The Effect of the Presidential Election on the Economy

The Effect of the Presidential Election on the Economy 

By Garrett Zhou

While not as controversial as last, this year’s election has had its fair share of drama. From superstar athletes such as Jon “Bones” Jones and Christian “Captain America” Pulisic hitting the “Trump Dance” as celebrations to people claiming that this presidency is the end of the world, Trump’s victory over Kamala Harris has swayed a lot of people. Many Trump supporters’ main reason for voting for him was simply the economy. Claims that he would fix inflation, lower gas prices, and bring more jobs to Americans were floating around. However, let’s see how true this claim that “Trump is going to fix the economy” actually is.

[Christian Pulisic in the USMNT win over Jamaica → https://www.nytimes.com/athletic/5934687/2024/11/20/christian-pulisic-donald-trump-dance-usmnt/]

The best way to predict future outcomes is to look at empirical examples. Trump had a presidency from 2016-2020, making him only the second president ever to serve two non-consecutive terms, the first being Grover Cleveland. I will determine economic success using a variety of factors such as the stock market, mortgage rates, employment, inflation, prices of everyday goods, etc. Firstly, some background information. Trump is an innate businessman who has run a successful real estate business for decades before entering the world of politics. According to Forbes, Trump’s net worth in 2016 was roughly 4.5 billion dollars, putting in the Forbes 400 Richest People in the World. He has been a very successful businessman in his career, and many expected this success to translate to his term in office. However, there were doubters aplenty.

Many claimed that running the country is a far different endeavor than running a real estate business. MacroTrends said the S&P 500 grew by 67% during his first term. Compared with both his predecessor and his successor, this is extremely good. During the Obama campaign, the growth was about 58% during his first term and 57% during his second term according to MacroTrends. Opinions also showed satisfaction with the economic growth. NBC Polls showed that about 65% remembered being satisfied with Trump’s work with American stock markets during his first term. In terms of overall GDP, During Trump’s presidency, the US GDP experienced 2.3% growth, which is a little bit above average, but remember, he had to work with Covid during the tail end of his term. Unemployment numbers are complicated. In 2016, Trump started with about 5.5% unemployed. In 2020, that number was 10%. However, before the COVID pandemic, unemployment was at an all-time low, about 3.5%. Then, the pandemic pushed unemployment to almost 15%. However, through numerous policies issued, unemployment dropped to about 10% by the end of 2020. According to Investopedia, the inflation rate during Trump’s presidency was about 1.9%. This is very low, with only Obama, John F Kennedy, and Dwight Eisenhower having lower inflation rates. According to Investopedia, this inflation went up a bit because of COVID-19, so his raw number is about 1.2-1.5%. 

Considering numbers before COVID from this source, arguing with Trump’s economic success is hard. He may be a little overhyped, but he was a great economic president. He raised labor force participation, decreased the poverty rate by 5%, increased median household income by $10,000, dropped mortgage rates by almost 0.5%, which is a fair amount but not too significant, dropped gas prices to $2.60 from $3.36, and, interestingly, dropped carbon dioxide emissions by 300 million metric tonnes. The last statistic is interesting because Trump was not known for his climate policies.

A lot of the complaints are about how bad the Biden-Harris campaign was at handling COVID and the economy in general. How true is the claim? It turns out that this claim is justified but not completely true. The Biden-Harris campaign had to deal with a lot of factors that hindered their ability to work on the economy. A couple of examples are the tail end of COVID-19, the Ukraine-Russia and Israel-Palestine wars, and China-Taiwan tensions. However, a lot of problems arise from their politics, which I am not going to cover. A big complaint was gas prices. You hear it every day: “I’m paying $100 to fill up my tank.” How big of a deal is this, and why did this problem arise? According to Forbes, gas prices rose by 120% during the Biden presidency. For someone who drives 30 miles daily, which is a very small amount, assuming a pretty normal 20 miles per gallon, this leads to an extra $3000 spent on gas over the course of a year, a significant amount for lots of people. This is about 5% of a median household’s income spent on gas, which is going to make Biden unpopular. The President can’t directly control gas prices, but he has a large impact on it. Now, let's look at grocery prices during Joe Biden’s tenure as President. Grocery prices rose 25.8% during Biden’s tenure according to Yahoo Finance, which is quite a bit larger than the average 3.8% grocery inflation previously. Overall inflation was also up. According to this link, inflation increased prices by 19.3% during Biden’s presidency, costing families an extra $17,080 per year. The average inflation during his tenure is 5.2%, much higher than the average of 2.4%. 

[Joe Biden speaking about Trump’s possible tariff implementation → https://abcnews.go.com/Politics/biden-quips-signing-stimulus-check-stupid-calls-trump/story?id=116651026]

It has been clear that Trump was successful economically during his first term in office. However, critics say that he will not replicate this success during his upcoming second term. So, what policies is Trump planning to implement this time around? 

The biggest policy at the forefront of people’s minds is the Chinese tariffs, as well as Mexico and Canada. According to CNN, Trump is planning major tariffs on Chinese products. For those who are not aware, tariffs are extra prices added to foreign products to make them more expensive than domestically produced products, even if the foreign products were cheaper before the tariffs. The point of this is to decrease reliance on imports, boost the domestic economy, and create more jobs. However, it is sometimes hard to switch to domestic products only, and these tariffs can have more repercussions later. During Trump’s first term in office, he placed tariffs on China. The effect of this was not the best; a trade war ensued between China and the US that had bad impacts on the US economy’s well-being. This time could be very similar, but the key difference is that China’s economy is struggling, meaning that Chinese companies will be desperate for exports. I am very interested in how this pans out, look out for updates on my blog. 

A lot of people believe that Trump will end the war in Ukraine, and if you thought that this doesn’t directly relate to the economy, you’d be dead wrong. The US has sent over $175 billion to Ukraine over the last 2-3 years, and while some of this doesn’t directly go to the Ukraine government, it’s still money spent. Currently, the Public Health System is severely underfunded; branches dealing with chronic conditions(which, ironically, six in ten Americans have), obesity, and disease control, among others. The federal housing program/housing assistance, veteran assistance, and the education program are just a couple other underfunded government programs that would reap the benefits of ending the wars in Israel and Ukraine. 

Last thing; the people have trust in Trump. The minute the stock markets opened after election day, major stock indexes like Dow Jones, NASDAQ, and the S&P 500 went up by around 3% according to NBC, showing that the people have a lot of trust in Trump and his policies. After the election, people bought a lot of stocks, causing stock prices prices to soar to all-time highs. Part of this may be Trump’s wealth. He is worth $5.6 billion according to Forbes, which is an all-time high. Compare this to Kamala Harris, who according to Forbes only has a net worth of around $8 million. It’s pretty clear that Trump is more successful financially than Kamala, leading more people to believe he can handle the engine that is the United States economy. 

[Trump pumping his fist after nearly being shot during a rally in Pennsylvania → https://www.newyorker.com/news/daily-comment/the-attempt-on-donald-trumps-life-and-an-image-that-will-last]

So, to conclude, the economy during Trump’s previous term was not as hype as previously thought, but it was up there with the best US economies in history. With the knowledge of the mistakes he has already made, and a fire to bring a better life to all Americans, from a non-biased standpoint, I truly believe that the American economy is looking at an upward trajectory for the first time in 4 years. Thanks for reading, and, as always, have a great day.