The economy is crucial to many voters in choosing president, but that fervor also makes it an attractive topic for distortions, misinformation and oversimplifications.
Nearly eight in 10 U.S. voters say the economy is a top issue for them in the upcoming presidential election. accordingly an AP-NORC poll conducted in September. Although 66% of voters say the economy is very or somewhat bad, six in 10 also say their personal finances are good.
Millions have already cast their votes through early voting or postal voting. But those still deciding between the two main candidates — Democrat Kamala Harris and Republican Donald Trump — have until Nov. 5 to wade through various myths and exaggerations surrounding the state of the economy and each candidate’s record to understand related topics.
How is inflation in the USA?
The most recent inflation cycle peaked at 9.1% in June 2022. Inflation has fallen significantly since then, sitting at a more manageable 2.4% in the September Consumer Price Index, a measure of inflation. Meanwhile, wage growth has been outpacing inflation for more than a year. The Federal Reserve lower its key interest rate in September fell half a percentage point after inflation for the first time in four years approached closer to its target of 2%.
But these macroeconomic figures do not resonate with everyone due to the prices of food and other crucial goods.
“The literal prices that people see on goods make them think they’re not doing so well because they feel like they’re higher than they think they should be,” said Elise Gould, senior Economist at the left-leaning Economic Policy Institute. But these prices are actually lower relative to their wages than they were four years ago.”
But that doesn’t mean the experiences of many voters struggling to afford basic necessities aren’t real. Housing costs are very high and put a strain on people’s budgets. The Fed’s interest rate policy is affected Credit card ratesand therefore people’s ability to make purchases.
Gould said despite the positive news about slowing inflation, the lack of long-term wage growth before this latest enhance has been tough for many Americans.
“Even when things are going well, we know that the vast majority of people have faced relatively slow wage growth over the past few decades and so it can be difficult to feel like they are getting ahead,” she said.
Was unemployment higher under Biden or Trump?
The unemployment rate under Donald Trump was relatively low at 4.7% when he took office in 2017 and trended mostly downward until the start of the pandemic. It then rose to 14.8% in April 2020 and fell sharply for the remainder of Trump’s term, which ended in January 2021. During Trump’s last full month in office, the unemployment rate was 6.7%.
The job market has been pretty balmy under President Joe Biden. The month he and Harris took office, the unemployment rate was 6.4%. But it has largely fallen since then and from February 2022 to April 2024 the unemployment rate was below 4%. In September, the unemployment rate was 4.1%, but the economy continues to see mighty job growth.
Looking at the record of the Biden-Harris administration and the Trump administration, aside from the immediate economic impact of the recession and supply shocks during their presidencies, unemployment has remained quite low. Overall unemployment averaged 3.8% since 2022 and an average of 4% between 2017 and 2019 before the pandemic hit the economy in 2020.
Labor force participation rates and employment-to-population ratios, a measure of the number of employed people and employed workers compared to the working-age population, were high in the EU last job report and show signs of a vigorous labor market.
Skanda Amarnath, executive director of Employ America, a left-leaning group that focuses on economic policy, said it is also critical to understand the percentage of the population that is adjusting for age, the prime-age employment rate. It is slightly higher now, about 0.3%, than it was just before the Covid outbreak, during the Trump administration, he said.
“We’ve seen generally slower employment growth recently, and that may just be because many people are now back in the workforce. It’s probably a little harder to increase employment quickly when you come from a high level than from a low one,” Amarnath said. “Still, we have achieved an employment rate where there is reasonably high demand for workers, a little combined with the fact that people are also retiring.”
The American Rescue Plan Act, the CHIPS and Science Act, the Inflation Reduction Act and the bipartisan infrastructure agreement enacted during Biden’s presidency contributed to the recovery, Amarnath said. The CARES Act, signed by Trump, likely helped the U.S. avoid a protracted recession, he added.
What impact would Trump’s proposed tariffs have on the US economy?
In an Oct. 15 interview with John Micklethwait, editor-in-chief of Bloomberg News at the Economic Club of Chicago, former President Trump said said Tariffs would be good for economic growth.
“We will bring companies back to our country… We will protect these companies with strong tariffs because I believe in tariffs,” he said.
The Trump campaign has also proposed a 60% tariff on goods from China, one of the U.S.’s largest trading partners, and 10% to 20% on other imports. The Tax Foundation, a business-friendly research think tank, appreciated that implementing Trump’s proposed tariffs would result in a decline in GDP of at least 0.8% and the loss of 684,000 jobs.
The tariffs would likely result in lower trade and retaliatory tariffs from other countries, raising prices and costing each household between $1,900 and $7,600 in 2023. accordingly the Budget Lab at Yale, a nonpartisan policy research center.
“If the tariff wars of President Trump’s first term are any indication, they will respond with tariffs and other trade measures of their own,” said Mark Zandi, chief economist at Moody’s Analytics. “Broadly speaking, tariffs will raise prices for imported goods, weaken consumer purchasing power and slow growth.”
Zandi added that while retail would be particularly challenging hit by these tariffs, he doesn’t believe any industry would be spared from the policy.
How do Harris and Trump’s economic plans compare?
Harris said her plans, which include building a more affordable housing supply, restoring and expanding the child tax credit and supporting legislation to expand labor rights, have been endorsed by respected economists and financial research sources.
“Please look at the Wall Street Journal or Goldman Sachs or the 16 Nobel Prize winners or Moody’s, who all analyzed the plans and said my plans would strengthen the economy, his would weaken it,” Harris said said.
The reality is a little more complicated. Some of the reports Harris referred to did not say that the economy would weaken under Trump, but rather that in certain scenarios, depending on the political breakdown in Congress, it would grow less than the economy under Harris.
Others show GDP falling more sharply as a result of Harris’ proposals. The Penn Wharton Budget Model, which looks at the Trump and Harris proposals, shows GDP fall 0.4% under Trump by 2034 and withering 1.3% under Harris in the same period, but notably does not take into account the proposals mentioned by both candidates not to tax tips or Trump’s tariff policies.
Before Biden withdrew his candidacy, 16 Nobel laureates said Biden’s investments in the economy would boost economic growth by signing legislation to improve infrastructure and manufacturing. They spoke out against Trump’s tariff plans. Although Harris is part of the Biden administration, her specific plans as a candidate were not discussed. On Wednesday, 23 Nobel Prize winners, including the economist who wrote the last letter, Joseph Stiglitz, approved Harris’ specific guidelines.
