With inflation progressively easing to normal levels, the U.S. economy is set to witness positive growth in the upcoming years. With the de-escalation of inflation, the Federal Reserve is poised to lower interest rates, further stirring economic activity. The Biden administration, which has forked out a substantial amount for infrastructural projects and has been gradually tripling in, is expected to gain significant impulse by 2025 and 2026 with numerous projects set to hit the ground. Although the base outlook looks bright, certain potential risks remain including the cooling of the job market, financial instability, and precariousness surrounding the upcoming November elections.
President Biden chose to step down from the presidential race, pushing Vice President Kamala Harris to the podium. Harris has gained the backing of all the top leaders of the Democratic party, making her this year’s nomination for the Presidential election. Although one can’t entirely credit the Biden administration for this sanguined economic outlook- given that the White House has a meager influence on interest rates and inflation, his administration’s key policy maneuvers have done the spadework for a boost in green energy, infrastructure, and manufacturing investment, that will possibly continue to thrive for years to come.
The Inflation Reduction Act, CHIPS Act, and a $1 trillion infrastructure law passed in 2021 are part of Biden’s administration policy packages and are set to have an enduring impact on the economy. With these initiatives, green energy, infrastructure projects, and semiconductor manufacturing across the country, are set to attract significant investment. For instance, expansions of dams and locks, airport upgrades, and the construction of semiconductor factories are just around the corner.
The economic gains set in motion during Biden’s presidency will probably benefit the next president, whether a Democrat or a Republican. Former president Donald Trump, who is a key nominee from the Republican party for the Presidential run, has promised to “destroy inflation” and lower interest rates, focusing more on infrastructure and manufacturing growth. As per the economists’ projections, these commitments are not far from achievable.
Many economists have agreed that the hot economy will experience a cooldown within the next few years. After peaking at over 7% in 2021 and 2022, the Fed's preferred inflation measure has dropped to 2.6% and is expected to decline further to 2.3% by the end of next year, reaching the Fed's target of 2% by 2026. With the drop in inflation, the Federal Reserve is expected to lower the interest rates, thus aiding businesses and consumers to borrow money. This reduction in interest rates will likely motivate more infrastructural and manufacturing projects.
Under the Biden administration, certain vital policies have been executed and they are expected to boost economic growth in the forthcoming years. The CHIPS Act, which allocates over $50 billion in incentives for manufacturing and semiconductor industries; the Inflation Reduction Act, which provides more than $800 billion to green energy investment, and the $1 trillion infrastructure law are all set to bring about significant positive changes in the economy. The scale of the economic benefits will probably materialize under the new president’s administration, as the funding from Biden’s initiatives is yet to be shelled out.
Powered by the Biden administration, the infrastructure spending will possibly reach the zenith level in the coming years, with the expenditure likely to remain at a constant high until around 2027 before gradually falling away. For instance- projects like the rejuvenation of the Montgomery Locks and Dam in Pennsylvania, and the Center for Manufacturing Competitiveness at Penn State Behrend, are set to commence in 2025, thus booming the expectations for generating a positive economic outlook and creating thousands more jobs.
Although the economic predictions look promising, several challenges are awaiting the next President which can have a significant impact on the economy. For instance, under the Trump administration, if there are changes made to tariffs and immigration policies, it could considerably affect labor markets and prices. A slow-motion impact on the economy and a gradual weakening of the job market can be experienced due to the Federal Reserve’s decision to perpetuate the high interest rates for a prolonged period.
With Biden’s administration focusing on its key policy changes and infrastructure spending, the US economy is expected to run on a solid bearing. The Biden government has laid the groundwork for future growth. However, one should not ignore the fact that several challenges are awaiting the next president. The new president must navigate these challenges prudently to ensure sustained prosperity. As inflation drops and the interest rates are reduced, the country is set to witness massive progress in the manufacturing economy, with a considerable possibility for growth. However, a lot of it depends on the evolving economic and political environment of the country in the forthcoming years.
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