Consumer sentiment about the state of the economy could be crucial in shaping the 2024 presidential election.
Biden remains struggling to address one of his biggest weaknesses: inflation, which has subsided recently but spiked during his first few years in office. The economic imperatives of former President Donald J. Trump have been undermined by mass unemployment and supply-chain disruptions caused by the pandemic.
Below is a fact check on some of their latest claims about the economy.
Both candidates misrepresented inflation.
What was said
“The inflation rate, in actual numbers, if you add it all up without just putting in the numbers they want to hear, is probably 40 percent or 50 percent.”
— Trump at a campaign event in Detroit in June
“When you add up energy prices, interest rates and everything else, I think it could be as high as 50 percent.”
— Trump in a June Fox News interview
This is misleading. Trump campaign spokeswoman Carolyn Leavitt noted that energy prices have increased 41% since January 2021, and certain energy costs such as gasoline have increased by more than 50% during the same period.
But the Consumer Price Index, the most widely used measure of overall inflation, has risen about 20% since January 2021, less than half of Trump's estimate. Year-over-year inflation peaked at 9.1% in June 2022.
In contrast, under Trump, the index rose about 7.4% cumulatively from January 2017 to January 2021, with year-over-year inflation peaking at 2.9% in July 2018.
The index also includes energy prices, but, as Trump noted, hasn't factored in interest rates since the 1980s for a variety of reasons. In a 1982 paper explaining why the Consumer Price Index considers rents rather than mortgage rates, economists at the Bureau of Labor Statistics wrote that mortgages are also investments in the future, while an inflation index should only focus on current consumption.
Harvard economist Judd Cramer said that if interest rates had been included in the CPI and given full weight in the calculation, the index could have risen by 50% under Biden.
Dr Cramer is one of the authors of a recent working paper that assessed the impact of incorporating borrowing costs into the CPI and its relationship to consumer sentiment. Taking into account housing costs and interest payments, the annualised inflation rate would peak at 18% in November 2022, compared with the official rate of 7.1%, the paper said.
But Dr Cramer rejected Trump's argument that an index that takes interest rates into account is a more accurate – or “real” – measure of inflation.
“Nobody would have said that the real price of goods fell 10 percent because mortgage rates fell during the Obama administration,” he said, adding that mortgage rates only affect a small percentage of Americans. “I don't think anybody thinks of it that way.”
“The point of our paper is that consumers care about interest rates, credit card payments, home payments, car payments, and so on, and we should be thinking about those things,” Dr. Cramer said.
“But we think they're doing it right in terms of what the BLS is measuring,” he added.
What was said
“I think inflation has gone up a little bit. It was at 9 percent when I took office and is now down to about 3 percent.”
—Biden in a May interview with Yahoo! Finance
error. When Biden took office in January 2021, the year-over-year inflation rate was 1.4%. By June 2022, more than a year after he took office, it had peaked at 9.1% before falling to 3.3% by May.
Trump has made false claims about job growth under Biden.
What was said
“100% of the jobs that were created went to illegal immigrants”
— Trump at an event in Detroit
error. Official employment figures do not back up Trump's comments, and various groups estimate that the undocumented immigrant population has grown in recent years but not enough to replace all of the jobs created during Biden's presidency.
Two groups that advocate for less immigration and stricter border security estimate that there will be 2.3 million to 2.5 million more illegal immigrants in 2023 than there were in 2020. One group, the Center for Immigration Studies, puts the total at 12.8 million, while the Federation for American Immigration Reform puts it at 16.8 million.
Since January 2021, the economy has added more than 15 million jobs.
Trump campaign spokesman Leavitt said the number of foreign-born workers increased by 414,000 in May, while the number of U.S.-born workers fell by 663,000 last month.
But month-to-month fluctuations don't tell the whole picture. For example, in April, the number of foreign-born workers decreased by 632,000, while the number of native-born workers increased by 866,000. Overall, the Bureau of Labor Statistics estimates that 29.9 million foreign-born workers (both authorized and unauthorized) and 131.1 million native-born workers will be employed in 2023. This means that since 2020, there have been 5.1 million more foreign-born workers and 8.1 million more native-born workers in the workforce.
What was said
“Under Biden, we had zero manufacturing jobs in March. You know that right? Zero. I don't think we've ever seen anything like this before. Zero. That's a hard thing to achieve. Zero.”
— Trump at a rally in Wisconsin in May
error. Manufacturing lost a total of about 6,000 jobs from February to March, but Trump would be wrong to say that this is unprecedented. Rather, since the Bureau of Labor Statistics began tracking monthly manufacturing employment in 1939, the sector has lost jobs about 40 percent of the time.
During his own presidency, employment in the sector fell in seven of the 12 months of 2019, before the coronavirus pandemic hit, and also fell in the first four months of 2020.
While total employment declined in March 2024, the sector added 291,000 workers in March (335,000 left the workforce).
What was said
“We have already created 15 million new jobs, which is a record.”
— Biden in a June speech
This requires context. From January to May 2021, when Biden took office, the economy added 15.6 million jobs. In raw numbers, that's more new jobs added in three years than any other president since at least 1945 created in his entire four-year term.
But in percentage terms, Biden's first 40 months of job growth are still below the rate of employment growth during some of his recent predecessors' terms. Under Biden, the economy has recorded 10.9% job growth so far, compared with 11.2% during Ronald Reagan's second term and 12.8% during Jimmy Carter's four years in office.
Of course, Biden is comparing his 3.5 years in office to his predecessor's entire term, so the comparison is not apples to apples. Moreover, Biden's first few years in office came on the heels of historic unemployment caused by the coronavirus pandemic. Most importantly, the president is not solely responsible for the state of the economy.
The two candidates also sparred over the 2017 tax cuts.
What was said
“They want to quadruple your taxes.”
— Trump at a rally in Las Vegas in June
“They're going to let it lapse. They're going to give you a four-fold tax increase, the biggest ever.”
— Trump at a campaign event in Detroit in June
error. Many of the 2017 tax cuts that Trump signed into law expire in 2025, and Biden has proposed raising taxes on high earners and corporations — but not enough to quadruple them.
The 2017 tax cuts lowered individual tax rates, raised the standard deduction and doubled the child tax credit, but also limited deductions for state and local taxes. The law is expected to lower average tax rates by 1.4 percentage points in 2025, according to the Urban-Brookings Tax Policy Center, a Washington think tank that studies fiscal issues. Most of the top 5% of earners would see the biggest change, by 2.4 percentage points.
Levitt cited an analysis by the Tax Foundation, a conservative think tank, that estimated that taxpayers would see an average tax increase of $2,800 if the provisions of the 2017 law were not extended.
But Biden has consistently said he would not support raising taxes on people making less than $400,000 a year. In his latest budget proposal, the president proposed extending tax cuts for people below that threshold. The budget also calls for “additional reforms to ensure that the wealthy and large corporations pay their fair share,” including restoring the top personal income tax rate from 37% to 39.5% for singles making more than $400,000 a year and families making more than $450,000.
It also included several provisions to reduce personal income taxes for average and low-income earners, including further expanding the child tax credit and making permanent the earned income tax credit for childless workers.
Biden's proposal would raise the average tax rate by about 1.9%, according to a Tax Policy Center analysis of Biden's very similar budget from last year. The biggest increase would be for the top 0.1 percent, at about 13.9%, while lower-income earners would see their taxes reduced — far short of the 300% increase Trump has warned about.
The Tax Foundation similarly estimated that Biden's proposals would reduce after-tax income by about 1.1% across all income groups, or 2.8% if lost economic growth is taken into account.
What was said
“He delivered a $2 trillion tax cut for the super-rich that only increased the debt and did little to impact regular people and their ability to function and grow.”
— Biden at a campaign event in June
This is an exaggeration. The 2017 law gave most Americans tax cuts, not just those at the top of their incomes, but it also had its own perception: While the tax cuts did increase the federal debt, some studies have shown that they actually boosted economic growth.
Leavitt noted that the 2017 law also increased the child tax credit and simplified taxes by increasing the standard deduction, provisions that would benefit ordinary people.
The independent Tax Policy Center estimates that 64.8% of Americans received a federal income tax cut in 2018, while 6.3% received an increase. About 81.7% of Americans earning between $50,000 and $75,000 a year (roughly the middle income) received an average tax cut of $750. This is consistent with an estimate by the Joint Committee on Taxation, a nonpartisan analyst group in Congress.
But higher-income earners benefited much more from the tax cuts, with the top 1 percent receiving about 17 percent of the total benefit, with an average tax cut of $30,000.
Several analyses of the 2017 law by bipartisan, left-leaning and conservative think tanks have found that it slightly increased gross domestic product in the short term, but economists are divided on its long-term impact. And while some recent studies have found that the 2017 law slightly boosted investment and worker wages, others have found that it had little or no effect on worker wages.
