Which Candidate Can Best “Handle” the U.S. Economy?

There’s More to this Question than One Might First Think

Sep 13, 2024

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As we head into the final sprint to election day for the 2024 Presidential election, polling is underway at a furious pace. With that polling, we see all sorts of data as to what Americans think about the candidates related to their positions on various policy issues. Top of mind for many Americans this election season is the U.S. economy with their concerns about inflation and especially the price of food.

Perhaps before voters are polled on economic issues and this presidential race, it would be helpful to ask ourselves some key questions. Specifically, just how much can a U.S. president actually affect and influence the nation’s economy, and how can voters evaluate a candidate’s ability to “manage” or “control” this gargantuan entity we call the U.S. economy?

What Economic Influence or Control Does a President Really Have?

From the polling that takes place, it is evident that many voters and much of the media assume that the president can directly and intentionally affect our economy. However, many Americans’ perceptions of presidential influence and control over the economy are distorted, not very nuanced, or flatly inaccurate. Mike Walden, Distinguished Professor and economist at North Carolina State University, clarifies how much direct influence the president actually has over the U.S. economy saying the:

“…president has influence over both fiscal policy and monetary policy, but the influence is indirect. Fiscal policy is implemented through the federal budget. While a president can make recommendations about the budget, ultimately both chambers of Congress must pass the budget…[1] (emphasis mine)

So, What Can the President Actually Do with Our Economy?

According to Walden, “…a president’s powers over the economy are limited, especially with the two major tools of fiscal policy and monetary policy. However, there is another source of presidential influence that shouldn’t be overlooked.” [2] This other “source” of a president’s influence which can significantly affect our economy Walden explains is the “bully pulpit, a term meaning “…a president advocating policies using speeches and interviews. The goal is to generate public support for policies and public pressure on Congress to agree with a president’s ideas and recommendations.”[3] (emphasis mine)

It is likely that, if we understand a president’s impact on the U.S. economy from perspective of their bully pulpit, we can all think of presidents who made use of it to directly influence, or at least attempt to influence, our economy in an impactful way. From TR to FDR to Carter to the present day, all of us probably can remember economic initiatives that our presidents campaigned on. We probably also can remember how well their economic policies did or did not work, assuming they were elected and had a Congress that also worked to implement them.

There’s Even More to the Answer

And the president’s economic role gets more complicated. Mark Thoma, a macroeconomist, econometrician, and Professor at the University of Oregon argues the president and their party (depending on who controls the House and the Senate) can have great impact on our economy by how they direct federal spending (i.e., the budget) and tax policy (i.e., tax cuts versus tax increases).[4] Thoma notes that the president: “…plays a role in determining how GDP is divided between various income classes… Tax cuts for the wealthy and spending cuts to social insurance that Republicans advocate will tend to redistribute income toward the wealthy and reduce the protection workers have, while Democratic policies -- tax increases on the wealthy and more generous social insurance -- would do the opposite.”[5] (emphasis mine)

What Does this All Mean for the American Voter?

The question remains, how is the American voter supposed to figure out which candidate can impact our economy in the manner they believe is best? That requires what I call “all the above” thinking. Yes, it requires understanding what a president can and can’t do with our economy, both directly and indirectly, so that we have realistic expectations. But it also requires something else. What is that?

A Final Question to Ask Ourselves about the Candidates

A strong case can be made that, while keeping in mind the factors mentioned above, the best question for a voter to ask about a presidential candidate’s ability to influence our economy is this: What are they saying they will do economically if elected president, and what track record do they have with economic issues?

This question requires a few “caveats” to avoid a “one size fits all” mentality in judging candidates’ qualifications for dealing with economic issues. One can fairly argue that some candidates who were elected did not have private sector business experience. They came from the public sector, from a public service background. Think of TR, FDR, or Eisenhower who, of course, had a military background. Yet one can fairly argue they were intelligent, systemic thinkers, and were politically astute in judging the impact of policy decisions on the economy. Others did come from a business background as Trump did.

The Candidates’ Qualifications

In the present presidential race, the contrast in professional and political backgrounds as they pertain to economic issues could not be more different. The Democratic candidate Kamala Harris comes from a public prosecutorial legal background as a public prosecutor, district attorney, and California’s Attorney General. In addition to that experience, Harris has served as United States Senator and currently is our Vice President. In those later two roles she has been exposed to economic issues from both a federal legislative viewpoint in the Senate, as well as that of the Executive Branch serving as Vice President under President Joe Biden. Republican Donald Trump has been CEO of his hospitality company and served one term as our president (2016-2020).

Here is where things get really interesting and far more subjective than many of us probably care to admit. What can either of these candidates claim or can actually “bring to the table” in terms of ideas for the future as well as past accomplishments related to the U.S. economy? Nevertheless, let’s attempt to unpack this question a bit.

Past Track Record- Harris

Harris can point to her time as Vice President and the economy related accomplishments of the Biden administration since inauguration in 2021. Taking office following President Trump, the Biden administration “…inherited a challenging economic and budgetary situation…due significantly to the COVID-19 pandemic. As of December 2020, the jobs level was nearly 10 million (6%) below the early 2020 peak, and the unemployment rate was an elevated 6.7%. There was a record budget deficit in fiscal year 2020 of $3.1 trillion, or 14.9% GDP.”[6] Early in Biden’s term Congress enacted the “…American Rescue Plan to provide relief from the economic impact of the COVID-19 pandemic…Biden's Infrastructure Investment and Jobs Act was signed into law in November 2021 and contains about $550 billion in additional investment. Biden also signed three major pieces of longer-term economic legislation to repair infrastructure like roads, bridges and water pipes, boost semiconductor investment, and expand green energy.”[7]

Today (August 2024), the U.S. unemployment rate is 4.2% and the inflation rate is 2.5%,[8] both of which are marked improvements over four years ago. Inflation is lower, yet price inflation for food remains prominent in the minds of many Americans and is one of Harris’ challenges in this election.[9] While not shying away from the Biden administration’s accomplishments with the economy, the Harris campaign has developed its own economic agenda for her administration, if elected.

Proposed Track Record- Harris

Harris calls her 2024 campaign policy positions “A New Way Forward”, According to historian Heather Cox Richardson, “…Harris vows to build the American middle class through an “opportunity economy.” Her vision for the future, she says, “protects our fundamental freedoms, strengthens our democracy, and ensures every person has the opportunity to not just get by, but to get ahead.”[10] Harris builds on the Biden-Harris administration economic programs by continuing on investment “…in the middle class which has created the strongest economy in the world. Harris is emphasizing the need to bring down household costs of food, medicine, housing, healthcare, and childcare, all issues important to Americans.”[11]

Regarding tax policy, Harris proposes to expand the Child Tax Credit and the Earned Income Tax Credit, invest in more housing with down payment assistance tax credits, and support the PRO Act. The PRO Act protects the rights of workers to unionize, while continuing the crackdown on business consolidation that kills competition and rolling back the Trump tax cuts for the wealthy and corporations.[12] Richardson points out that her “…biggest economic shift from the current administration is pegging a new capital gains tax for those earning more than a million dollars a year at 28%, significantly lower than the 39.6% President Joe Biden proposed in his 2025 budget. The plans also call for the first-ever national ban on corporate price gouging on food and groceries (37 states already have such laws).[13]

Trump Track Record- Past

The economy and the presidency is analogous to a relay race. It depends on how the “race” was run, meaning the condition of the economy, under one’s predecessor when the “baton” (i.e., the economy) is handed to the next president. Evidence shows that the economy improved greatly during the Obama administration which “had the baton” during the economic crisis and recession of 2007-09.

It is difficult, if not impossible, to examine the Trump administration’s economic performance without doing it within the context of the devastating Covid epidemic. When Trump took office in 2016 and was “handed the baton”, the economy had greatly improved and held fairly strong during his term[14] until the Covid pandemic hit in 2020. As mentioned above when describing the economy when Biden-Harris took office, the economic downturn that occurred in the last year of Trump’s term was severe because of the pandemic with the U.S. economy shrinking in 2020 by 3.5 percent.[15] Many argue that Trump mismanaged the pandemic response, treating it as a political problem rather than a public health crisis. Evidence of this is pointed to by five areas of performance failure: failing to help small businesses from closing, preventing layoffs of critical state and local government positions, slashing epidemic prevention activities, botching the public health response, and failing to help workers retain their jobs.[16]

A cornerstone of Trump’s administration was reducing our trade deficit with China using tariffs. By many accounts, it was not successful. According to Politico, “The U.S. trade deficit over the four years of President Donald Trump’s presidency soared to its highest level since 2008, despite his tough tariff tactics intended to bring it down…The combined U.S. goods and services trade deficit increased to $679 billion in 2020, compared to $481 billion in 2016, the year before Trump took office. The trade deficit in goods alone hit $916 billion, a record high and an increase of about 21 percent from 2016.”[17] While the trade deficit with China decreased, U.S. companies turned to other markets for these goods in other countries, a retaliatory trade war was launched on American agriculture (example- soybeans), and the price of goods for Americans increased.[18]

Another cornerstone of the Trump administration was its 2017 tax cuts. Two years later, an NPR report stated that even the nonpartisan Tax Policy Center was saying that “more than 60% of tax savings went to people in the top 20% of the income ladder” and reduced the corporate tax rate by 40%.[19] Corporate tax revenues fell by 31% in the first year after the cut was passed.[20] Overall tax revenues declined as a share of the economy in the two years following the tax cut’s approval.[21] As NPR reported, Maya MacGuineas, president of the Committee for a Responsible Federal Budget put it this way: “The tax cuts were never going to- and have not- come anywhere close to paying for themselves.”[22] The Committee on a Responsible Federal Budget estimates that the ten-year cost of the legislation and executive actions former President Trump signed into law was about $8.4 trillion, with interest.[23]

Since Trump campaigned for president in 2016 touting his successful business career, it would be remiss to not review that career to help determine a candidate’s track record related to “handling the economy”. To evaluate Trump’s business acumen, former GOP political strategist and author Stuart Stevens points to a 2019 New York Times (the Times) investigation finding that Trump “…for over a decade had managed to lose more money than any other American, and in some years, twice as much as any other American.”[24] Stevens quotes the Times’ report on Trump’s business performance:

“And so, year after year, Mr. Trump appears to have lost more money than nearly any other individual taxpayer, according to the I.R.S. information on high earners…Indeed, in 1990 and 1991, his core businesses lost more than $250 million each year- more than double those of the nearest taxpayers in the sampling for those years.”[25] (emphasis mine)

Trump Track Record- Future

Recently, GOP presidential candidate (again) Donald Trump proposed eliminating the federal income tax and replacing that revenue with income from new tariffs and existing tariff increases (i.e., a tax on imported goods).[26] Analysis by organizations like Moody’s Analytics and well-known economists indicates this would have a devastating impact on the U.S. economy and raise Americans’ cost of living by increasing rates of inflation over those that exist today since tariff costs are passed on to the consumer (they are not paid for by the nation from which the goods are imported). Plus, the “math doesn’t work.” Tariffs were a revenue source for the federal government when it was much smaller, but not anymore.[27] Trump has also expressed his desire to extend the 2017 tax cuts from his previous administration cited earlier. Beyond that, it is difficult to find other economic planks to Trump’s campaign to meaningfully analyze how he would attempt to manage the economy as president if elected again.

In the Final Analysis

The bottom line- while we Americans may often not have a clear understanding of the real impact a president has had or prospectively could have on the economy, we can do a much better job in our role of We the People when we know the right questions to ask. Then we can get the information to make an informed decision. We can examine the candidate’s temperament and their history (both before being elected and after) in the context of what they say they will do as president for our economy. That is when we can make what for each of us is the best choice we know how to make. We avoid making decisions based on inaccurate information, false conclusions, or misrepresentations. We find out the truth and act accordingly. And after all, is not “truth” the bedrock a democracy requires to operate for the benefit of the common good? The author hopes this helps you in your role of providing the informed consent of the governed.

[1] You Decide: Can the President Control the Economy? - College of Agriculture and Life Sciences (ncsu.edu)

[2] You Decide: Can the President Control the Economy? - College of Agriculture and Life Sciences (ncsu.edu)

[3] You Decide: Can the President Control the Economy? - College of Agriculture and Life Sciences (ncsu.edu)

[4] How much impact can a president have on the economy? - CBS News

[5] How much impact can a president have on the economy? - CBS News

[6] Economic policy of the Joe Biden administration - Wikipedia

[7] Economic policy of the Joe Biden administration - Wikipedia

[8] United States Economy at a Glance (bls.gov)

[9] Why food prices still feel so high : NPR

[11] Letters from an American, September 9, 2024, Ibid

[12] Letters from an American, September 9, 2024, Ibid

[13] Letters from an American, September 9, 2024, Ibid

[14] did-trump-create-or-inherit-the-strong-economy.pdf (senate.gov)

[15] GDP: 2020 was the worst year for the economic growth since Second World War - The Washington Post

[16] 5 Ways the Trump Administration’s Policy Failures Compounded the Coronavirus-Induced Economic Crisis - Center for American Progress

[17] America’s trade gap soared under Trump; final figures show - POLITICO

[18] America’s trade gap soared under Trump; final figures show - POLITICO

[19] “After 2 years, Trump Tax Cuts Have Failed to Deliver On GOP Promises”, by Scott Horsley, NPR, All Things Considered, December 20, 2019, https://www.npr.org/2019/12/20/789540931/2-years-later-trump-tax-cuts-have-failed-to-deliver-on-gops-promises

[20] “After 2 years, Trump Tax Cuts Have Failed to Deliver on GOP Promises”, by Scott Horsley, NPR, All Things Considered, December 20, 2019, Ibid

[21] “After 2 years, Trump Tax Cuts Have Failed to Deliver on GOP Promises”, by Scott Horsley, NPR, All Things Considered, December 20, 2019, Ibid

[22] “After 2 years, Trump Tax Cuts Have Failed to Deliver on GOP Promises”, by Scott Horsley, NPR, All Things Considered, December 20, 2019, Ibid

[23] How Much Did President Trump Add to the Debt?-2024-01-10 (crfb.org)

[25] It Was All a Lie, How the Republican Party Became Donald Trump, by Stuart Stevens, pg. 53, Ibid.

[26] Trump Wants to Eliminate Income Taxes: Here’s What That Would Mean for the Economy and Your Wallet (yahoo.com)

[27] Trump Income Tax and Tariff Proposals: Details & Analysis (taxfoundation.org)

Democraticus- The Democratist

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