During the presidential debate, the moderators asked Vice President Kamala Harris, “When it comes to the economy, do you believe Americans are better off than they were four years ago?” Harris sidestepped this question and instead expressed her faith in “the ambition, the aspirations, the dreams of the American people.”
Former President Donald Trump then asserted, “Look, we've had a terrible economy…We have inflation like very few people have ever seen before. Probably the worst in our nation's history. We were at 21 percent...This has been a disaster for people, for the middle class, but for every class.”
Harris let that go unchallenged.
What is going on here? It’s not that Harris is a lousy debater — we saw quite the opposite as the event unfolded. Rather, the simple fact is that the Harris campaign has already conceded that the economy has performed terribly during the last four years. This is despite the fact that the unemployment rate remains historically low, inflation has fallen substantially and the S&P 500 is hitting new records.
But most Americans are not entranced by statistics. They already have jobs and they don’t own a lot of stocks. They experience the economy primarily through their trips to the gas station and the grocery store, where they notice that prices are still far higher than they were four years ago. Being ordinary human beings rather than economists, they do not notice that inflation (the rate of change of prices) has declined to near the Federal Reserve’s 2 percent target. Nor do they consider that wages have risen about as much as prices, or that the economy was hit by a shock of unprecedented strength and complexity by the pandemic. And so Harris knows that any attempt to convince voters that the economy is actually doing quite well will be met with incredulity.
We are neither political scientists nor political operatives, so we have no advice to offer Harris’s campaign strategists. But it is ironic that they feel unable to defend their economic record when it has been so much better than that of other advanced economies. Those economies were also hit by pandemic recessions followed by pronounced surges in inflation. As detailed in our recent research brief, we found the following:
First, despite assertions that Biden-Harris policies caused the pandemic surge in inflation, U.S. prices have risen just a little more (19.9 percent) since the start of their administration than the average of other advanced countries, weighted by the size of their economies (17.6 percent). This largely reflects the same factors driving prices elsewhere — supply-chain disruptions, rising global commodity prices, the pandemic shift in consumption from services to goods and fiscal stimulus.
Second, as noted above, U.S. wages have kept up with prices, so that the real value of wages’ purchasing power has risen about 0.3 percent during the Biden-Harris administration — while that of the other advanced economies has fallen 3.3 percent.
Third, the American unemployment rate has averaged 4.2 percent since the end of 2020, which is not only very low by historical standards, but below the 5.4 percent rate averaged by the other advanced economies. And this is despite the fact that many other countries subsidized employment to a much greater degree than America did, thereby limiting the rise in unemployment abroad during the pandemic recession. The relatively low U.S. unemployment rate also speaks to the continued dynamism and flexibility of the American labor market compared to in many foreign economies.
Fourth, underlying the better tone of U.S. labor markets has been a strong expansion of the economy. Since the end of 2020, U.S. real GDP has risen 11.8 percent, compared with 8.3 percent in the other advanced economies. And this calculation obscures the fact that many economies had deeper pandemic recessions in 2020 than did the U.S. Measured from the end of 2019, U.S. real GDP has grown 10.7 percent, more than double the 4.6 percent rise in the other advanced economies.
Fifth, underlying all these favorable factors, the S&P 500 has risen 52 percent since the end of 2020, compared with only 45 percent in the other economies.
To be sure, some of the strong performance of the American economy was achieved at the cost of larger fiscal deficits: an average 5.4 percent of GDP for the U.S. non-interest deficit (adjusted for deviations from full employment), compared with only 2.6 percent for the other advanced economies. Even so, reflecting the larger rise in the American economy, government debt as a share of GDP is projected to have actually fallen a bit more in the U.S. than in the comparison group.
In sum, the performance of the U.S. economy during the Biden-Harris administration has been far better than either their critics have alleged or Harris herself has acknowledged. It would be a shame if Americans went to the voting booth without understanding this important fact.
Steven Kamin is a senior fellow at the American Enterprise Institute, where he studies international macroeconomic and financial issues. Benedict Clements is an economic consultant and professor at the Universidad de las Américas in Ecuador.
