4 economic figures to understand for the debate

The first debate between Vice President Harris and former President Trump is expected to be hotter than postpandemic inflation, which has become a major theme in the upcoming presidential election.

The Trump campaign has continually hit Harris and President Biden, who dropped out of the race in July, over high inflation amid the country’s economic recovery from the COVID-19 pandemic.

Inflation peaked at 9 percent in July 2022, and even though annual inflation finally dropped below 3 percent in July, Americans have felt the pain of higher prices and borrowing costs that have eaten into savings stockpiled during the pandemic. 

Harris and Biden have sought to emphasize their administration’s role in the economic recovery, efforts to crack down on price-gouging and legislative accomplishments, such as the Inflation Reduction Act. Biden trailed Trump in polling on his handling of the economy, but the polling has been mixed with Harris.

Trump was leading the vice president 2-to-1 on the economy in the CNBC All-America Economic Survey released last month. But a poll by the Financial Times and the University of Michigan Ross School of Business released a few days later found Harris held a slight edge over Trump on which candidate respondents trusted to handle the economy.

With partisan rhetoric on the economy poised to fly across the stage Tuesday evening, here are four figures to keep in mind.

Inflation: 2.9 percent

The consumer price index (CPI) is a broad measurement of the price of goods and services in the economy. The pace at which it rises annually, along with other similar measurements, is colloquially referred to as inflation.

The Federal Reserve tries to keep inflation at an annual rate of 2 percent, because a little bit of inflation is generally considered a good thing, suggesting robust economic activity. But when inflation rises considerably above 2 percent, it poses a problem because the money households are bringing home may not line up with their accustomed expenses.

This is what happened in the aftermath of the pandemic, following economic shutdowns when labor and materials were in short supply. Prices started to rise because of increased input costs, and then some businesses used those cost bumps as cover to further increase their margins. The extent to which that margin expansion reflects a new psychological norm for consumers is being debated by economists. Some suggest that making fewer purchases may be a good way for consumers to push back against it.

While “inflation” is always a bogeyman in political discourse, with politicians trying to spin it to their advantage, pinning it on any single economic factor is not accurate. The 2021-to-2022 inflation spike was global in nature and can really only be ascribed to the pandemic itself. Since 2022, inflation in the CPI has fallen to an annual rate of 2.9 percent, which is still elevated but becoming less and less noticeable.

GDP growth: 3 percent

Gross domestic product (GDP) is the total economic output. It’s like the profit margin on the economy as a whole, if it’s thought of as a business. More specifically, it’s the value of what is purchased, invested, spent by the government and exported to other countries.

The U.S. economy has boomed amid pandemic recovery, which probably accounts for some of the inflation that it has experienced. The economy climbed as high as a 17-percent annual increase in the second quarter of 2021 and is still above the longer-term trend of the decade ending in 2020, which is roughly around 5-percent annual growth, seasonally adjusted. In the second quarter of this year, GDP came in at 5.9 percent, according to that particular measurement of it.

Voters and consumers don’t really “feel” GDP in the same way that they “feel” the price of things or the heft of their paychecks. But positive overall performance in the economy can translate to decent wages and good employment levels. Average hourly earnings for non-managers are up 25 percent since 2020, while the CPI has risen just 20 percent.

Unemployment: 4.2 percent

The unemployment rate is the number of unemployed people divided by the number of people in the labor force. Currently, there are about 7.1 million people who are out of work, out of 168.5 million people constituting the civilian labor force.

That puts the unemployment rate at 4.2 percent, which is low in absolute terms, though it has ticked up from its recent bottom of 3.4 percent in April 2023. Unemployment, as a data point, has a lot of inertia, meaning that when it starts to take off, it can be hard to slow it down.

This was the fear in July, when the rate rose to 4.3 percent, triggering a heretofore reliable recession indicator and sparking fears of a coming recession. But in August, the rate dipped back down to 4.2 percent, suggesting that while unemployment may be off its historical lows, it is not taking off.

National debt: $35 trillion 

National debt has been climbing since the early 2000s, and has in recent years crossed into uncharted territory that has economists and lawmakers on both sides of the aisle on edge.

The national debt topped $35 trillion for the first time in July, eight months after blowing past the $34 trillion milestone and almost a year after rising above the $33 trillion mark.

It’s poised to top $50 trillion by 2034, according to the nonpartisan federal forecasters at the Congressional Budget Office (CBO).

The CBO estimates the main drivers of national debt growth in the coming years will be Social Security and federal health care programs such as Medicare, both of which the Republican and Democratic party platforms pledge to not cut, and interest payments, which are set by the politically independent Fed in line with its mandate to maintain 2 percent year-over-year inflation and maximum employment.

The nation’s growing debt, combined with partisan standoffs over the debt ceiling and “a steady deterioration in standards of governance over the last 20 years,” led the rating agency Fitch to downgrade the U.S. credit rating last summer. Moody’s, another rating agency, last fall shifted its outlook on U.S. government debt from “stable” to “negative,” citing the cost of high interest rates and political polarization.