Economic Growth Meets Frustration

Free Special Election Edition

As voters prepare to head to the polls on Tuesday to elect a president, the economy looms large in their minds, serving as a critical focal point in the electoral landscape.

This economic backdrop presents a complex narrative for both Vice President Kamala Harris’s campaign and her opponent, former President Donald Trump. While positive indicators suggest a strong economy, a prevailing sense of pessimism among voters complicates the situation.

A recent Wall Street Journal poll revealed that 62% of respondents rated the economy as “not so good” or “poor.” This widespread dissatisfaction can largely be attributed to the lingering effects of high inflation experienced from 2021 to 2023.

The U.S. Economy Outperforms

Despite the current economic challenges, the U.S. economy has shown resilience. In the third quarter, the GDP grew at an annual rate of 2.8%, a robust figure that underscores the ongoing economic expansion.

Consumer spending, which drives approximately 70% of economic output, accelerated sharply during this period, bolstered by a strong labor market and the purchase of big-ticket items. Over the past year, the U.S. economy has outperformed its peers, growing at a rate of 2.7%.

Notably, this growth comes as other major developed economies struggle to keep pace, with none of the world’s next six largest economies achieving more than 1% growth during the same period.

Sticker Shock Remains Vivid

However, the narrative of economic growth is tempered by the stark reality faced by many American households. Despite overall growth, many voters report feeling the financial squeeze of high prices for essential goods and services, such as groceries and housing.

While inflation data indicates a modest annual increase of 2.1%, the reality of “sticker shock” remains vivid for many. Prices have surged since before the pandemic, and consumers express frustration that even though inflation is cooling, the elevated price levels have become the new norm.

A Disconnect Leads to Frustration

Joanne Hsu, director of consumer surveys at the University of Michigan, observed that consumers frequently cite high price levels as a source of financial strain, highlighting the disconnect between economic indicators and personal financial experiences.

This ambivalence is reflected in consumer confidence surveys, including those conducted by the University of Michigan and the Conference Board. These surveys reveal that while consumer confidence has rebounded slightly with the cooling of inflation, it remains considerably lower than during previous periods of economic stability.

Despite the backdrop of economic growth, many Americans feel trapped in a cycle where rising costs outpace wage growth, leading to frustration and disillusionment with the economic recovery narrative.

While some consumers recognize that inflation is slowing and that their wages have begun to outpace rising costs, the overall sentiment remains one of frustration. This persistent feeling of dissatisfaction may ultimately influence how voters perceive each candidate’s plans for addressing the economy.

As both Harris and Trump seek to convince voters of their respective economic capabilities, they face the challenge of navigating the turbulent waters of recent history. The COVID-19 pandemic profoundly disrupted the economy, creating a complex backdrop against which both candidates must present their narratives.

Both Candidates Cherry-Pick the Data

Trump can point to the strong but slowing economy he inherited from President Obama, characterized by steady growth and low unemployment. However, he must also contend with the recession that occurred during his tenure, when the pandemic wreaked havoc on the economy.

Harris can highlight the significant economic rebound that has defied Wall Street's pessimism and led to record job creation. Yet she, too, must address the inflationary pressures that have caused frustration among voters, particularly when wage growth has not kept pace with rising prices for many consumers.

The discourse surrounding both candidates often revolves around cherry-picked data, with each attempting to frame their record in the most favorable light.

Importantly, economists suggest that voters should place greater emphasis on candidates' future economic promises rather than solely their past performances. The reality is that the economic landscape is fluid, and the actions taken in the coming years will shape the financial well-being of millions of Americans.

For Harris, there is an opportunity to emphasize her administration’s successes in navigating a challenging post-pandemic economy, while for Trump, the focus may rest on highlighting the economic discontent among voters and offering solutions to mitigate their frustrations.

Housing Affordability A Big Issue

The housing market presents another layer of complexity in the current economic narrative. While job growth has been strong, housing costs have surged in recent years, creating significant barriers for first-time homebuyers. This situation has been exacerbated by the Federal Reserve's aggressive interest rate hikes in 2022 and 2023, aimed at taming inflation but resulting in higher mortgage rates.

As prospective buyers struggle to afford homes, the issue of housing affordability becomes intertwined with voters’ broader economic concerns. Harris aims to showcase her administration's economic achievements while addressing the very real frustrations that voters experience. In contrast, Trump seeks to capitalize on public discontent regarding inflation and the rising cost of living.

Next President Inherits a Stabilized Economy

Economists indicate that the next president will likely be less burdened by inflation than President Biden was, allowing for a potentially smoother start to their administration. This is crucial, as three of the past four newcomers to the White House took office during or around a recession, which significantly limited their first-term agendas.

With the economy expected to stabilize, the next president will benefit from higher productivity growth, which not only makes the economy less prone to inflation but also enhances its capacity to sustain budget deficits and deliver stronger wages.

Ultimately, the outcome of the election will hinge on voters' perceptions of which candidate can best navigate the complexities of the economy and respond to their everyday concerns.

Presidential Race in a Dead Heat

“Jump ball.” “Coin flip.” “Toss up.” “Dead heat.” Political analysts are running out of ways to convey that the presidential race is effectively tied, yet the message is crucial. As CNN’s Dana Bash remarked on “Inside Politics,” “this race could not be closer.”

In the final week of the campaign, it’s essential for the media to communicate the prevailing uncertainty. ABC News Washington bureau chief Rick Klein stated, “We have a responsibility to not just say what the polls show but explain what they don’t and can’t. Any suggestion that the outcome of this election is certain is simply not borne out by the numbers.”

Fundamentals and Technicals Clash

In presidential elections, fundamental and technical analyses are key methods for predicting outcomes. Fundamentals encompass campaign styles, economic conditions, ground game effectiveness, and candidate charisma. Technicals include polling data and political betting markets.

Typically, these measures align, with candidates excelling in fundamentals also leading in polls and betting odds. However, in the 2024 election, they are significantly misaligned. "We've never seen a disconnect like this in any modern presidential election," data scientist Thomas Miller told Fortune Magazine.

Miller relies on betting markets, viewing them as more reliable than polls. His data indicates that while Vice President Kamala Harris is employing successful campaign strategies—optimism, inclusivity, and a center-left position—she is trailing in technicals. In contrast, Donald Trump, who has taken a negative, fear-driven approach, is leading in the betting odds.

Miller argues that Trump's far-right agenda and apocalyptic framing of the economy, despite positive growth indicators, contrast sharply with Harris's unifying message. This divergence suggests a potential path to victory for Harris, even as technical indicators favor Trump, leaving analysts puzzled.

CNN senior political data reporter Harry Enten, frequently on air in the lead-up to the election, quipped, “I spend more hours figuring out ways to say this race is close than New Yorkers spend in traffic.”

Enten has highlighted razor-thin margins in swing state polls, explaining that outcomes could range from a Trump landslide to a Harris landslide, with many narrow possibilities in between.

CEOs Brace for Trump Comeback

As the presidential race nears its conclusion, many CEOs and business leaders have remained surprisingly silent about the election, a move that Donald Trump’s camp interprets as a signal that corporate America may be preparing for his potential victory.

His “enemies” list appears to be expanding as the election approaches, including Democratic politicians, media figures, lawyers, and political donors he accuses of “unscrupulous behavior.”

CEOs who remember Trump’s first term understand the importance of taking these threats seriously; he could easily tank a company's stock or incite a boycott with a single tweet.

“Trump has had no issue calling out political enemies by name and threatening to use the force of government for retribution, and apparently that is intimidating a lot of wealthy targets,” Brian Riedl, a senior fellow at the Manhattan Institute, a center-right think tank, told The Washington Post. “It is a very scary sign that government intimidation works.”

Reports indicate that top business executives, including those from Silicon Valley, are reaching out to Trump in an apparent effort to rebuild relations and protect their interests should he defeat Vice President Kamala Harris.

While many American business leaders have used their influence to push back against such bullying, others are opting to either submit or remain quiet to avoid becoming targets.

At a recent black-tie charity dinner in New York City, Trump engaged in brief conversations with several business leaders who, after months of staying neutral, are now cozying up to the Republican nominee without fully endorsing him.

The stakes are high as business leaders privately strategize on how to prepare for a Trump return, with discussions at a recent Business Council gathering focused on the potential repercussions for companies seen as enemies by the former president.

Trump has bragged about receiving attention from tech executives, including Apple’s Tim Cook and Google’s Sundar Pichai. However, CEOs remain wary of Trump’s proposed tariffs and foreign policy views. Despite this, some view engagement with him as a necessary insurance policy in a tightly contested election.

Trump Promises More Tariffs if Re-elected

Trade has emerged as a flashpoint in the 2024 election, with Democrats contending that former President Donald J. Trump’s tariff policies have inflicted significant harm on blue-collar workers, despite promises to protect American jobs.

If re-elected, Trump promises to overhaul the global trading system by imposing steep tariffs on nearly all imports—over $3 trillion in goods. His plan is to raise the cost of foreign products, force factories back to the U.S., and potentially spark widespread trade wars.

Mark Zandi, chief economist at Moody’s Analytics, called the idea “a really bad one,” predicting that higher prices for materials and goods would hurt manufacturers, burden consumers—especially lower-income families—and derail the economy. “If we go down the tariff war path,” Zandi added, “we’re going down a very dark path for the economy.”

Critics of Trump’s trade approach argue that his proposed tariffs—up to 60% on Chinese imports and 10-20% on goods from nearly all other trading partners—could lead to significant economic repercussions. They warn that these measures would likely drive up consumer prices, slow economic growth, and result in job losses.

Tax policy experts also label Trump's idea to replace federal income taxes with revenue from tariffs as deeply flawed and potentially devastating to the broader economy.

If Trump returns to the presidency, Robert Lighthizer, a staunch trade protectionist, is expected to play a pivotal role, potentially as Treasury secretary, commerce secretary, or a top economic adviser.

Having served as Trump’s U.S. trade representative from 2017 to 2021, Lighthizer, 77, was instrumental in shaping Trump's signature "America First" trade agenda, which centered on boosting American manufacturing through the imposition of harsh tariffs.

Lighthizer hails from Ashtabula, Ohio, a factory town that he has described as pivotal in shaping his views on trade agreements with Japan, China, and Mexico, which he has labeled an “unmitigated disaster” for American workers.

During his previous tenure, Lighthizer's confrontational stance on China led to escalating tariffs that ignited a trade war. The U.S. ultimately imposed tariffs on more than $360 billion in Chinese goods, a move that frustrated many American businesses reliant on imports.

Yet, this strategy did force China to negotiate, culminating in a 2020 trade deal where Beijing pledged to enhance intellectual property protections and increase purchases of American products. However, two years later, trade data revealed that China had largely failed to meet those commitments.

Trump’s 2016 promises of tariffs and reworked trade deals won over many working-class voters, pushing Democrats to adopt a more protectionist stance to win them back. Over the past four years, the Biden administration has maintained and even increased Trump-era tariffs on Chinese goods while halting new trade agreements.

Billions have been invested in U.S. semiconductor and solar panel factories, signaling a major departure from decades of bipartisan trade liberalization.

Vice President Kamala Harris now faces a test of this approach as the election nears. Trade remains a key issue, particularly in swing states like Pennsylvania, Michigan, and Wisconsin, where manufacturing job losses hit hard.

A recent Bank of America survey found that investor anxiety over potential trade disruptions is on the rise, with companies taking steps to brace for economic fallout.

Columbia Sportswear's CEO told The New York Times that price increases might be necessary to offset higher tariff-related costs, and Airbus is preparing for the possibility of additional U.S. levies on its products.

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