We Asked AI: How Much Can the Next President Improve the Economy?

The economy is sure to be a hot button in this year's election and the September 10, 2024, debate between Kamala Harris and Donald Trump provided a glimpse into how each candidate might attempt to improve the economy if elected. Both candidates presented different viewpoints, but given what the next president will inherit (out-of-control debt, increased costs of living, and-potentially-a divided Congress), how much will he or she really be able to enact positive and timely change?  

Here are the top insights we gleaned from AI...

Debt: A Double-Edged Sword

Even presidents have limited control over certain structural elements of the economy, such as the national debt-a massive sum exceeding $35 trillion. Interest payments on this debt consume a growing portion of the federal budget, leaving little room for new spending without raising taxes or cutting other programs. 

Additionally, the Federal Reserve’s independent control over monetary policy, especially regarding interest rates and inflation management, means that a president has limited direct influence over these critical levers of our economy.

Juggling Jobs & Generational Issues

The labor market is characterized by a large population entering retirement age while the younger generations continue to struggle with employment. This is to say nothing of trends like automation which could reduce the number of already-scare jobs. While presidential policies can encourage job creation, the generational makeup of our population is difficult to contend with. Reversing troubling trends like wage stagnation and declining workforce participation are Herculean feats.

What Tactics Are Available to the Next President?

Vice President Harris has somewhat ambiguously pledged to support the middle class. But what does that mean exactly?  It could mean reducing costs: tax credits for the middle class, another attempt at healthcare reform, green energy investments, and increased access to education and job training?. If you're thinking that these sound like long-term plays, you're not wrong. Even if successful, by the time most of these measures came to fruition or had a tangible impact, a few years would have already elapsed. American's are seeking relief NOW.

Former President Trump might favor: tax cuts, deregulation to encourage business growth, increasing fossil fuel production, and tariffs on foreign goods.

But for Every Action, There is an Equal and Opposite Reaction

Spending plans and tax cuts would likely increase the federal deficit. A growing deficit usually means money printing, followed by higher inflation and interest rates, perpetuating a vicious cycle we know all too well.

Deregulation and tariffs could lead to short-term economic gains but also increased market volatility and potential trouble in global trade, such retaliatory tariffs on US goods. 

For those approaching retirement or reliant on savings and investments, both candidates' suggested policies carry some potential risks and benefits. Healthcare reform could lower out-of-pocket costs, retirees may find more room in their budgets to save or invest. However, any rise in inflation from new spending programs could erode the purchasing power of fixed-income investments?. 

Tax cuts, particularly on capital gains, could provide immediate benefits to those with investment portfolios, allowing them to retain more of their investment income. However, any trade conflicts or market volatility resulting from deregulation or protectionist measures could negatively affect stock markets, making it riskier for Americans dependent on income from their investments?.

Political Gridlock

Both candidates face considerable obstacles in enacting their economic agendas. One of the largest challenges is political gridlock. If Congress remains divided after the election, either candidate will struggle to pass major economic reforms without bipartisan support. Additionally, global factors-like energy markets, geopolitical tensions, and supply chain disruptions-will shape the U.S. economy in ways that no president can fully control.

The next president will also inherit high inflation rates and labor market disruptions from the pandemic, which complicates any efforts to lower costs for Americans or increase wages. Long-term trends, like automation and an aging workforce, will continue to exert downward pressure on job growth and wages, limiting the immediate effects of policy changes?.

Enough Doom & Gloom! What Can We Do to Help Ourselves?

Diversify: Maintaining a diversified portfolio that includes a mix of assets can help cushion against market fluctuations in any one market. It's the don't-put-all-your-eggs-in-one-basket adage. 

Maintain Liquidity: Ensure that you have enough liquid assets to cover short-term needs without needing to sell investments during a market downturn or rely on assets that take time to liquidate.

Stay informed. Think outside the box. Be proactive. Take charge. If you're reading this, you probably already have some affinity for precious metals. You know that gold and silver can not only hedge against volatility in other markets, but also have inflation-fighting properties, and are long-trusted stores of value that are simple to buy and easy to sell in a pinch.

As Americans, we have earned the right to elect our next president. However, we also have a responsibility to ourselves and to our families to chart our own course towards financial security. The challenges we face are immense. There's no disputing that. But, as we've seen, even the Commander-in-Chief has limited powers to remove them on our behalf. We need to help ourselves and be the architects of our own future.