President Joe Biden and former President Donald Trump are poised to face off in the Nov. 5 election, much as they did four years ago. The 2020 race was largely a referendum on the Trump presidency, but the 2024 election could be won or lost based on how well each candidate articulates his economic achievements.
The economy is the single most important issue for eligible voters, including independent voters, who could play a decisive role at the polls, says Aakash Doshi, a commodities strategist at Citigroup. If voters perceive that the Federal Reserve can return inflation to the central bank’s 2% annual target without pushing the U.S. economy into a recession, that would favor the incumbent, Doshi says. A hard economic landing would favor Trump.
While presidents don’t control the nation’s economy, their policies play a sizable role. Trump, who served from 2017 to 2021, inherited a fairly healthy economy from former President Barack Obama. On Trump’s watch, gross domestic product grew at a solid clip, prices were stable, and the stock market rallied, helped in part by federal stimulus spending aimed at countering the economic impact of the Covid pandemic.
Trump championed bringing manufacturing jobs back to America, negotiating better trade deals, scaling back regulations, and trimming corporate taxes. But the 2017 Tax Cuts and Jobs Act drove up the size of the U.S. debt.
Biden has aimed his economic message at bolstering the middle class, and has also spent generously to counter the economic impact of Covid. Congress passed landmark economic legislation during Biden’s first three years in office, including the American Rescue Act, the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the Chips and Science Act. But this spending, together with post-Covid economic adjustments and other factors, triggered soaring inflation, which hurt his approval ratings.
The 10 charts below track key aspects of the economy from each president’s inauguration through January of their fourth year in office—in Biden’s case, roughly the duration of his term to date. They exclude the volatile period from February through December 2020 when the Covid pandemic swept the U.S.
1. Gross Domestic Product
Gross domestic product, which measures economic output, is a fundamental indicator of the economy’s performance. Real GDP, adjusted for inflation, averaged 2.6% during Trump’s first three years in office, a decent performance but below the 4% economic growth he had pledged to deliver. Much of that growth came from tax cuts and spending increases, notes Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget.
From Biden’s inauguration in January 2021 through the end of last year, real GDP grew by an average of about 3.4% a year. Much of the growth in 2021 was due to “automatic recovery mechanisms in the economy” after Covid-related shutdowns, says Douglas Holtz-Eakin, an economist and president of the conservative-leaning American Action Forum think tank.
Still, GDP grew by 2.5% last year, after much of the recovery bounce arguably had dissipated. The New York Federal Reserve Staff Nowcast estimate for this year’s first quarter stands at 2.8%.
2. Stock Market
The
S&P 500
generally averaged growth of 10% a year from its inception through the end of 2023. But the benchmark U.S. stock-market index did far better during both presidents’ first three years in office.
From Trump’s inauguration in January 2017 through the end of 2019, the S&P 500 rose by 42.2%. The 2017 tax cuts helped create a conducive environment for business investment, while low unemployment levels encouraged consumer spending. As a result, Trump presided over a portion of the longest bull market on record, which ran for 132 months, before ending in February 2020 in a dramatic Covid-related selloff.
Biden oversaw a jump of 23.8% in the S&P 500 from his inauguration through the end of 2023. The index set 69 records in that span, versus 115 during the comparable stretch of Trump’s term.
A strong stock market helps investors build wealth and encourages consumer and business spending, which drives economic growth.
3. Inflation
During the Trump era, Americans enjoyed relatively low inflation, following the historically low levels of the Obama years. The consumer price index hit a high in June 2018 of only 2.9%.
The Covid pandemic changed inflation’s trajectory, however, as supply-chain snarls, government stimulus spending, and pent-up demand combined to send prices sharply higher. Russia’s attack on Ukraine added further price pressures, particularly in the energy sector. The CPI reached a peak of 9% in June 2022, in the second year of Biden’s term.
Inflation has since fallen to 3.1% year over year, based on the latest CPI reading. Credit goes largely to the Fed, which raised interest rates 11 times in the past two years, to a targeted range of 5.25%-5.50%, to cool price growth. Still, high costs, particularly for food, have dogged the Biden presidency. Government data show that food costs are up more than 20% from the start of Biden’s term.
4. Interest Rates
When Trump took office, the federal-funds target rate was 0.5%-0.75%. By January 2019, Fed officials had ratcheted interest rates up to 2.25%-2.50%, only to reduce them by a percentage point in successive cuts later that year.
Under Biden, escalating inflation forced the Fed to undertake the most aggressive monetary-policy tightening campaign in four decades. Although the central bank’s subsequent actions brought inflation down from a lofty peak, they also tightened financial conditions and exacerbated the housing market’s affordability crisis.
The Fed expects to lower interest rates later this year, although Fed officials, including Chair Jerome Powell, have indicated they are in no rush to do so until they gain greater confidence that price growth is headed sustainably toward a 2% a year.
Trump heaped criticism on Powell, his Fed nominee, as the central bank hiked rates in 2018. Biden has rarely weighed in on monetary policy, although he said in December that the U.S. economy was in a “sweet spot” that shouldn’t prompt further rate hikes.
5. Government Debt
The Trump and Biden administrations were birds of a feather in one regard: borrowing and spending. “They both spent money hand over fist,” Holtz-Eakin says.
Public debt stands at $34.3 trillion today, equal to $101,976 per American. Biden added $3.8 trillion to the national bill largely through the American Rescue Act, pandemic-era stimulus legislation passed at the start of his presidency, according to calculations by the Committee for a Responsible Federal Budget. But much other spending legislation under Biden has been bipartisan, so his administration shouldn’t shoulder sole responsibility.
The Committee for a Responsible Federal Budget estimates that Trump added $8.4 trillion to the debt, including about $3.8 trillion in 2020 that included stimulus legislation to shore up the U.S. economy. Meanwhile, the 2017 tax cuts are expected to add $2.2 trillion in debt over a 10-year period.
Both administrations opted to run the U.S. economy hot, MacGuineas says. “That probably appeared to work more successfully for Donald Trump, because it didn’t create inflation, but it did create a huge legacy of debt—a legacy that Biden also has, but not to a great extreme as of yet,” she says.
6. Unemployment
Trump presided over a strong job market: He took office with unemployment at 4.7%, en route to 3.5% in September 2019—a then-50-year low. The economy added 6.4 million jobs during his term, before the arrival of Covid.
Biden inherited a labor market beset by pandemic-related chaos. The economy shed 9.3 million jobs in 2020, and unemployment reached 6.4% by the start of 2021.
By January 2023, however, as the Covid crisis eased and the economy reopened, unemployment had fallen to 3.4%, the lowest rate in 54 years—and it isn’t much higher today. The U.S. economy added 14.8 million new jobs from 2021 to 2023, with monthly payroll gains averaging 412,000.
The past seven years have witnessed demographic shifts that will see the U.S. population grow at a slower rate, while the share of Americans over 65 climbs to record levels. Both trends curtail the labor supply, which should keep the unemployment rate low.
7. Wages
Although Trump declared in his 2020 State of the Union address that the U.S. was in a “blue-collar boom,” many lower- and middle-class households might not have felt it. Average hourly earnings rose about 9% in the first three years of his term, but in a continuation of Obama-era trends, real wage growth was slow or stagnant for most American workers from 2017 to 2019.
Tighter labor markets are finally driving real wage gains again. Average hourly earnings rose 14.8% during Biden’s first three years in office, according to data from the Bureau of Labor Statistics, but inflation diminished purchasing power. Only in 2023 did real wages start to recover and outpace inflation. If wage growth stays the same or continues to grow as inflation cools further, Americans could see their purchasing power expand.
“The story wasn’t bad under Trump until 2020, but the recovery seen in the first three years of the Biden administration has been exceptional,” says Joshua Gotbaum, a guest scholar of economic studies at The Brookings Institution.
8. Housing Market
The median home price rose through Trump’s presidency—and rose even more during Biden’s early years in office, before stalling.
When Trump entered the White House, the median sale price of a home in the U.S. was $200,000, according to Zillow data. From 2017 to 2019, prices climbed 11%, abetted by low inventory. Although mortgage rates rose from 3.5% in the fall of 2016 to a peak of 4.9% in November 2018, higher rates didn’t scare off buyers.
Biden entered office in the midst of a pandemic-fueled homebuying spree. Home sales reached a 15-year high in 2021, and many homeowners cashed in on higher values. But the Fed’s interest-rate hikes, which began in March 2022, hit would-be home buyers hard. The average 30-year mortgage rate peaked in November 2022 at 7.8%, according to Freddie Mac data. The median home price dropped, then rose again, and is now around $325,000.
9. Consumer Confidence
During Trump’s years in office, consumer sentiment was relatively unchanged, as measured by the University of Michigan’s Consumer Sentiment Index. According to Joanne Hsu, director of the Surveys of Consumers, that indicates Americans see the economy as being in a “holding pattern,” which could be viewed as a testament to the stable economic environment fostered during the Trump years.
During Biden’s first three years in office, however, consumer sentiment hit recession-level lows, with the index reaching an record low in June 2022. In the past two months, sentiment has begun to bounce back, but remains substantially below prepandemic levels.
Hsu says the consumer-sentiment reading fell, in part, because of the sharp rise in inflation after more than 10 years of low inflation and ultralow interest rates.
Yet diminished confidence hasn’t stopped the public from spending. That could be because, in other parts of Michigan’s consumer survey, Americans reported expectations for strong income and labor markets.
10. Credit Delinquency Rates
Low credit utilization and modest delinquency rates are indicators of financial health and spending power. When debt piles up, however, consumers must pull back on spending to cover higher monthly charges. Because consumer spending accounts for about 70% of the U.S. economy, higher delinquency rates can spell trouble for GDP.
Delinquency rates, or the percentage of debt that is past due, averaged 4.7% in Trump’s first three years in office, and 2.8% in Biden’s first three years. There’s an easy explanation for the difference: Pandemic-era practices and policies proved beneficial to many households’ financial health early in Biden’s term. Not only did people spend less during “lockdown”; stimulus payments also boosted savings.
As Americans draw down their pandemic savings, delinquency rates are rising again. They topped 3% in the fourth quarter, according to data from the New York Fed. But there is no need to panic: Delinquency rates hit 12% at the end of 2009, following the financial crisis and recession.
The final chapter of Biden’s presidency has yet to be written. Based on economic results so far, both presidents will have plenty to crow about—and some issues to duck—as this election year unfolds.
Write to Megan Leonhardt at [email protected]
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