US Election Issue: Economy

Facts

• OVERVIEW: The US is the world's largest economy in nominal GDP and fifth largest by purchasing power parity. In Q1 2024, major economic sectors included real estate, rental, and leasing (13.5%), professional and business services (12.9%), government (11.5%), and manufacturing (10.1%). Fiscal policies, such as taxation and spending plans, are set by the president and his Council of Economic Advisers, the Department of the Treasury, and members of Congress. The Federal Reserve (Fed) manages monetary policies like interest rates and inflation control.^{[1][2][3][4][5][6][7]}
• CURRENT STATE — ECONOMIC GROWTH: According to the Organisation for Economic Co-operation and Development (OECD), the US economy has seen 'robust recovery' since COVID, and is 'continuing to expand at a solid pace.' It leads the G7 with an 8.6% GDP growth from 2019 Q4 (pre-pandemic) to 2024 Q1. In 2024 Q2, US real GDP grew by a rate of 1.7%, compared to 2.3% and 3.4% in 2024 Q1 and 2023 Q4, respectively. While the OECD forecasts US GDP growth at 2.6% in 2024 and 1.8% in 2025, the International Monetary Fund (IMF) predicts slightly higher rates of 2.7% and 1.9%, respectively, placing the US second to Canada in 2025 (2.3%).^{[8][9][10][11][12]}
• CURRENT STATE — INFLATION AND INTEREST RATES: As of June 2024, Personal Consumption Expenditures Price Index (PCE) inflation is at 2.5% year-over-year, down from a peak of 6.8% in June 2022. Regarding the Consumer Price Index (CPI), inflation as of July was 2.9% year-over-year, up 0.2% from June. To address rising inflation, the Fed increased its federal funds target rate from 0.00-0.25% to 5.25-5.50% across 11 hikes between March 2020 and July 2023, maintaining this rate ever since. This is the highest level since 2006. The Fed predicts that 2025 median PCE inflation will sit at 2.3%, with a median interest rate of 4.1%, before falling to 2.0% and 3.1%, respectively, in 2026.^{[13][14][15][16][17][18]}
• ECONOMY AS AN ELECTION ISSUE: According to Gallup, the economy and high cost of living/inflation sit tied at third (13%) as key issues for Americans. Pew Research found 36% believe current economic conditions to be 'poor' and 41% 'only fair,' compared to 23% who believe it to be 'excellent or good.' Additionally, 62% consider inflation the biggest problem, with healthcare affordability (57%) and federal budget deficit (53%) ranking third and fifth, respectively. When split along party lines, 46% of Democrats versus 80% of Republicans view inflation as a significant issue, and 37% of Democrats versus 10% of Republicans rate the economy positively.^[19][20][21]
• DEMOCRATIC PLEDGES: Democrats claim that under a new administration, no one earning under $400K/year will face a federal tax increase, while the 'ultra-wealthy' and 'big corporations' will pay their 'fair share,' and the national deficit will be cut by $3T over the next decade. Increased IRS funding is expected to raise $440B, and they claim expanding Medicare price negotiations could save $160B. The party also pledges to build or renovate 2M homes, offer $10K tax credits for first-time home buyers and sellers, improve supply chains, lower oil and gas prices, combat price gouging, and ensure affordable child care under $10/day for working families.^[22]
• REPUBLICAN PLEDGES: The GOP and Donald Trump's economic strategy includes boosting domestic energy production from oil, natural gas, and nuclear sources, reducing government spending, and cutting regulations to curb inflation. They aim to reinstate the 'Trump Tax Cuts and Jobs Act,' expand the child tax credit, double the standard tax deduction, and ban taxes on tips. Their trade policy focuses on supporting American producers over foreign outsourcers. They also pledge to boost technological and banking innovation, such as permitting unrestricted Bitcoin mining, opposing a Central Bank Digital Currency, and repealing Biden's executive order on artificial intelligence.^[23]

Sources: ^[1]datacatalog.worldbank.org, ^[2]oecd.org, ^[3]BEA (a), ^[4]U.S. Department of the Treasury, ^[5]The White House, ^[6]Crsreports, ^[7]Constitution, ^[8]IMF, ^[9]BEA (b), ^[10]OECD, ^[11]Researchbriefings, ^[12]OECD iLibrary, ^[13]The Fed (a), ^[14]The Fed (b), ^[15]BEA (c), ^[16]Forbes, ^[17]BEA (d), ^[18]BLS, ^[19]Pew Research Center (a), ^[20]Pew Research Center (b), ^[21]Gallup.com, ^[22]Democrats and ^[23]The American Presidency Project.

Narratives

• Democratic narrative, as provided by New York Times, Washington Post and Democrats. Having worked alongside Pres. Biden to bring inflation to its lowest rate in three years, Kamala Harris knows exactly how to run the economy should she be elected. As president, Harris would end Trump's corporate tax cuts and actually tax billionaires, boost child care programs, and lower prescription drug costs. No matter how many times Trump calls her a 'communist,' voters know Harris simply wants to protect and strengthen the country's social safety net.
• Republican narrative, as provided by City Journal, FOX News and Forbes. Harris has lied for years about the true inflation rate she and Biden caused — estimated at 18% by November 2022 using traditional methods — and now she's whitewashing her record and telling Americans to vote for more of the same. She wants to spend trillions to kill the oil industry and tens of billions on public housing, and that's just a start. Her ideas are so bad that she's now copying Trump's proposals, such as no taxes on tips, but her record on boosting the IRS proves that's also a lie.
• Narrative C, as provided by Youtube. While Trump and Harris argue over who's going to print more money to maintain the status quo, RFK Jr. would rather not increase the debt nor raise taxes, but instead take the hundreds of billions of dollars given to the war machine every year and use it to fund college education and social security. He would also prevent corporations from out-bidding young people who want to buy a home, as well as abolish the billion-dollar subsidies for energy corporations to help stimulate smaller green energy companies. America has plenty of money, and RFK Jr. knows how to spend it properly.