President Joe Biden asserted earlier this year that the U.S. economy is “literally the envy of the world,” inheriting what he described as an economy “on the brink” from his predecessor, Donald Trump.
“It takes time, but the American people are beginning to feel it,” he declared during his State of the Union address in March.
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Is U.S. Economy Really Bad?
The health of an economy can be evaluated by several measures, but the most commonly used metric is gross domestic product (GDP). GDP measures how much is produced, how much is spent and how much is earned in an economy over a given period.
According to the Federal Reserve Bank of St. Louis, the U.S. GDP increased by 2.8 percent in the second quarter of 2024 compared to the same period in 2023. Since the third quarter of 2022, national GDP has consistently grown year-on-year. Hence, the U.S. economy has shown continual improvement since then, notwithstanding public sentiment.
The Bureau of Economic Analysis also reported that in June 2024, personal income for Americans rose by $50.4 billion or 0.2 percent on a monthly basis. Similarly, disposable personal income (DPI) went up by $37.7 billion. Additionally, personal outlays, which include personal consumption expenditures (PCE), saw a rise of $59.3 billion, while consumer spending increased by $57.6 billion.
How Does U.S. Economy Compare?
Curiously, 36 percent of Americans hold the belief that the U.S. economy isn’t keeping up with other major world economies like the U.K., Japan, Germany, and France.
However, facts speak otherwise. The U.S. has been faring better than its G7 counterparts, notably due to an improved labour market amidst high inflation post-pandemic.
Adam Posen, president of the Peterson Institute for International Economics, told Axios, “The enormous labour market churn of COVID-19 in 2020-21 had the unintended benefit of moving millions of lower-income workers to better jobs, more income security, and/or running their own businesses.”
The International Monetary Fund (IMF) projects that the U.S. economy will enjoy an average growth rate of 2.1 percent until 2029, compared to Canada’s anticipated 1.7 percent, the U.K.’s 1.4 percent, and France’s 1.3 percent per annum. Lower down the list are Italy, Germany, and Japan.
| Country | Annual Growth Rate (%) |
|————–|————————|
| USA | 2.1 |
| Canada | 1.7 |
| UK | 1.4 |
| France | 1.3 |
| Italy | 0.8 |
| Germany | 0.7 |
| Japan | 0.4 |
Why Do People Think Economy Is Bad?
Despite the positive trends, a significant number of Americans remain skeptical. Polling conducted exclusively for Newsweek by Redfield & Wilton Strategies found that 46 percent of Americans believe the economy is in a worse state than it was in January 2021 when Trump vacated the White House, compared to 33 percent who think it has improved.
Opinions of the economy diverge considerably along partisan lines. The poll discovered that 68 percent of those who will vote for Trump in the 2024 election believe the economy to be worse since 2021, while only 25 percent of Harris’ supporters think the same.
Economist John Min from Monex USA explained to Newsweek that inflation played a crucial role in shaping these perceptions. He said, “When inflation is high and persistent, as seen since 2021, it divides Americans into winners and losers.”
High-earning households, possessing significant financial assets, manage to shield against inflation’s erosive effects, largely remaining unaffected. These assets include stocks and home equities, whose recent appreciations have helped maintain their financial standing.
On the contrary, lower earners bereft of such protective assets find themselves struggling, often relying on secondary jobs and high-interest credit to make ends meet. Median incomes have also fallen, plunging from $78,250 in 2019 to $74,580 in 2022.
| Year | Median Household Income ($) |
|——|—————————-|
| 2019 | 78,250 |
| 2022 | 74,580 |
Partisan Differences
The divide in economic outlooks is palpably partisan. According to the Redfield & Wilton Strategies poll, 69 percent of likely Trump voters foresee economic decline, whereas only 22 percent of Harris backers share this pessimism.
Experts like Ethan Struby of Carleton College suggest that economic evaluations are often coloured by political biases. He posited that Republicans, having lost the previous election, might demean current economic conditions to align with a worldview critical of Biden’s handling of the economy.
Christina Farhart, also of Carleton College, echoed this sentiment, noting that many view the economy through a partisan lens. Farhart observed that this form of motivated reasoning extends beyond the economy, influencing perceptions of politicized issues such as policy proposals and conspiracy theories.
On the campaign trail, Trump and Harris have presented vastly different economic narratives. Trump, in an August speech, criticised Harris’ economic management, branding her approach as detrimental. Harris, preferring to focus on her policies, has emphasised the perceived adverse impacts of Trump’s fiscal strategies. Her team has criticised Trump’s economic policies as beneficial only to the wealthiest, arguing they would raise costs for ordinary Americans.
Brian Nelson, Senior Policy Advisor for Harris, told The Hill, “Their reckless policies will bring chaos to economic markets and raise costs for working families. On the other hand, Vice President Harris and Governor Walz offer a choice: plans to lower costs and create opportunities for the middle class.”
Farhart concluded, “Most people lack a deep understanding of the economy or the Federal Reserve’s actions, thus they turn to political elites for cues, which can mislead them when economic indicators are favourable or otherwise.”
