New report shows US economy continues growth; can Trump, Harris keep it that way?

(TNND) — The American economy continued to grow in the third quarter of the year, according to a report released Wednesday by the Commerce Department.

The gross domestic product, a broad measure of the U.S. economy, grew 2.8% compared to last year.

That’s down slightly from 3% in the second quarter and down from 4.4% in the third quarter a year ago.

Colorado State University economist Stephan Weiler said 2.8% annual growth is in line with long-run economic expansion that shouldn’t invite inflation.

“The stove is turned up, but it’s not over-boiling,” he said.

The Commerce Department also reported that inflation, as measured by the personal consumption expenditures price index, increased 1.5% on an annual basis in the third quarter. That’s below the Federal Reserve’s inflation target is 2%.

The Fed ratcheted up its benchmark interest rate 11 times between 2022 and 2023 as a lever to tame inflation.

The Fed finally reversed course last month, cutting half a percentage point off its benchmark interest rate as inflation continued to cool and worries over the labor market increased.

Inflation, as measured by the PCE, increased 3.6% last year and 7.1% in 2022.

The economy is a top issue in the minds of voters during this election, and inflation is their top economic concern, according to recent surveys from Gallup and Bankrate.

Americans felt better about their finances and the economy in October, as The Conference Board’s Consumer Confidence Index recorded its strongest monthly gain since March 2021.

But there are big partisan differences in perceptions of the economy.

A recent poll from the Associated Press-NORC Center for Public Affairs Research showed just 38% of voters think the national economy is doing well.

That survey found that 85% of Republicans view the economy as doing poorly, while 61% of Democrats view the economy as doing well.

“I think in general (the economy) is good, but it’s not – unfortunately, even good economies don’t always support the people that are distressed or that are unemployed,” Weiler said.

He mentioned an increase in “discouraged workers” and the number of long-term unemployed Americans.

He also mentioned how unemployment rates are higher for people without high school or college degrees compared to college graduates.

“I do understand why some people would see the economy as doing poorly,” he said.

ELECTION & THE ECONOMY

With the election less than a week away, economists and policy experts are weighing in on the plans from both Vice President Kamala Harris and former President Donald Trump.

A poll from the New York Times/Siena College showed more people trust Trump to handle the economy, 52% compared to 45% for Harris.

But neither candidate has a plan to address our nation’s rising debt burden, according to the nonpartisan, nonprofit Committee for a Responsible Federal Budget.

That group analyzed economic plans from both campaigns and said both would actually increase our national debt.

Harris’ plan would increase the debt by $3.95 trillion through 2035, according to the CRFB.

Trump’s plan would increase the debt by $7.75 trillion, the group said.

The CRFB emphasized that its estimates contain a great deal of uncertainty.

And, of course, either president would have to work with members of the opposite party in Congress to pass economic-related legislation.

Harris has campaigned on an “opportunity economy.”

She has proposed to significantly expand the Child Tax Credit and other individual tax credits, increase support for housing and health care, expand Medicare, lower taxes on tips, and strengthen border security, according to the CRFB.

Trump has proposed to modify and extend the Tax Cuts & Jobs Act, further cut taxes for corporations and small businesses, increase military spending, strengthen border security, expand deportations and immigration enforcement, and increase support for housing, health care, and long-term care, the CRFB said.

The Penn Wharton Budget Model estimated that Harris’ tax and spending proposals would increase primary deficits by $1.2 trillion over the next 10 years.

The PWBM estimated that Trump’s tax and spending proposals would increase primary deficits by $5.8 trillion over the next 10 years.

Trump wants to impose new tariffs on imports.

“I took in from China hundreds of billions of dollars in taxes and tariffs, and I had no inflation,” Trump said in an economic policy speech last month. “We didn’t have any inflation, 1.2%. We had essentially no inflation. Now you’ve had over the last four years, you’ve had the highest inflation I think in the history of our (country). Somebody said, ‘No, sir, it’s only 58 years.’ Well, that’s pretty bad, too. I think it’s really in the history of our country.”

Weiler said the idea of big tariffs is worrying to economists.

Just when we’re getting a lower inflation rate, Weiler said new tariffs could reverse the progress.

“Because everything is going to get more expensive,” he said. “All of the goods and services. It’s not that the companies pay the (big) tariff. They passed most of it along to consumers.”

Big tariffs also invite retaliation from other countries, he said.

The U.S. is the second-largest goods exporter in the world, behind only China, according to our government.

Weiler said a trade war has the potential to decrease economic activity by reducing export sectors.

Tariffs can raise government revenue, but if the economy isn’t growing as fast then you don’t get as much tax revenue, he said. And the benefits of the tariffs can become self-canceling, he said.

“Notice that you haven’t heard much about the debt, or that you haven’t heard much about raising government revenue. … It comes down much more to a nationalistic type of approach,” Weiler said.

American University economist Robert Blecker said in a published analysis that Trump implemented a lot of tariffs during his first term and wants more during a second term, including a 10-20% tariff on all imports and as much as a 60% tariff on products from China.

Blecker said foreign countries won’t pay for the higher tariffs.

Wholesalers, retailers and distributors absorbed some of the cost of tariffs through lower profit markups during Trump’s term in the White House, according to Blecker.

They also avoided the tariffs by shifting their sourcing to countries without tariffs, he said.

Americans didn’t really see a big increase in consumer prices at the time.

But Blecker said new tariffs, especially if they’re large and they’re applied to all imports, would be much more likely to push up prices for consumers.

Harris said in a video with Mark Cuban that Trump’s tariffs plan “is applying a machete when a scalpel is what’s necessary.”

Weiler said Harris is pushing “pretty standard Democratic stuff” on the economic policy front.

Close to two dozen Nobel Prize-winning economists have sided with Harris over Trump, writing that her economic agenda is “vastly superior to the counterproductive economic agenda of Donald Trump.”

Weiler said Trump’s plans have more potential to depress U.S. economic activity compared to Harris’ plans.