President Joe Biden said earlier this year that the U.S. economy was “literally the envy of the world” after inheriting an economy from his predecessor Donald Trump that he said was “on the brink.”
“It takes time, but the American people are beginning to feel it,” he said during his State of the Union address in March.
But despite his positive attitude, more than a third of Americans disagree. According to a survey conducted exclusively for Newsweek According to a study by Redfield & Wilton Strategies, 46 percent of Americans believe the economy is in worse shape than it was in January 2021, when Trump left the White House. Thirty-three percent said it has improved. Of the 1,500 voters surveyed on August 15, 15 percent said they thought the economy had stayed the same, while 6 percent said they did not know.
The poll also found a significant partisan bias in views on the economy: 68 percent of those who said they would vote for Trump in the 2024 presidential election said the economy is worse than in 2021, while only 25 percent of those who plan to vote for Biden’s successor, Vice President Kamala Harris, think so.
When asked about the current state of the U.S. economy, 41 percent said it was either bad or very bad, while 36 percent said it was either good or very good. Twenty percent of respondents said it was neither good nor bad. Here, too, a partisan divide was evident: 60 percent of potential Trump voters said the economy was in worse shape, while only 26 percent of Harris supporters said the same.
Is the US economy really bad?
The health of an economy can be assessed by a variety of metrics, but the most commonly used is gross domestic product (GDP). GDP measures how much is produced, spent, and earned in an economy over a given period of time.
The Federal Reserve Bank of St. Louis reported a 2.8 percent increase in U.S. GDP in the second quarter of 2024 compared to the same period in 2023. Since the third quarter of 2022, national GDP has been steadily increasing year-on-year. Simply put, the U.S. economy has been steadily improving since then, no matter what people think.
According to the Bureau of Economic Analysis, Americans’ personal income rose $50.4 billion, or 0.2 percent, on a monthly basis in June 2024. Disposable personal income (DPI), which is personal income minus current personal taxes, rose $37.7 billion, also up 0.2 percent. Personal spending, which includes personal consumption expenditures (PCE), personal interest payments, and personal current transfer payments, rose $59.3 billion, or 0.3 percent, while consumer spending rose $57.6 billion, or 0.3 percent.
Photo illustration by Newsweek/Getty
How does the US economy compare?
And more than a third (36 percent) of respondents believe that the U.S. economy is not doing as well as other major economies in the world, such as the United Kingdom, Japan, Germany and France.
However, the US is actually doing better than all other G7 countries. While all G7 countries struggled with high inflation in the post-pandemic period, the US still managed to achieve growth thanks to an improved labor market.
“The huge labor market fluctuations caused by COVID in 2020-21 had the unintended benefit of providing millions of lower-income workers with better jobs, more income security and/or the opportunity to start their own businesses,” Adam Posen, president of the Peterson Institute for International Economics, told Axios. “We are now benefiting from the positives in the form of labor force participation, wage growth and improved productivity,” which Posen said is “very different from Europe and Japan, where most workers remained tied to their pre-COVID jobs.”
The International Monetary Fund (IMF) predicted that the US economy would perform reasonably well for the rest of the decade, i.e. until 2029, at least compared to other G7 countries; its annual growth forecast is 2.1 percent.
By comparison, GDP growth of 1.7 percent per year is expected in neighboring Canada until 2029, 1.4 percent in the United Kingdom and 1.3 percent in France. Italy, Germany and Japan are even further behind, with real GDP expected to grow by 0.8 percent, 0.7 percent and 0.4 percent annually respectively by the end of the decade.
Why do people think the economy is bad?
Despite the positive trends, Americans are unconvinced. Not only do they believe the economy is worse since Biden took office, but a significant percentage (45 percent) believe things are still going in the wrong direction, compared to 35 percent who believe America’s economic situation is improving.
There is a big difference in how the state of the economy affects Americans of different economic backgrounds, said John Min, chief economist at Monex USA Newsweek.
“When inflation is high and persistent, as the U.S. has experienced since 2021, it divides Americans into two camps: winners and losers,” he said.
“Households in the top two income quintiles own the most financial assets, such as stocks and real estate assets, which provide powerful protection against the destructive effects of inflation. And as stock and real estate prices hit new highs this year, this camp was able to get ahead of inflation in real financial assets and win.”
The same cannot be said of low-income earners with lower assets who find it difficult to keep up with rising prices.
“While household incomes have managed to catch up, albeit with some delays, the situation remains precarious for many who live paycheck to paycheck, often need a second job and/or rely on loans with record-high financing fees,” Min said.
Median incomes in the U.S. have also fallen since before the pandemic and the current administration took office. In 2019, the median household income in the U.S. was $78,250. In 2022, the latest available year reported by the St. Louis Fed, the median was $74,580 – a decline of nearly 5 percent.
“Households in the bottom three groups are feeling increasing financial pressure,” Min said. “For them, today’s economic situation is worse than it was in January 2021.”
Party political differences
The differences in opinion over who believes the economy is recovering again run along partisan lines: 69 percent of those planning to vote for Republican Trump believe the economy is headed for ruin, compared to just 22 percent of supporters of Democrat Harris, according to the Redfield & Wilton Strategies poll.
“We would expect that when the economy is doing well, the party in power would be ‘rewarded’ at the ballot box,” said Ethan Struby, assistant professor of economics at Carleton College in Minnesota, Newsweek“Our research suggests that at least some of the differences in the polls can be explained by strategic responses. Republicans who were on the losing side in the last election might say inflation is bad because that is consistent with the worldview that Biden is doing a bad job.”
Christina Farhart, associate professor of political science and international relations at Carleton College, agreed with Struby. She said Newsweek During their research, they discovered that “a strong political aspect plays a role in the interpretation of the economic situation,” and that is not surprising.
“This kind of directional thinking would be expected not only in economic information, but also in any other information that has been politicized – from policy proposals to conspiracy theories,” Farhart added.
During their campaigns, Trump and Harris have praised their differing views on the economy. Tellingly, a speech about his economic plans in August was peppered with personal jabs at his Democratic opponent: “For four years she giggled while the economy burned,” Trump said. “That’s the laugh of a madman, I can tell you that. She’s crazy.”
His posturing about Harris’ ability to get the economy under control is not an uncommon tactic across the American political landscape, although Trump is known for taking his jibes personally. While Harris is used to attacking her opposition, her team has focused on publicizing her own promises and pointing out what impact they believe Trump’s fiscal policies will have on the country and its economy.
“While promising to give more tax breaks to the wealthiest Americans and large corporations, their economic agenda will raise the cost of everyday items, groceries, prescription drugs, housing and health care for everyone else,” Brian Nelson, Harris’ senior policy adviser, said in a statement to The Hill. “Their reckless and backward policies will wreak havoc on economic markets, raise costs for working families and drive up inflation. Vice President Harris and Governor Walz offer a better alternative in this election: real plans to cut costs, create opportunity and protect middle-class freedoms.”
Farhart added: “Most people are not very well informed about the economy or the actions of the Federal Reserve, so they look to their preferred political elites to tell them whether the information is positive or negative. These elites, who are guided by the guidelines, can mislead people when the numbers are objectively favorable – or not.”
