Consumer sentiment about the state of the economy could be pivotal in shaping the 2024 presidential election.
President Biden is still grappling with how to address one of his biggest weaknesses: inflation, which has recently cooled but soared in his first years in office. Former President Donald J. Trump’s frequent economic boasts are undermined by the mass job losses and supply chain disruptions wrought by the pandemic.
Here’s a fact check of some of their more recent claims about the economy.
Both candidates misrepresented inflation.
What Was Said
“They had inflation of — the real number, if you really get into the real number, it’s probably 40 percent or 50 percent when you add things up, when you don’t just put in the numbers that they want to hear.”
— Mr. Trump at a campaign event in Detroit in June
“I think it could be as high as 50 percent if you add everything in, when you start adding energy prices in, when you start adding interest rates.”
— Mr. Trump in a June interview on Fox News
This is misleading. Karoline Leavitt, a spokeswoman for the Trump campaign, cited a 41 percent increase in energy prices since January 2021, and prices for specific energy costs like gasoline rising more than 50 percent during that time.
But the most widely used measure for overall inflation, the Consumer Price Index, has increased by about 20 percent since January 2021, less than half of Mr. Trump’s estimate. Year-over-year inflation peaked at 9.1 percent in June 2022.
In comparison, under Mr. Trump, the index cumulatively rose by about 7.4 percent from January 2017 to January 2021, and year-to-year inflation peaked at 2.9 percent in July 2018.
The index does include energy prices, but Mr. Trump is right that it has not included interest rates since the 1980s for a variety of reasons. In a 1982 paper explaining why the C.P.I. would take into account rental costs rather than mortgage rates, economists from the Bureau of Labor Statistics wrote that mortgages were in part investments for the future, while the inflation index should focus only on current consumption.
If interest rates were included in the C.P.I. and given a heavy enough weight in the calculation, it is possible that the resulting index could have risen by 50 percent under Mr. Biden, said Judd Cramer, an economist at Harvard University.
Dr. Cramer was an author of a recent working paper that assessed the effect of including borrowing costs on C.P.I. and its relation to consumer sentiment. Once accounting for housing costs and interest payments, annualized inflation peaked at 18 percent in November 2022, according to the paper, compared with the official rate of 7.1 percent.
But Dr. Cramer rejected Mr. Trump’s characterization of an index that factored in interest rates as a more accurate gauge or “real” rate of inflation.
“Nobody would have said that the real price of goods fell by 10 percent during the first Obama administration because mortgage rates went down,” he said, adding that mortgage rates affect a small subset of Americans. “I don’t think that’s the way anybody thinks about it.”
“The point of our paper,” Dr. Cramer said, “is that consumers do care about interest rates, about what they pay on their credit cards, about what they pay if they want to buy a home, about car payments, so we should thinking about those things.”
“But in terms of what the B.L.S. is measuring, we think they’re doing it correctly,” he added.
What Was Said
“I think inflation has gone slightly up. It was at 9 percent when I came in, and it’s now down around 3 percent.”
— Mr. Biden in a May interview with Yahoo! Finance
False. Year-over-year inflation was 1.4 percent in January 2021, when Mr. Biden took office. It peaked at 9.1 percent in June 2022, more than a year into his presidency, and has fallen to 3.3 percent in May.
Mr. Trump made false claims about job growth under Mr. Biden.
What Was Said
“One hundred percent of the jobs created have gone to illegals.”
— Mr. Trump at the Detroit event
False. Official estimates of employment do not support Mr. Trump’s statement. And estimates from various groups show that the population of unauthorized immigrants has grown in recent years, but not nearly enough to take all the jobs created during Mr. Biden’s presidency.
Two groups that advocate lower levels of migration and stricter border security have estimated that there are 2.3 million to 2.5 million more unauthorized immigrants in 2023 than in 2020. One group, the Center for Immigration Studies, estimated a total population of 12.8 million while the other, Federation for American Immigration Reform, pinned the number at 16.8 million.
The economy has added more than 15 million jobs since January 2021.
Ms. Leavitt, the Trump campaign spokeswoman, cited an increase of 414,000 foreign-born workers in May, compared with a decrease of 663,000 native-born workers last month.
But monthly fluctuations do not tell the entire story. For example, in April, the number of foreign-born workers decreased by 632,000 and the number of native-born workers increased by 866,000. Overall, the Bureau of Labor Statistics estimated that 29.9 million foreign-born workers — both authorized and unauthorized — and 131.1 million native-born workers were employed in 2023. That is an increase of 5.1 million in employed foreign-born workers and 8.1 million native-born workers since 2020.
What Was Said
“Under Biden, zero manufacturing jobs were created in the month of March. You know that, right? Zero. I don’t think that’s ever happened. Zero. It’s hard to do. Zero.”
— Mr. Trump in a May rally in Wisconsin
False. The manufacturing sector did shed about 6,000 total jobs from February to March, but Mr. Trump is wrong that this is unprecedented. Rather, since the Bureau of Labor Statistics began tracking monthly manufacturing employment in 1939, the sector has lost jobs in about 40 percent of the months.
Under his own presidency, employment in the sector declined in seven months out of 12 in 2019, even before the coronavirus pandemic hit, and in the first four months of 2020.
Even as the total number of jobs declined in March 2024, the sector still hired 291,000 workers in March (335,000 left their jobs).
What Was Said
“We’ve already created 15 new million jobs — a record.”
— Mr. Biden in a June speech
This needs context. The economy added 15.6 million jobs from January 2021, the month when Mr. Biden took office, to May. By raw numbers, that is indeed a larger increase in new jobs over three years than the number added over other presidents’ full four-year terms since at least 1945.
But by percentage, Mr. Biden’s first 40 months still lag behind the job growth of some of his recent predecessors’ full terms. The economy added 10.9 percent more jobs under Mr. Biden so far, compared with 11.2 percent in President Ronald Reagan’s second term and 12.8 percent in President Jimmy Carter’s four years in office.
Mr. Biden is, of course, comparing his three and a half in office with the entire term or presidencies of his predecessors so the comparison is not equivalent. Moreover, Mr. Biden’s first years in office followed historic job losses wrought by the coronavirus pandemic. Most important, presidents are not singularly responsible for the state of the economy.
The two candidates have also sparred over the 2017 tax cuts.
What Was Said
“They want to quadruple your taxes.”
— Mr. Trump in a June rally in Las Vegas
“They’re going to let them expire. They’re going to give you the biggest tax increase you’ve ever had, ever, by four times.”
— Mr. Trump at a campaign event in Detroit in June
False. Many elements of the 2017 tax cut Mr. Trump signed into law will expire in 2025, and Mr. Biden has proposed some tax increases on high-income earners and corporations. But this does not amount to a quadrupling of taxes.
The 2017 tax cuts reduced personal tax rates, increased the standard deduction and doubled the child tax credit, but it also limited the deduction for state and local taxes. In 2025, the law is expected to reduce the average tax rate by 1.4 percent, according to the Urban-Brookings Tax Policy Center, a Washington think tank that studies fiscal issues. Most in the top 5 percent of income would see the greatest change, by 2.4 percent.
Ms. Leavitt cited an analysis by the Tax Foundation, a conservative think tank, estimating that taxpayers would see an average increase of $2,800 if the 2017 law’s provisions were not extended.
But Mr. Biden has also consistently said he does not support raising taxes on people making under $400,000 a year. In his latest budget, the president proposed extending tax cuts for those making under that threshold. It called for “additional reforms to ensure that wealthy people and big corporations pay their fair share,” such as restoring the top individual income rate to 39.5 percent, from 37 percent, for single filers making above $400,000 and families making more than $450,000.
It also included several provisions that would reduce personal taxes for average and low-income earners including further expanding the child tax credit and making permanent the earned-income tax credit for childless workers.
Mr. Biden’s proposals would increase the average tax rate by about 1.9 percent, according to a Tax Policy Center analysis of Mr. Biden’s very similar budget from last year. The top 0.1 percent would see the biggest increase of about 13.9 percent, while the low income filers would see a reduction in taxes. That is no nowhere near the 300 percent increase Mr. Trump warned of.
The Tax Foundation similarly estimated that Mr. Biden’s proposals would reduce after-tax income by about 1.1 percent across all income groups and, if accounting for an estimated loss in economic growth, by 2.8 percent.
What Was Said
“He provided a $2 trillion tax cut for the super wealthy, which has done nothing but increase the debt and very little impact on ordinary people and their ability to, you know, function and grow.”
— Mr. Biden at a campaign event in June
This is exaggerated. Most Americans, not just those earning the highest incomes, received a tax cut under the 2017 law, despite perceptions to the contrary. The tax cut did increase the federal debt, but some studies showed that it had spurred economic growth.
Ms. Leavitt noted that the 2017 law also increased the child tax credit and simplified taxes by increasing the standard deduction — arguably provisions that did benefit ordinary people.
The independent Tax Policy Center estimated that 64.8 percent of people received a federal income tax cut in 2018, while 6.3 saw an increase. About 81.7 percent of Americans who made $50,000 to $75,000 — roughly a median income — received a tax cut that averaged $750. That is consistent with estimates from the Joint Committee on Taxation, the nonpartisan analysts of Congress.
High-income earners did far better under the tax cut, though, with the top 1 percent receiving nearly 17 percent of the total benefit with an average tax cut of $30,000.
Several analyses of the 2017 law from nonpartisan, left-leaning and conservative think tanks showed that it led to a modest near-term increase in gross domestic product, though the economists have disagreed on the long-term effects. One recent study also found that the 2017 law bolstered investment and workers’ pay modestly, though other studies have found little to no effect on workers’ pay.