US Economy Outperforms G7 Peers in Post-COVID Growth, but Challenges Remain

In the upcoming presidential debate between President Joe Biden and former President Donald Trump, the state of the US economy is expected to be a major point of contention. However, a comprehensive analysis by experts from the Atlantic Council reveals that the United States is outperforming all of its advanced economy peers in post-COVID growth.

The robust growth can be attributed to various factors, including fiscal policies such as the Inflation Reduction Act and CHIPS and Science Act, which have stimulated job creation in the manufacturing sector. The Federal Reserve’s intervention, keeping interest rates near zero and injecting trillions into the economy, has also played a significant role.

Furthermore, the rise of homegrown artificial intelligence companies like NVIDIA has propelled the United States ahead of its fellow G7 countries. Combined with increased productivity growth, these factors have contributed to an unexpected surge in the US economy.

However, one area of concern is inflation. While it is falling in the United States, it is not declining as rapidly as in Europe. The tradeoff for higher growth has resulted in somewhat sticky inflation, which has generated discontent among citizens who feel the impact of rising prices in their daily lives.

Job creation is another contentious issue that will likely be debated during the upcoming event. President Biden is expected to highlight that the United States lost jobs during the Trump presidency due to the COVID-19 pandemic. However, the US labor market rebounded swiftly, recovering all the lost jobs within twenty-nine months. As of May 2024, over fifteen million jobs have been created during the Biden administration.

Both sides of the aisle agree on the need for a strong stance on economic competition with China. However, the approach differs, with Trump advocating for a 60 percent tariff on Chinese goods, while Biden has taken a more targeted approach with recent tariff increases. It is worth noting that most of the Trump-era tariffs remain in place, and the share of US imports from China has decreased over the past decade.

The United States is also making progress in reducing emissions intensity while maintaining economic growth. Emissions fell by 1.9 percent in 2023, even as the economy expanded by 2.4 percent. The country’s energy production is at an all-time high, driven by increased output in oil, gas, and renewable energy sources such as solar and wind. However, coal output has declined, and the energy production mix is undergoing a significant transformation.

While the United States leads in economic growth among G7 nations, it falls behind in broader measures of well-being. The country has experienced a decline in the Atlantic Council’s Prosperity Index over the past decade, with smaller gains in areas such as education compared to its peers. Life expectancy in the United States also lags behind other G7 countries and experienced the worst decline during the COVID-19 pandemic.

Income inequality remains a persistent problem in the United States, with minimal overall improvement in recent years. Despite some progress, the country is worse off in terms of income inequality compared to 2010.