Addressing Common Misconceptions About Economics • Nevada Current

The economy is a key factor for many voters when choosing a president, but that fervor also makes it an attractive target for distortions, disinformation and simplifications.

Nearly eight in 10 US voters say the economy is one of the most important issues to them in the upcoming presidential election. in accordance with AP-NORC poll conducted in September. While 66% of voters say the economy is very or somewhat poor, six in 10 also say their personal finances are good.

Millions have already voted through early or postal voting. But those still deciding between the two major candidates – Democrat Kamala Harris and Republican Donald Trump – will have until November 5 to sort through various myths and exaggerations to understand the state of the economy and each candidate’s record on their respective issues.

What is the inflation situation in the US?

The latest inflation cycle peaked in June 2022 at 9.1%. Inflation has since fallen significantly to a more manageable 2.4% in the September consumer price index, a measure of inflation. Meanwhile, wage growth has outpaced inflation for more than a year. Federal Reserve reduce the key interest rate by half a percent for the first time in four years in September after inflation approached towards its target of 2%.

But these macroeconomic indicators are not exciting for everyone due to the prices of food and other essentials.

The literal prices people see for goods make them think they are not doing so well because they feel they are higher than they think they should be,” said Eliza Gould, senior economist at the Left Institute of Economic Policy. But in fact, these prices as a share of their wages are lower than they were four years ago.”

That doesn’t mean that the experience of many voters struggling to afford basic necessities isn’t real. The cost of housing is very high and puts a heavy burden on people’s budgets. The Fed’s interest rate policy has influenced credit card ratesand therefore people’s ability to make purchases.

Gould said that despite the positive news about slowing inflation, the lack of long-term wage growth before this recent increase has been a tough time for many Americans.

“Even though things are going well, we know that the vast majority of people have experienced relatively slow wage growth over the past few decades, and so it can be difficult to feel like you’re going to get ahead,” she said.

Was unemployment higher under Biden or Trump?

The unemployment rate under Donald Trump was quite low at 4.7% when he took office in 2017 and was generally trending downward before the pandemic hit. It then rose to 14.8% in April 2020 and fell sharply for the rest 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 hot under President Joe Biden. The unemployment rate was 6.4% the month he and Harris were sworn into office. But it has largely fallen since then, and from February 2022 to April 2024, the unemployment rate was below 4%. The unemployment rate was 4.1% in September, but the economy continues to show strong job growth.

Looking at the track record of the Biden-Harris administration and the track record of the Trump administration, aside from the immediate economic impacts of the recession and supply shocks during their presidencies, unemployment has remained fairly low. Overall unemployment averaged The rate has been 3.8% since 2022 and averaged 4% between 2017 and 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 employed workers relative to the working-age population, were high in latest vacancies report and demonstrate signs of a healthy labor market.

Skanda Amarnath, executive director of Employ America, a left-leaning economic policy group, said it’s also important to understand the age-adjusted population’s employment rate at the oldest ages. It’s slightly higher now, about 0.3%, than it was before Covid hit during the Trump administration, he said.

“We’ve seen overall slower rates of employment growth recently, and this can only be attributed to the fact that many people are now back in the workforce. It’s probably a little harder to increase employment quickly when you’re coming from a high level rather than a low level,” Amarnath said. “However, we are at an employment level where there is quite a high demand for labor, coupled to some extent with the fact that people are also moving into retirement.”

The American Rescue Plan Act, the CHIPS and Science Act, the Inflation Relief Act and the bipartisan infrastructure deal passed during Biden’s presidency contributed to the economic recovery, Amarnath said. The CARES Act signed by Trump likely helped the U.S. avoid a protracted recession, he added.

What will Trump’s proposed tariffs do to the US economy?

In an interview with John Micklethwaite, editor-in-chief of Bloomberg News, at the Economic Club of Chicago on October 15, former President Trump said tariffs will be beneficial for economic growth.

“We’re going to bring companies back to our country… We’re going to protect these companies with high tariffs because I believe in tariffs,” he said.

The Trump campaign has also proposed a 60% tariff on goods from China, one of the United States’ largest trading partners, and a 10% to 20% tariff on other imports. Tax Foundation, a business-oriented research think tank, rated that if Trump’s proposed tariffs go into effect, they would reduce GDP by at least 0.8% and eliminate 684,000 jobs.

The tariffs would likely result in lower trade and retaliatory tariffs from other countries, higher prices and costs per household of between $1,900 and $7,600 in 2023 dollars. in accordance with The Budget Lab at Yale University, a nonpartisan center for policy research.

“If the tariff wars during President Trump’s first term are any indication, they are going to respond with their own tariffs and other trade actions,” said Mark Zandi, chief economist at Moody’s Analytics. “Overall, tariffs will lead to higher prices for imported goods, weakening consumer purchasing power and slowing economic growth.”

Zandi added that while the retail sector will be particularly hard hit by these tariffs, he doesn’t think any industry will emerge unscathed from the policy.

How do Harris’ and Trump’s economic plans differ?

Harris said her plans, which include building more affordable housing, 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 see the Wall Street Journal, Goldman Sachs, 16 Nobel laureates or Moody’s, who reviewed the plans and said mine would strengthen the economy and his would make it weaker,” Harris. said.

The reality is a little more complicated. Some of the reports cited by Harris do not say the economy will weaken under Trump, but in certain scenarios it will grow less than the economy under Harris, depending on the political breakdown in Congress.

Others show that GDP fell further as a result of Harris’ proposals. Penn Wharton Fiscal Model Looking at Trump and Harris Proposals Shows GDP fall 0.4% under Trump by 2034 and falling 1.3% under Harris over the same period, but notably does not take into account proposals to not tax tips mentioned by both candidates or Trump’s tariff policy.

Before Biden withdrew his candidacy, 16 Nobel Prize-winning economists said Biden’s investments in the economy through signing legislation to improve infrastructure and manufacturing would boost economic growth. They spoke out against Trump’s tariff plans. Although Harris is part of the Biden administration, they have not discussed her specific plans as a candidate. On Wednesday, 23 Nobel Prize-winning economists, including the economist who wrote the last letter, Joseph Stiglitz, approved Harris’ specific policies.