Republican presidential nominee and former U.S. President Donald Trump holds a campaign rally at Macomb Community College in Warren, Michigan, U.S., November 1, 2024 (L), and Democratic presidential nominee U.S. Vice President Kamala Harris speaks during a campaign event in Atlanta, Georgia, U.S., October 19, 2024.
Reuters
A flurry of remarkably good economic news over the past week could create a daunting mandate for whoever is elected the next U.S. president: Don’t mess it up.
Days ahead of the Nov. 5 election, inflation is expected to cool even further from its pandemic peaks, private job creation is beating estimates, pending home sales data is popping, consumer sentiment is surging toward optimism and gross domestic product is growing apace, though slightly below some expectations.
The S&P 500 is up over 50% since President Joe Biden took office in January, 2021, and 24% so far this year, according to Morning Consult.
“Remember how we were going into a depression and all that stuff. Guess what? We have the strongest economy in the world. The whole damn world,” President Joe Biden said Tuesday during an event announcing new infrastructure grants at the Port of Baltimore.
Vice President Kamala Harris and former President Donald Trump are both pitching themselves as the best steward of the future health of the U.S. economy.
At the same time, both candidates are working to frame themselves as a departure from the status quo, recognizing voters’ lingering dissatisfaction with the economy, despite the strong macro-level data.
Forty-four percent of U.S. adult respondents say they believe that “total economic collapse” is at least somewhat, if not very, likely, according to an October YouGov poll. The poll surveyed 1,113 U.S. adult citizens from Oct.17 to Oct. 19 and had a margin of error of plus/minus 3.8 percentage points.
The mood of economic pessimism within the electorate has prompted both Trump and Harris to roll out a slate of policy proposals that promise a new economic future for Americans.
Trump has pledged universal tariffs on all imports from all countries, a sweeping immigrant deportation program, deepening corporate tax cuts and more.
Economists and even some of Trump’s own allies note that his proposed universal tariffs, mass deportations and tax cuts could, at least temporarily, send major shockwaves through the economy, triggering potential market crashes.
Harris, meanwhile, wants to hike corporate tax rates, enact a federal ban on corporate “price gouging” in the grocery sector, and provide subsidies and tax credits for housing development, child care and more.
The vice president has faced criticism from economists and leaders in corporate America for her proposed price gouging ban, and her plans to hike taxes on corporations.
The stable economy will be an opportunity for the next president to actually focus on the policies on which they campaigned, said Justin Wolfers, a professor of public policy and economics at the University of Michigan.
By contrast, both former President Barack Obama and Biden took office during a time when “stabilizing the economy would have to come before any of their normal governing priorities,” Wolfers said. “What they got to do was put out the recessionary fire rather than pursue their programs.”
The present reality makes the presidential election even more consequential, Wolfers said.
“If you’re in a middle of a recession, whether you’re a Democrat or a Republican, you’ve got one job: Fix the recession,” he said. “Whereas if, for instance, what Trump wants is tax cuts for the rich and what Harris wants is to tax the rich in order to give cuts to the middle and working class, they might each have the scope to do it.”
Either way, the next president will have to perform a delicate balance: Execute on their pledges to overhaul an economy that voters appear to loathe without derailing the current trajectory of real economic growth.
With an economy ravaged by the Covid-19 pandemic, Biden had to carry out an economic rescue plan, giving him the leeway to implement massive stimulus bills and other sweeping policies to keep American households and businesses afloat.
As Biden prepares to leave the White House, the strong economic numbers of recent weeks help back his case that his administration, in tandem with the Federal Reserve, have stuck the landing, even if Americans have yet to feel it.
“It is to hard to see the economy performing better,” Moody’s Chief Economist Mark Zandi said in a Wednesday post on X. “Of course, many lower and middle income Americans are not benefiting like they should. Changing this is what the next President and Congress need to focus on.”