President Joe Biden said earlier this year that the U.S. economy is "literally the envy of the world" after inheriting an economy he said was "on the brink" from predecessor Donald Trump.
"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 outlook, more than one-third of Americans don't agree. According to polling conducted exclusively for Newsweek by Redfield & Wilton Strategies, 46 percent of Americans believe the economy is in a worse state than in January 2021, when Trump left the White House, compared to 33 percent who said it has improved. Fifteen percent of those 1,500 eligible voters surveyed on August 15 said that, in their eyes, the economy remains the same, while 6 percent said they didn't know.
The poll also found a significant partisan skew in beliefs about the economy, with 68 percent of those who said they will vote for Trump in the 2024 presidential election saying the economy is worse than it was in 2021, while only 25 percent of those planning to vote for Biden's replacement, Vice President Kamala Harris, think the same.
When asked to describe the current state of the U.S. economy, 41 percent said it was either bad or very bad, compared to 36 percent who said it was either good or very good. Twenty percent of respondents said it was neither good nor bad. Another partisan split was observed here: 60 percent of prospective Trump voters said the economy is worse for wear, while only 26 percent of Harris supporters indicated the same.
Is U.S. Economy Really Bad?
The health of an economy can be evaluated by several measures, but the most commonly used metric is gross domestic product (GDP). GDP measures how much is produced, how much is spent and how much is earned in an economy over a given period.
The Federal Reserve Bank of St. Louis measured 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 increased consistently when compared to the year prior. To put it simply, the U.S. economy has continually improved since then, despite what people may think.
According to the Bureau of Economic Analysis, in June 2024, personal income for Americans rose by $50.4 billion, or 0.2 percent on a monthly basis. Disposable personal income (DPI), which is personal income minus personal current taxes, went up by $37.7 billion, also reflecting a 0.2 percent increase. Personal outlays, which include personal consumption expenditures (PCE), personal interest payments and personal current transfer payments, grew by $59.3 billion, or 0.3 percent, while consumer spending increased by $57.6 billion, or 0.3 percent.
How Does U.S. Economy Compare?
What's more, more than one-third—36 percent—believe the U.S. economy is not doing as well as other major world economies like the U.K., Japan, Germany and France.
However, the U.S. is actually faring better than all of its G7 counterparts. While all G7 nations struggled with high inflation in the post-pandemic period, the U.S. still managed to achieve growth thanks to an improved labor market.
"The enormous labor market churn of COVID in 2020-21 had the unintended benefit of moving millions of lower-income workers to better jobs, more income security, and/or running their own businesses," Adam Posen, president of the Peterson Institute for International Economics, told Axios. "We are reaping the benefits of it now in labor force participation, wage growth, and improved productivity," which Posen said was "very different from Europe and Japan where most workers remained tied to their pre-COVID jobs."
The International Monetary Fund (IMF) predicted reasonably good fortunes for the U.S. economy for the rest of the decade, up until 2029, at least when compared to other G7 nations, with an annual growth projection of 2.1 percent.
Comparatively, neighboring Canada is expected to see GDP expand by 1.7 percent per year, the U.K. by 1.4 percent per year and France by 1.3 percent per year until 2029. Trailing further behind are Italy, Germany and Japan, where real GDP is expected to increase by 0.8 percent, 0.7 percent and 0.4 percent annually, respectively, for the rest of the decade.
Why Do People Think Economy Is Bad?
Despite the positive trends, Americans aren't convinced. On top of thinking the economy is worse since Biden took office, a hefty percentage (45 percent) think things are still heading in the wrong direction, compared to 35 percent believing America's economic fortunes are getting better.
There's a stark difference in how the state of the nation's economy affects Americans from different economic backgrounds, John Min, chief economist at Monex USA, told Newsweek.
"When inflation is high and persistent, as the U.S. has been experiencing since 2021, it divides Americans into two camps: winners and losers," he said.
"Households in the top two quintiles in income hold most of the financial assets, such as stocks and home equities, that provide effective protection against the erosive effects of inflation. And when stock and house prices rallied to new highs this year, this camp was able to stay ahead of inflation in real financial terms and win."
The same cannot be said for lower earners with fewer assets who have been struggling to keep up with rising prices.
"Although the household incomes managed to keep pace, albeit with some lags, the situation remains precarious for many who are living paycheck to paycheck, often requiring a second job and/or relying on credit with record-high finance charges," Min said.
Median incomes across the U.S. have also dropped since before the pandemic and the current administration took office. In 2019, the median household income across 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 almost 5 percent.
"Households in the bottom three quantities are feeling increasing financial pressure," Min said. "For them, today's economy is worse than January 2021."
Partisan Differences
Who thinks the economy is on the road to recovery is again split along partisan lines: 69 percent of those planning to vote for the Republican, Trump, believe the economy is on the road to ruin, while only 22 percent of backers of the Democrat, Harris, think the same, the Redfield & Wilton Strategies polling revealed.
"We would expect that when the economy is doing well, the party in power would be 'rewarded' at the ballot box," Ethan Struby, assistant professor of economics at Carleton College in Minnesota, told Newsweek. "Our research suggests that at least some of the polling difference can be explained by strategic responses, and Republicans, having been on the losing side of the previous election, could be saying inflation is bad because that's consistent with the worldview that Biden is doing a bad job."
Christina Farhart, associate professor of political science and international relations at Carleton College, echoed Struby. She told Newsweek that during research, they have found "a strong political lens playing a role in the interpretation of the state of the economy," and that it isn't surprising.
"This kind of directional motivated reasoning would be expected to happen with not only economic information, but also any other information that has become politicized from policy proposals to conspiracy theories," Farhart added.
During their campaigns, Trump and Harris have waxed lyrical about their differing view on the economy. A speech regarding his plans for the economy in August was characteristically littered with personal jibes against his Democratic opponent: "For four years, she's cackled while the economy burned," Trump said. "That's the laugh of a crazy person, I tell you. She's crazy."
His posturing over Harris' ability to handle the economy is not a lesser-used tactic across the American political landscape, although Trump has been known for making his jibes personal. While Harris is no stranger to launching attacks on her opposition, her team has focused on publicizing its own pledges and pointing out the impact it believes Trump's fiscal policies will have on the country and its economy.
"As they pledge to give more tax giveaways to the richest Americans and big corporations, their economic agenda will increase costs on 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 backwards policies will bring chaos to economic markets, raise costs for working families, and send inflation skyrocketing. Vice President Harris and Governor Walz offer a stronger choice in this election: actual plans to lower costs, create opportunity, and protect the freedoms of the middle class."
Farhart added: "Most people are not deeply knowledgeable about the economy or actions of the Federal Reserve, so people turn to their favored political elites to tell them whether the information is positive or negative. This elite cue-taking can lead people astray when the numbers are objectively favorable—or not."
Newsweek