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Journalists often tend to focus on negative news, but it’s hard not to acknowledge the positive state of the American economy compared to Europe. While Europe continues to struggle, particularly with rising consumer prices and falling asset values, the US economy seems to be thriving.
Think about it – America has experienced steady GDP growth, a robust job market, and asset prices that have corrected reasonably well. This outcome is quite unexpected, considering factors like the end of quantitative easing, the pandemic, and the ongoing war in Ukraine. Two years ago, we might have predicted major asset price corrections and stagflation. However, the current administration’s efforts to transition to a more balanced economy seem to be working remarkably well.
So, why has the US economy performed so well? I believe there are three key factors: fiscal stimulus, consumer confidence, and the job market.
Firstly, the substantial fiscal stimulus following the pandemic has been a major differentiator between the US and Europe. The implementation of Joe Biden’s signature legislation, such as the Inflation Reduction Act and the Chips Act, has provided a significant boost to demand and consumption. Investment in manufacturing construction has also contributed significantly to GDP growth.
Secondly, consumer confidence has played a crucial role. Thanks to the support offered by the Biden administration, American consumers have been able to spend and bolster the economy. In contrast, spending in the euro area, UK, and Japan has plummeted. In the second quarter of 2023, consumer spending in the US was up 9% compared to 2019 levels, while growth in the eurozone was only 3% above 2019 levels.
Finally, the US job market remains strong despite interest rate increases, and job satisfaction is currently at a 36-year high.
Given these positive indicators, we have to ask: why isn’t Biden receiving more credit for the economy’s success? And what can he do to improve his standing?
To delve deeper into these topics, I recommend reading Anne Case and Angus Deaton’s research on the impact of college degrees on life outcomes. Additionally, take a look at the success of K-12 schools run by the military, which highlights the potential for education reform. For a different perspective, explore John Gapper’s feature article on engineering climate change-proof fruit and John Burn-Murdoch’s analysis of the lifespan divide among America’s least fortunate.
As I have previously stated, it may take time for voters to fully realize the positive impact of the economy. However, Biden can take certain steps to improve economic sentiment, such as removing Trump’s tariffs on imports and preventing Middle East crises from causing further oil price increases. Additionally, Biden should emphasize the potential negative consequences of Trump’s economic policies, such as his proposed tariffs on all imports.
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