Rhetoric vs. Reality: Unpacking Economic Misconceptions

The economy has emerged as a central issue for voters in the upcoming presidential election, with nearly 80% identifying it as a critical concern, according to a recent AP-NORC poll. Despite 66% of respondents rating the economy as poor, about 60% report feeling good about their personal finances.

With early and mail voting underway, those still undecided between Democratic candidate Kamala Harris and Republican contender Donald Trump have until November 5 to sift through prevailing myths and claims regarding economic conditions and proposed solutions.

Inflation in the United States saw a peak of 9.1% in June 2022 but has since decreased to 2.4% as of September, indicating a return to more manageable levels. Wage growth has outpaced inflation for over a year, leading the Federal Reserve to cut its key interest rate by half a percentage point for the first time in four years.

However, these statistics may not resonate with everyone. “The literal prices that people see on goods make them think they’re not doing as well,” says Elise Gould, a senior economist at the Economic Policy Institute. She notes that while prices may feel high, they represent a smaller share of wages than they did years ago.

Yet, many Americans face genuine struggles with rising housing costs and credit card rates, which affect their purchasing ability. Gould emphasizes that the decades of slow wage growth have created a challenge for many, despite recent improvements in economic indicators.

When examining unemployment, Trump’s administration reported a 4.7% unemployment rate upon his inauguration in 2017, which fell until the pandemic drove it to 14.8% in April 2020. By the time he left office, the unemployment rate stood at 6.7%.

Under President Biden, the labor market has remained strong, with the unemployment rate dropping from 6.4% in January 2021 to 4.1% in September 2023. Over this period, the average unemployment rate has been approximately 3.8%, showcasing a positive trajectory in job growth.

Labor force participation rates also reflected a healthy market, according to recent reports. Skanda Amarnath of Employ America notes that while employment gains may have slowed, they remain robust, especially as more individuals re-enter the labor force.

Trump recently suggested in an interview that tariffs could bolster U.S. economic growth. His campaign proposes implementing a 60% tariff on goods from China and lower tariffs on other imports. However, the Tax Foundation warns that such tariffs could decrease GDP by at least 0.8% and potentially eliminate nearly 684,000 jobs.

According to economist Mark Zandi, tariffs would likely trigger retaliation from trade partners, raising consumer prices and reducing purchasing power. The retail sector would likely suffer significant consequences from these measures.

In contrast, Harris’s economic plans include increasing affordable housing and expanding the child tax credit. She cites endorsements from prominent economists supporting her proposals, which she claims would strengthen the economy. However, analysis of both candidates’ economic plans indicates that potential GDP changes are more complex and vary based on political circumstances.

Before his withdrawal, Biden garnered similar endorsements for his infrastructure investments. Recently, 23 Nobel Prize-winning economists supported specific policy proposals from Harris, emphasizing the ongoing debate about which economic strategies would ultimately benefit the U.S. economy.