Comparing Economic Outcomes: Biden and Trump

The economy will be a key topic at this week’s Democratic National Convention, with Democrats likely to highlight the strong recovery during President Joe Biden’s term and the poor state of the labor market when Donald Trump left office. However, the truth lies somewhere in between the claims made by Trump and Democratic nominee Kamala Harris, as both Trump and Biden dealt with the unprecedented effects of the COVID-19 pandemic.

During Trump’s presidency, the U.S. experienced robust economic growth, with real gross domestic product (GDP), which measures the inflation-adjusted value of all goods and services produced, expanding at an annualized rate of 2.7% over Trump’s first three years. Under Biden, this figure increased to 3.5% annually. However, Trump’s overall term saw a weaker annualized growth rate of 1.4%, significantly impacted by the COVID-19 economic shock in 2020. Biden’s growth was notably strong in 2021, reaching 5.9%, but slowed to 1.9% and 2.5% in 2022 and 2023, respectively.

Stock performance was better during Trump’s presidency, although both administrations saw stronger-than-average gains. The S&P 500 index achieved an annualized return of 12.5% since Biden took office in 2021, compared to 16.3% under Trump. Notably, Biden’s presidency has not seen the stock market crash that Trump predicted during the 2020 election.

Inflation has been a more pressing issue under Biden, rising 19% over the first 42 months of his term compared to a 6% increase during Trump’s first 42 months. Inflation peaked at a four-decade high of 9% in 2022 before falling to just over 3%. Biden has attributed this surge to the lingering effects of COVID-19 and the Russia-Ukraine war.

Both Biden and Trump oversaw strong labor markets. Since Biden’s inauguration, overall employment has increased by 11%, average wages have risen by 17%, and unemployment has decreased from 6.7% to 4.3%. The fact that job growth and sub-4% unemployment have persisted alongside interest rate hikes and moderating inflation indicates labor market strength. Trump’s notable achievements include reducing unemployment from 4.7% to 3.5% in late 2019 and early 2020, a level not seen since 1969, with wages growing by 15% over his term, outpacing inflation.

Biden’s job market gains are largely attributed to the post-pandemic recovery, as unemployment was at 3.5% in February 2020. The number of employed Americans has increased by only 4% since then. Biden has emphasized COVID-19-influenced data, while Trump’s labor market performance is affected by pandemic disruptions, which sent unemployment to an unprecedented 14.9% in April 2020 and caused the workforce to contract from December 2016 to December 2020.

Consumer sentiment is currently lower than at any point during Trump’s presidency, according to the University of Michigan’s widely cited survey. Despite strong economic growth and record stock market highs, Americans are still feeling the effects of inflation. The personal savings rate in April, which measures the percentage of income remaining after expenses and taxes, fell to 3.6%, less than half of the 7.7% recorded in April 2019.

Gas prices have fluctuated significantly. From December 2016 to 2020, the average price of gasoline decreased from $2.37 to $2.28 per gallon. However, it rose to $3.41 per gallon recently. Gas prices spiked to over $5 per gallon in 2022, following Russia’s invasion of Ukraine, which disrupted global energy markets as the U.S. and its allies stopped purchasing oil from Russia.

The national debt has increased under both administrations. It stood at $35.2 trillion when Biden took office, marking a 25% rise. During Trump’s presidency, the debt increased by 39% from $19.95 trillion in January 2017. The total deficit for the U.S. was $5.85 trillion from fiscal years 2021 to 2023, compared to $2.43 trillion from 2017 to 2019, and a record $3.13 trillion in 2020 alone.

Kamala Harris will officially accept her party’s presidential nomination at the Democratic National Convention this week. This follows President Biden’s decision to end his reelection campaign amid party pressure over his debate performance and low poll numbers. Harris’ rise has shifted some political dynamics: A Financial Times poll shows voters trust Harris slightly more than Trump on economic matters, a notable turnaround from Trump’s six-point lead over Biden last month (with a margin of error of 3.1 points). Harris has campaigned on the Biden administration’s economic record, despite past voter skepticism, emphasizing the recovery from the pandemic.

The economy is the top issue for voters ahead of the November presidential election. Polls show Americans previously had more confidence in Trump’s economic management than Biden’s. Biden has faced the lowest confidence in economic management since George W. Bush during the Great Recession, according to Gallup. Despite this, the Biden administration highlights achievements such as record stock prices, GDP growth, and successful policies like the CHIPS Act, which preceded the AI boom.

Trump and his allies have falsely claimed that Biden-era job gains are largely due to illegal immigration, while in reality, the American-born workforce grew by 2% under Biden compared to 16% for the foreign-born workforce, many of whom immigrated legally. Misinformation also surrounds inflation, with Trump inaccurately asserting that recent inflation rates are the worst in U.S. history and that total inflation runs at almost 50% under Biden. The Biden administration has also mischaracterized inflation, with Biden incorrectly stating he inherited a 9.1% inflation rate (annual CPI inflation was 1.4% in January 2021).

Voters usually reward presidents when the economy performs well and punish them when it falters. However, presidential influence over economic conditions is limited. The pandemic-era recession and post-pandemic inflation were global phenomena, and while both administrations have pointed to lower gas prices at various times, these are often driven more by supply and demand than by government policy. Ultimately, the Federal Reserve Chair may hold more sway over economic growth and inflation than the president.