Donald Trump was unable to defeat Nikki Haley in the New Hampshire primary, but this year's presidential election is likely to be a repeat of the 2020 election. Voters will inevitably compare Trump's and Biden's presidential performances. poll This shows that people in key battleground states largely support President Trump's economic response.
To change people's perceptions, Mr. Biden needs to correct not only Mr. Trump's economic policies but also his own.
The task is formidable because many believe that the occupant of the White House determines the state of the economy. But with the notable exceptions of Lyndon Johnson, Ronald Reagan, and Bill Clinton, postwar U.S. presidents have primarily influenced the economy.
Consider what has happened since the 2008 financial crisis.As shown by key indicators such as real GDP, employment, and inflation. stable economic trends It lasted through both Obama and Trump's time in office until the coronavirus disease (COVID-19) pandemic struck in 2020. At the time, the economy plummeted as businesses closed, but quickly recovered as businesses reopened.
of Fiscal policy response Trump and Biden have had similar responses to the pandemic. The total allocation of funds to households, businesses, and local governments reached $5 trillion, more than five times the amount allocated to the 2008 financial crisis.While this boosted the economy, the federal budget deficit spiked In 2020-2021, it reached $3 trillion annually, triple the pre-pandemic level.
The big surprise was that inflation spiked in 2021-2022, forcing the Federal Reserve to significantly tighten monetary policy. In the process, many voters have blamed Biden's policies for the rise in inflation, but have not given him any credit. Employment increased by 14 million people In the last 3 years.
In this situation, one economic indicator is clearly low. Indicators of consumer sentiment. Until recently, the University of Michigan index was nearly 40 points below pre-pandemic levels. This reflects polling on Trump and Biden's handling of the economy, showing voters want a return to an era of low inflation.
The good news for Mr. Biden is that consumer confidence returned late last year as inflation receded and the economy performed better than expected.Former President Trump advisor Larry Kudlow Conceded a point He said his predictions of an impending recession were off the mark after data showed the economy would grow by 3.1% in 2023. So looking ahead, views on the economy could improve as inflation recedes and the Fed lowers interest rates.
Mr. Biden, on the other hand, must explain why the policies supported by Mr. Trump will have a negative impact on the economy. President Trump's campaign promise to raise tariffs by 10% across the board is particularly vulnerable.
WSJ Commentary by Phil Gramm and Donald J. Boudreau of the American Enterprise Institute document How did the 2018-2019 tariff hike affect businesses by increasing the price of imported goods, which is then passed on to consumers? Additionally, the impact of additional tariffs could be even greater now, as they could hamper the Fed's efforts to curb inflation, thereby causing interest rates to rise for a longer period of time. Biden should ask voters what they think about this.
But the biggest concern for business leaders attending the World Economic Forum in Davos is that such unilateral action risks causing massive damage. global trade war. In fact, as the Wall Street Journal editorial board points out, the last U.S. president with such a radical trade vision was Herbert Hoover, who signed the deal. Smoot-Hawley Tariff Act That contributed to the Great Depression.
Meanwhile, Biden needs to improve his standing on immigration, which has been unpopular with voters, as the number of illegal immigrants has surged at the southern border. Perhaps he will show his determination to address this issue, intends to limit immigrants' ability to apply for asylum In recent budget deliberations.
But that alone may not be enough to sway voters' perceptions. Mr. Biden should also explain to the American people why the increase is essential. legal immigration.
The main reasons for the slowdown in economic growth over the past decade are demographics: The growth rate of the working-age population fell to 0.3% per year from 1.1% previously, and as a result, real GDP slowed by a similar amount. With population growth expected to slow further over the next decade, the United States needs to attract more workers to alleviate labor shortages and spur economic growth.
Contrary to President Trump's claims that the US economy is moribund, the US economy is outperforming Europe and many Asian countries, including China. this is, Significantly outperforms the US stock market Compared to the international market in recent years. There's no question about it, as Carlyle Group's David Rubenstein said in an interview with CNBC. The US economy is in a “league of its own.”
An important reason is that the technology sector is rapidly growing and one in which the United States plays a dominant role globally. In the future, the rapid development of generative artificial intelligence by US companies will Improved productivity And this will increase the economic growth rate.
The bottom line is that while challenging myths about Trump's economic policies, Biden must also counter the pessimism that many voters feel about the American economy. Otherwise, Trump's economic legacy could become yet another urban legend.
Dr. Nicholas Sagen is a world-class economist and author of three books, including: Investing in the Trump Era: The Impact of Economic Policy on Financial Markets.
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