Presidential Preview: Economy

Editor's note: In advance of the 2024 presidential election, The Chronicle is breaking down each candidate’s stance on priority issues, examining their platform and political history to keep voters in the Duke and Durham community informed. This week, we take a look at the economy:

“It’s the economy, stupid.”

Democratic strategist James Carville, architect of Bill Clinton’s 1992 campaign, wasn’t wrong in his advice to the former president about voters’ priorities. While the political climate is different today, this year is no exception: Americans still really care about the economy.

Inflation is the top issue for Americans across the country — including in North Carolina. After peaking at 9.1% in June 2022, the inflation rate has since dropped to 3.0% as of June 2024, inching closer to the Federal Reserve’s 2% target.

Nevertheless, prices have still risen 20.8% since February 2020, with high grocery and gas prices of particular concern to voters. What used to cost Americans $1,000 in 2020 now costs $1,208. Housing prices have also risen by 47%, putting a strain on prospective buyers and making homeownership a far-fetched reality for many young Americans.

Wages have risen 22.3% since February 2020, notably outpacing inflation. But such income increases are not distributed equally, so while prices have risen for everyone, not every family has seen a comparable increase in their spending income to make up for it. Many consumers instead feel that their purchasing power — the ability to buy products with their income — has worsened in recent years.

Since the COVID-19 recession, the economy has improved rapidly by multiple measures, including new stock market highs and massive job creation. But despite this progress, polling shows most Americans remain sour about the economy. In a February poll conducted by the New York Times and Siena College, only 26% of voters believe the economy is “good” or “excellent,” and more than half believe it is “poor.”

President Joe Biden and Republican nominee Donald Trump both blame each other’s administrations for current economic challenges. In CNN’s June 27 presidential debate — which moderators Jake Tapper and Dana Bash opened with a question about the economy — Trump claimed Biden was solely responsible for heightened inflation, meanwhile Biden asserted he inherited a broken economy. Both of these statements are strong exaggerations but are rooted in some truth.

Donald Trump

In analyzing the Trump presidency, it is only fair to split up the economy into the pre-COVID and COVID eras. Prior to the pandemic, economic statistics were a mixed bag, but people generally tend to perceive the Trump economy more favorably than Biden’s.

Though significant progress had been made during the Obama administration, Trump inherited an economy still recovering from the 2008 Great Recession. Low inflation — a rate of 2.8% when he took office — meant the economy was not yet fully back on its feet or producing at a high level.

Inflation is generally inversely proportional to unemployment — high inflation creates low unemployment, while low inflation is coupled with high unemployment. The unemployment rate was dropping rapidly as inflation rose, measured at 4.7% in early 2017. 

Excluding 2020, real American Gross Domestic Product (GDP) grew annually at an average rate of 2.7% in the Trump era, shy of Biden’s 3.5% during his first three years. Trump’s administration oversaw continued job creation, and in February 2020, the unemployment rate reached a 50-year low of 3.5%.

New legislation

Among Trump’s biggest economic policy goals were cutting taxes and government spending to reduce the national debt. While the debt soared during his presidency, Trump successfully cut taxes with the passage of the Tax Cuts and Jobs Act (TCJA) in 2017.

The TCJA reduced the top corporate tax rate from 35% to 21%. It also affected individual and small business taxes by reducing rates for all seven tax brackets except the lowest, which remained at 10%.

Many credit the act with the economy’s growth during the first half of the Trump administration. The TCJA also doubled the Child Tax Credit to $2,000, with nearly 50 million families benefiting from the increased credits in 2019 according to the Treasury Department. The bill overturned the individual mandate of the Affordable Care Act, which required many people to pay a tax penalty if they did not purchase the minimum health care coverage.

Critics of the bill believe it contributed to income inequality because corporations reaped a disproportionate share of the cuts. The Tax Policy Center found that the top 10% of earners saw 52% of the plan’s benefits, and millions of low-income families who did not pay enough in taxes to meet eligibility requirements did not receive the full Child Tax Credit increase.

Although supporters contended that the law would pay for itself through economic growth, the TCJA instead significantly contributed to a rising national debt. The Congressional Budget Office found that the annual federal deficit — the amount the federal government spends minus revenue — blossomed to $984 billion in 2019, $300 billion more than the CBO originally forecasted.

COVID-19 and Trump’s response

Nonetheless, the economy was fairly steady in early 2020. The stock market rose to record heights and unemployment was low. But that all changed in March.

Unemployment rose more than 10 points in two months to a high of 14.7% in April. Other countries suffered fewer job losses, and many criticize Trump’s downplaying of the crisis, arguing his actions had adverse economic effects.

After difficult negotiations with Congress, Trump signed a historic $2.2 trillion stimulus package to boost a struggling economy. The Coronavirus Aid, Relief and Economic Security (CARES) Act, the largest financial rescue package in American history, provided significant funding to healthcare, businesses and households.

The CARES Act issued a direct stimulus check of $1,200 to every individual making up to $75,000 or joint filers up to $150,000, with an additional $500 for every child. The bill also extended unemployment assistance, provided $175 billion to states to combat the pandemic and enacted the nearly $800 billion Paycheck Protection Program, which allowed small businesses to apply for favorable loans to cover their costs.

Later that year, Trump signed a $900 billion financial aid package as part of the Consolidated Appropriations Act, which Congress approved Dec. 21. The bill had similar plans as the CARES Act, with slimmed-down unemployment benefits, a $600 cap on stimulus checks and additional aid to small businesses.

Trump spent a historic amount during his presidency, with a national debt $7.8 trillion higher in January 2021 than in January 2017. Despite employment rebounding to 6.7% by December 2020, the former president left office with 3 million fewer jobs than when he began.

2024 platform

A majority of the 2017 tax cuts implemented by the Trump administration are set to expire in 2025, and Trump has expressed interest in reinstituting them if re-elected. To balance the budget, Trump suggested restoring the president’s impoundment power, which previously allowed the executive to withhold certain funds appropriated by Congress. The Impoundment Control Act of 1974 restricted this power by allowing Congress to review possible impoundment by the federal government.

“If Congress provided more funding than was needed to run the government, the president could refuse to waste the extra funds and instead return the money to the general treasury,” Trump said on his campaign website.

He — and many Republicans — have also criticized Biden’s Inflation Reduction Act spending. Trump plans to institute fewer clean energy regulations and “unleash American oil and natural gas production” to bring down oil costs.

Most economists say that Trump’s plan would worsen inflation, not lower it, and hamper economic growth. 

Kamala Harris

Although Harris has not yet made extensive statements on her 2024 economic stances, voters can generally expect similar policies to those enacted during Biden’s first term. In her recent campaign appearances, she laid out her broader economic vision — one defined by strengthening the middle class, increasing taxes on corporations and broadening the social safety net.

“Building up the middle class will be a defining goal of my presidency,” Harris said in a July 22 address to her campaign staff. “Because we here know when our middle class is strong, America is strong.”

“In our vision of the future, we see a place where every person has the opportunity not just to get by but to get ahead — a future where no child has to grow up in poverty, where every senior can retire with dignity and where every worker has the freedom to join a union,” Harris told the American Federation of Teachers in a July 25 address.

Tax policy

Already a highly contentious issue, tax policy is likely to take center stage in national politics soon with the TCJA set to expire in 2025.

Biden promised not to increase individual income taxes for those making under $400,000, and Harris told Politico July 26 that she would uphold this commitment if elected. Harris also voted against the TCJA as a senator and has spoken out against the bill’s low corporate taxes.

“[Trump] intends to give tax breaks to billionaires and big corporations and make working families foot the bill,” Harris said July 24. “America has tried these failed economic policies, but we are not going back.”

Harris’ 2020 plan included reversing Trump’s tax cuts on the top 1% and using “that money to give a tax credit of up to $6,000 to working families each year.” Harris also supported increasing the corporate tax rate to the pre-TCJA level of 35%, with Biden’s 2025 proposed budget raising it to 28%. However, Biden has not been able to get corporate tax hikes passed in Congress, and a Harris administration would likely need more Democratic support to enact her tax goals.

Conservatives say the proposed tax increases could have negative effects on GDP, wage growth and employment. Additionally, if businesses see increased costs to offset the greater tax burden, consumers would likely face higher prices.

Another criticism of the Biden-Harris $400,000 figure is that it could hurt small businesses, because there are many companies that technically earn more than $400,000 but don’t take home the full amount, instead reinvesting much of it back into the company.

LIFT Act and tax credits

As a senator representing California, Harris introduced the LIFT (Livable Incomes for Families Today) the Middle Class Act in 2018. The bill would have provided additional money to low- and middle-income families, with a $3,000 tax credit per individual and $6,000 per couple.

The credit was designed to phase out as incomes rise; the Tax Policy Center estimated in 2018 that the lowest quintile of earners would see a 12.6% increase in after-tax income, while the top quintile would have no change. Although the bill was not passed by Congress, the Biden-Harris administration quickly took action on tax credits after taking office in 2021.

The administration’s first major piece of legislation was the American Rescue Plan (ARP), a wide-ranging $1.9 trillion stimulus package signed into law in March 2021 that was designed to jumpstart the economy. It provided $1,400 stimulus checks for individuals who made less than $75,000 annually or joint-filers who made less than $150,000. The plan also included a child tax credit of up to $3,600 for eligible families.

The immediate impact was evident. Adjusted for inflation, American GDP grew by 5.7% in 2021, representing the fastest annual real GDP growth since 1984. Unemployment dropped sharply to 3.9% by the end of the year, and consumer spending rose considerably with the influx of available money. Child poverty also fell to historic lows in 2021, largely due to the ARP’s child tax credit expansion.

The other effect of the stimulus bill, alongside the Federal Reserve’s moves to contain the economic fallout from the pandemic, was inflation. Economists disagree on the extent to which Biden’s spending policies contributed to the trend, but prices did increase in the aftermath of the ARP’s implementation.

It is not clear whether Harris would support the LIFT Act as president, though Biden’s proposed 2025 budget includes reinstating the ARP’s child tax credit. Many fiscal conservatives have criticized the Biden-Harris administration’s spending, arguing that costs will fall primarily on taxpayers. With a rising federal deficit and inflation remaining a key economic priority, the bill’s $3 trillion cost over 10 years may not gain traction in Congress.

Other economic stances

In her July 25 speech to the American Federation of Teachers, Harris singled out specific family-related economic policies she would call on Congress to pass if elected in November.

“We see a future with affordable health care, affordable childcare and paid leave,” she said. “Not for some, but for all.”

Paid family leave was included in Biden’s 2025 budget, along with health care expansions.

As a federal prosecutor, Harris specifically took on big banks and mortgage lenders in the aftermath of the 2008 financial crisis. In 2012, she won an $18 million settlement for California homeowners who fell prey to predatory mortgage lending and foreclosure practices.

Her 2020 presidential campaign included support for the Rent Relief Act that she first introduced to the Senate in 2018, which proposed tax credits to renters who made less than $100,000 and spent at least 30% of their income on housing.

Harris supported Biden’s proposed caps on rent increases in 2024. However, some economists believe rent caps would disincentivize landlords to invest in housing, further reducing the housing supply and increasing prices.

Harris proposed a $15 minimum wage in her 2020 presidential campaign, but the president can’t raise the minimum wage of non-federal employees without congressional approval. While the federal minimum wage is still $7.25, many states and companies pay their employees much higher, so only a small fraction of workers would see their incomes rise. North Carolina is one of 20 states that has the same $7.25 minimum wage as the federal level.

The Biden-Harris administration has specifically focused on investing in manufacturing and other blue-collar professions, giving their administration the best rate of manufacturing job creation of any recent president. In 2023, unemployment dropped below Trump's 50-year low, and Black and Hispanic unemployment rates have hit record lows. 

Biden became the first president to join union workers on a picket line in 2023, and his administration has pushed for pro-labor policies while in office. The United Auto Workers endorsed Harris in late July, joining the American Federation of State, County and Municipal Employees and the International Brotherhood of Electrical Workers.

The Biden-Harris record

When Biden and Harris took office, unemployment was at 6.4% after peaking around 15% in mid-2020. To improve the economy, Biden and Harris unveiled the Build Back Better plan, which included raising taxes on the wealthiest Americans and large corporations. It also provided new spending on climate, healthcare, emerging technologies and manufacturing.

The administration’s first big piece of bipartisan legislation was the $1.2 trillion Infrastructure Investment and Jobs Act, signed into law in November 2021. The act, often referred to as the “Bipartisan Infrastructure Law” (BIL), has funded over 40,000 construction projects on roads and bridges in all 50 states, and it also contains funding for electric vehicle chargers, railway networks and high-speed broadband.

Critics say the policy was not fiscally responsible in the wake of inflation, but some who voted against it have since supported funding to their districts.

Harris was the tiebreaking vote for the Inflation Reduction Act, which passed along partisan lines in 2022. Despite its name, economic experts believe inflation has actually dropped for other reasons, including falling gas prices, the Federal Reserve increasing interest rates and the resolution of ongoing supply chain issues.

The act’s healthcare and environmental provisions mark the largest federal investment in combating climate change and the introduction of price negotiations on drugs for those on Medicare, including a $35 cap on insulin. This builds on the job creation from the BIL, and economists predict it will create more than 400,000 jobs related to electric vehicles and constructing renewable energy facilities.

The IRA also instituted a 15% minimum corporate alternative minimum tax that targets corporation’s adjusted financial statement income, or “book income” — the profit companies report to their shareholders.

Although the corporate income tax rate is still set at 21% per the Trump administration’s TCJA, many corporations use loopholes, deductions and tax credits to pay much less than 21% of their income in federal taxes. For example, 55 of the country’s biggest corporations paid nothing in 2020 taxes. The new alternative minimum tax — which has not been used since the 1980s — only applies to companies who reported $1 billion in annual profit and is expected to raise more than $200 billion over 10 years.

Harris’ 2020 platform similarly supported decreasing “corporate favoritism” in the economy, lowering the cost of prescription drugs and cracking down on price-gouging.

One of the biggest promises from the Biden 2020 campaign was to cancel student debt. His initial 2022 executive action cutting up to $20,000 in student debt for every borrower was ruled unconstitutional by the Supreme Court in June 2023. Despite this ruling, the Biden-Harris administration has cleared a total of $153 billion for more than 4 million borrowers by enacting existing regulations within the Department of Education that had not been previously used.

However, the Department of Education’s 2023 Saving on a Valuable Education (SAVE) program — which lowers monthly payments for low-income borrowers — was temporarily halted July 18 by the 8th U.S. Circuit Court of Appeals, effectively blocking the remainder of the administration’s student debt relief efforts.

Harris has publicly supported student loan relief efforts as vice president and proposed multiple loan forgiveness plans as a senator. She also supported the College for All Act, introduced by Sen. Bernie Sanders, I-Vt., and Rep. Pramila Jayapal, D-Wash. In 2017. Although it never passed, the bill would have made community college free for everyone and four-year college free for those making less than $125,000.

Other candidates

Independent candidate Robert F. Kennedy Jr. follows an economic agenda mirroring many progressive Democrats. Kennedy’s platform states he is “committed to being the strongest pro-labor president since the 1960s” and that he supports the right to organize and increasing the minimum wage to $15 an hour. The former environmental lawyer also promises to increase taxes on corporations and free government agencies “from the control of big corporations.”

Libertarian Party candidate Chase Oliver aims to decrease government spending and regulation, which he argues will promote economic innovation. He wants to work with each state to pass a Balanced Budget Amendment to the U.S. Constitution, which would require the government to spend less than or equal to its revenue. Oliver’s plan for inflation centers around decreasing demand by reducing the money supply and government spending.

Independent candidate Cornel West has emphasized economic justice in his platform, identifying targets of “eradicat[ing] poverty” and “abolish[ing] homelessness.” The proposals listed on his campaign website include establishing a National Jobs Program and a $27 minimum wage.

Prospective Green Party candidate Jill Stein has proposed an Economic Bill of Rights to guarantee a “living-wage job, guaranteed livable income [and] housing,” among other things. She also seeks to guarantee free childcare, eliminate student debt and heavily tax corporations.

Editor’s note: Following the announcement that Kamala Harris would replace Joe Biden as the Democratic nominee, this article was updated Aug. 4 with information on her economic platform.

The original entry for Biden is below.

Joe Biden

Biden inherited a troubled economy, but not all of the blame can be fairly placed on Trump as a result of the pandemic’s profound impact.

Unemployment was at 6.4% when Biden took office after peaking around 15% in mid-2020. To improve the economy, Biden unveiled the Build Back Better plan, which included raising taxes on the wealthiest Americans and large corporations, new spending on climate, healthcare, emerging technologies and greater investment in manufacturing.

Biden’s first major piece of legislation was the American Rescue Plan (ARP), a wide-ranging $1.9 trillion stimulus package signed into law in March 2021 that was designed to jumpstart the economy. It included $1,400 stimulus checks for individuals who made less than $75,000 annually or joint-filers who made less than $150,000. The plan also gave additional funding to schools and small businesses, supported COVID testing efforts and vaccine distribution and included a child tax credit of up to $3,600 for eligible families.

The immediate impact was evident. Adjusted for inflation, American GDP grew by 5.7% in 2021, representing the fastest annual real GDP growth since 1984. Unemployment dropped sharply to 3.9% by the end of the year, and consumer spending rose considerably with the influx of available money.

The other effect of the stimulus bill, as well as the Federal Reserve’s continued moves to contain the economic fallout from the pandemic, was inflation. Economists disagree on the extent to which Biden’s spending policies contributed to the trend, but prices did increase in the aftermath of the ARP’s implementation.

Two of the biggest causes of elevated inflation during Biden’s term were supply-chain issues and increased demand. The ARP contributed to this increase in demand by giving consumers more money, and many were eager to spend after the pandemic. But some of the supply-side factors from the pandemic were out of Biden’s control, including slowed factory production, increased gas prices caused by the destruction of oil refineries in the Russia-Ukraine war and persistently sluggish international supply chains.

A healthy labor market also contributed to inflation. With more workers holding jobs, they demanded higher wages from their employers, causing companies to increase prices to offset the increased labor costs. The burden of higher prices on consumers can be offset with increased income, but such raises were not distributed equally across the labor force.

New legislation

Some of Biden’s biggest legislative accomplishments have been within job creation, specifically domesting manufacturing.

His first big piece of bipartisan legislation was the $1.2 trillion Infrastructure Investment and Jobs Act, signed into law in November 2021. The bill, often referred to as the “Bipartisan Infrastructure Law” (BIL), has funded over 40,000 construction projects on roads and bridges in all 50 states. The bill also contains funding for electric vehicle chargers, improving railway networks and developing high-speed broadband. Critics say the bill was not fiscally responsible in the wake of inflation, but some of those who voted against it have since expressed support for funding in their districts.

Biden signed the Inflation Reduction Act (IRA), which passed along partisan lines, in 2022. Despite its name, economic experts believe inflation has actually dropped for other reasons, including falling gas prices, the Federal Reserve increasing interest rates and the resolution of ongoing supply chain issues.

The act’s healthcare and environmental provisions mark the largest federal investment in combating climate change and the introduction of price negotiations on drugs for those on Medicare, including a $35 cap on insulin. This builds on the job creation from the BIL, and economists predict it will create more than 400,000 jobs related to electric vehicles and constructing renewable energy facilities.

Finally, Biden passed the $280 billion CHIPS and Science Act in 2022, which provides funding for research and domestic semiconductor manufacturing. Currently, the U.S. only manufactures about 12% of the world’s computer chips, with most imported from Taiwan.

However, regulatory roadblocks in the legislation, especially related to permitting complications, could slow down how soon people will feel the statutes’ tangible benefits. After a slow start, many grants have been awarded to companies across the country, but the true impact of these investments will likely not be known until the latter half of the decade.

These bills have specifically focused on manufacturing and other blue-collar professions, giving the Biden administration the best rate of manufacturing job creation of any recent president. In 2023, unemployment dropped below Trump's 50-year low, and Black and Hispanic unemployment rates have hit record lows. Biden also became the first President to join union workers on a picket line and has pushed for pro-labor policies while in office.

Tax policy

Many fiscal conservatives have criticized the Biden administration’s spending, saying the costs will fall primarily on taxpayers.

Biden promised to not increase individual income taxes for those making under $400,000, and he has kept that promise thus far. As part of the IRA, he gave tax incentives for companies to manufacture solar and wind energy. Multiple Republicans in Congress have introduced proposals to repeal Biden’s tax on fossil fuels.

The IRA also put into place a 15% minimum corporate alternative minimum tax, which targets corporation’s adjusted financial statement income. This “book income” is the profit companies report to their shareholders.

While the corporate income tax rate is still set at 21% per the Trump administration’s TCJA, many corporations use loopholes, deductions and tax credits to pay much less than 21% of their income in federal taxes. For example, 55 of the country’s biggest corporations paid nothing in 2020 taxes.

The alternative minimum tax — which has not been used since the 1980s — only applies to companies who reported $1 billion in annual profit, and it is expected to raise more than $200 billion over 10 years.

For his Fiscal Year 2025 budget, Biden proposed raising the corporate income tax from 21% to 28%, as he had promised during his 2020 campaign. However, he has struggled to get congressional approval for this tax proposal in previous years. 

Conservatives say the proposed tax increases could have negative effects on GDP, wage growth and employment. Additionally, if businesses have increased costs to offset the greater tax burden, consumers would likely face higher prices.

Student loan relief 

One of the biggest promises from the Biden campaign was to cancel student debt.

His initial executive order in 2022 cutting up to $20,000 in student debt for every borrower was ruled unconstitutional by the Supreme Court in June 2023. That plan would have cut roughly $40 billion in outstanding student loans, affecting over 40 million borrowers.

Despite this ruling, the Biden White House has cleared a total of $153 billion for more than 4 million borrowers by enacting existing regulations within the Department of Education that had not been previously used. The Public Service Loan Forgiveness program, which clears debt for public sector workers who have made more than 10 years of payments, was created in 2007 but remained ineffective because of administrative issues.

The Saving on a Valuable Education (SAVE) program, which was introduced by the Biden administration in August 2023 and lowers monthly payments for low-income borrowers, was recently given a legal boost. The 10th U.S. Circuit Court of Appeals ruled July 1 to allow the plan to continue in August after federal judges in Kansas and Missouri initially blocked the decreased payments.

2024 platform

Much of Biden’s 2024 platform is to “finish the job” from his first term, with the helpful caveat that he won’t have the challenge of bringing the economy out of a pandemic.

Biden’s campaign website lists rebuilding “a strong, inclusive middle class” — what he calls the “backbone of America.” Biden’s core economic message throughout his first term has been to build an economy “from the middle out and bottom up — not the top down,” a strategy that continues to characterize his platform for re-election.

To do this, Biden aims to build on policies enacted during his first term: increasing the corporate tax rate, lowering the cost of prescription drugs and restoring an expanded child tax credit.

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