From Gas Prices to Inflation and the Cost of Living

Top line

The economy will be a hot topic at Tuesday’s presidential debate, with Vice President Kamala Harris likely to highlight the Biden administration’s record on jobs and former President Donald Trump likely to focus on inflation — but the truth lies somewhere in the middle of Trump and Harris’ claims, as Trump and Joe Biden have had to deal with the unprecedented fallout from the pandemic.

President Donald Trump speaks during a press conference in 2020, with a photo of Kamala next to him … (+) Hello Harris.

Getty photos

Key facts

GDP: The country’s economic output has grown strongly under both Biden and Trump, with real gross domestic product, which tracks the inflation-adjusted value of all goods and services produced by the U.S., growing at an annualized rate of 2.7% in Trump’s first three years and 3.5% during Biden’s term. Trump’s annual growth rate of 1.4% over his entire term is weaker, though that includes the COVID-19 shock in 2020, while Biden-led growth is centered at 5.9% in 2021, slowing to 1.9% and 2.5% in 2022 and 2023.

Stock market: Stocks have fared better under Trump, though both presidencies have coincided with better-than-average growth — the S&P 500 has returned 11.8% annually since Biden took office in 2021, compared with 16.3% under Trump (and certainly not the Biden-era stock market crash his 2020 opponent predicted).

Inflation: Inflation has been much worse under the Biden administration, rising 19% in Biden’s first 42 months compared with 6% in Trump’s first 42 months, according to the government’s Consumer Price Index. Annual inflation peaked under Biden at 9% in 2022, hitting a 40-year high, before falling to just over 3% — which Biden blamed on the lingering impact of COVID-19 and the Russia-Ukraine war.

Labor market: Both Biden and Trump have overseen strong labor markets. Since Biden took office, overall employment has risen 11%, average wages have risen 18%, and unemployment has fallen from 6.7% to 4.2%. It was a particularly strong sign that job growth and unemployment below 4% have coincided with rising interest rates and falling inflation, which typically hurt the labor market, although the U.S. employment picture has shown some cracks in recent months. Perhaps Trump’s most impressive labor market accomplishments have been dropping unemployment from 4.7% to just 3.5% in late 2019 and early 2020, matching its lowest level since 1969, and wage growth of 15%, outpacing inflation over his four-year term.

COVID Jobs Asterisk: Much of Biden’s gains in the labor market are part of a post-pandemic recovery, as unemployment was just 3.5% in February 2020 and the number of Americans employed rose just 4%. Biden has focused heavily on COVID-19-distorted data, and Trump’s labor market performance is strictly cutoff-date, as COVID-19 disruptions have erased much of that nominal progress, briefly boosting unemployment to a record 14.9% in April 2020 and effectively shrinking the total labor force from December 2016 to December 2020.

Consumer health: Consumer sentiment was lower last month than at any point under Trump, according to a widely followed University of Michigan survey, as Americans continue to feel the effects of inflation despite strong economic growth data and a record stock market. July’s personal savings rate of 2.9%, which measures the percentage of Americans’ income left after spending and taxes, was less than half of April’s 6.8%. The savings rate has never dipped below 5% under Trump.

Gas prices: The average cost of a gallon of gasoline fell from $2.37 to $2.28 from December 2016 to 2020, rising to $3.24 on Monday, according to the Energy Information Administration — but gasoline prices rose to a record high of more than $5 a gallon in 2022, shortly after Russia’s invasion of Ukraine sent global energy prices soaring as the U.S. and its allies pledged not to buy crude oil from Russia, the world’s third-largest oil producer.

Federal debt: The federal government’s domestic debt of $35.3 trillion is more than 25% higher than it was when Biden took office, after increasing 39% during Trump’s presidency, up from $19.95 trillion in January 2017. The United States will see a total deficit of $5.85 trillion in fiscal years 2021-23, compared to $2.43 trillion in 2017-19 and a record $3.13 trillion in 2020 alone.

Peg’s News

Tuesday night’s debate, moderated by ABC News in Philadelphia, will pit Harris and Trump against each other head-to-head for the first time this cycle, with the economy expected to be a major topic of discussion. The U.S. economy is at a potential turning point, with slowing job growth raising concerns about a recession, while the Federal Reserve is expected to cut interest rates later this month for the first time in nearly four years, a move that would boost growth as lower borrowing costs spur spending by consumers and corporations. Harris’s economic record is somewhat of a mystery, though she has supported policies such as unrealized capital gains taxes on the wealthiest Americans and a ban on grocery store price gouging, both populist policies that have sparked controversy for their potentially dampening second-order effects on growth. Trump’s policy ideas for a potential second term include large tariffs on Chinese goods, which economists say could worsen inflation, and a promise to rein in government spending.

Key general information

The economy is the top issue voters cite ahead of November’s presidential election, according to multiple polls. The survey also suggests that Americans have more faith in Trump than his Democratic counterparts to oversee the economy, with Biden receiving the lowest confidence in doing the right thing for the economy of any president since George W. Bush in 2008 amid the Great Recession, according to a Gallup poll. Recent polls from the Financial Times and CNBC have found that a significantly larger share of Americans believe they will be better off financially under Trump than under Harris. The wavering confidence comes even as the Biden administration has touted accomplishments under his presidency, such as all-time highs in stock prices, GDP growth and the success of policies like his CHIPS Act, which preceded the artificial intelligence boom.

Tangent

Trump and his allies have dismissed Biden-era job growth as “almost 100%” the result of illegal immigration, which is not true, but the number of American-born workers has risen by a less dramatic 2% under Biden, compared to a 16% increase for foreign-born workers, many of whom arrived legally. Disinformation has also seeped into the discussion of inflation. Trump has falsely claimed that the past few years have seen the worst inflation the United States has ever faced, with overall inflation at nearly 50% under Biden, which is far from the truth. The Biden camp has also mischaracterized inflation, with Biden claiming that he came into office with 9.1% inflation (the annual CPI inflation was 1.4% in January 2021).

Against

Voters tend to punish presidents when the economy is weak and reward presidents when the economy is strong, but no matter who sits in the Oval Office, their real power over economic conditions is limited. The pandemic-era recession and the post-pandemic inflation frenzy were both global phenomena. And while both Biden and Trump have at different times touted lower gas prices, the price often has more to do with supply and demand than government policy. Crucially, the real king of economic growth and inflation is probably not the president—it’s the chairman of the Federal Reserve.

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