to understand the age-adjusted share of the population, or prime-age employment rate. It is now slightly higher at about 0.3% than it was during the Trump administration, just before the coronavirus outbreak, he said.
“We’ve seen an overall slowdown in the pace of employment growth recently, but that may simply be because more people are returning to the labor force themselves, as opposed to lower levels. If you’re coming from a higher level, it’s probably a little harder to grow jobs quickly,” Amarnath said. “Despite that, our employment rate is a fairly strong demand for labor and to some extent the fact that people are leaving home for their retirement years.”
Amarnath said the American Rescue Plan Act, the CHIPS and Science Act, the Control of Inflation Act, and the bipartisan infrastructure agreement enacted during President Biden’s tenure helped fuel the economic recovery. He added that the CARES Act, signed into law by President Trump, likely helped the U.S. avoid a prolonged recession.
How will President Trump’s tariff proposals affect the US economy?
In an Oct. 15 interview with Bloomberg News Editor-in-Chief John Micklethwait at the Chicago Economic Club, former President Trump said tariffs are good for economic growth.
“We’re going to bring businesses back to our country…I believe in tariffs, so we’re going to protect those businesses with strong tariffs,” he said.
The Trump campaign also proposes imposing 60% tariffs on products from China, the United States’ largest trading partner, and 10% to 20% on other imports. The Tax Foundation, a business-friendly research think tank, estimates that President Trump’s proposed tariffs, if implemented, would reduce gross domestic product (GDP) by at least 0.8% and result in the loss of 684,000 jobs. I am doing it.
According to Yale University’s Budget Institute, a nonpartisan policy research center, tariffs would likely result in lower trade and retaliatory tariffs from other countries, raising prices and increasing It will cost you between $1,900 and $7,600.
“If the tariff battles of President Trump’s first term are any indication, they will respond with their own tariffs and other trade measures,” said Mark Zandi, chief economist at Moody’s Analytics. “Broadly speaking, tariffs would raise the price of imported goods, reduce consumer purchasing power, and slow growth.”
Zandi added that while the retail industry will be particularly hard hit by these tariffs, he doesn’t think any industry will be unscathed by the policy.
How do Harris’ and Trump’s economic plans compare?
Harris said her plan, which includes building a more affordable housing supply, restoring and expanding the child tax credit, and supporting legislation that expands worker rights, has been recognized by prominent economists and financial researchers. Said to be approved by.
“You should check out the Wall Street Journal or Goldman Sachs or the 16 Nobel Prize winners or Moody’s. They all analyze plans and say my plan will strengthen the economy, but his They say the plan will weaken the economy,” Harris said.
The reality is a little more complicated. Some of the reports Harris mentioned did not say the economy would weaken under the Trump administration, but they did say that, depending on political breakdowns in Congress, the economy would grow less than it did under Harris in certain scenarios. There is.
Some suggest that GDP will fall further as a result of Harris’ proposals. Penn Wharton’s budget model, which considered the Trump and Harris proposals, shows that GDP would decline by 0.4% by 2034 under Trump and 1.3% over the same period under Harris. However, it is notable that the tip tax exemption proposal mentioned by both candidates is not considered. , or Trump’s tariff policies.
Before Biden withdrew his candidacy, 16 Nobel Prize-winning economists said Biden would boost economic growth by investing in the economy by signing legislation to improve infrastructure and manufacturing. They spoke out against President Trump’s tariff plans. Harris is a member of the Biden administration, but did not discuss her specific plans as a candidate. On Wednesday, 23 Nobel Prize-winning economists, including Joseph Stiglitz, the economist who led the final letter, endorsed Harris’ specific policies.
