With few months to the US General Elections, and with different polls showing mixed trajectory of the election outcome; it is important to weigh the economic blueprint of the two main contenders of the Presidential election – Kamala Harris (KH) and Donald Trump (DT). The goal of this article is not to take a position on whose blueprint is better, but to critique the economic plans of both candidates in the context of the current US economy.
On taxes, DT plans to make permanent the provisions of the Tax Cuts and Jobs Act (TCJA). At its inception, the TCJA cut corporate taxes permanently to 21% and individual tax rate temporarily (up to 2025). Within the scope of the TCJA are different tax incentives including a temporary raise in estate tax exemption; penalty waiver on drawdown on 529 plans used to pay down qualified student debts; rise in standard deduction (which reduces tax payments) and child tax credit. KH, on the other hand, is building on Joe Biden’s tax plans inferred from the FY25 budget. Specifically, KH will likely increase the corporate tax from 21% to 28%; repeal the reduced tax rates on foreign-derived intangible income; increase tax rate for the top individual income bracket (> $400k) to 39.6%; tighten rule on estate tax.
Critique – DT’s broad tax plan is to keep tax rates low. In my view, the benefit from low corporate taxes has been realized already and the US economy will likely be positively impacted if DT bring corporate taxes lower than 21%. This is equally true for personal taxes. If DT wins, he will either have to resort to borrowing and breaching the debt ceiling to fund his budgets. He will likely face resistance from parliament and there could be delayed budget approvals and frequent government shutdowns. KH’s tax plan is more in tune with the current fiscal need in the US, but it will likely put more pressure on households who are already stressed. Her plans could foster disincentive to work and lower disposable income, but it is important that the extra revenue raised from the higher taxes are ploughed back to the US economy.
On expenditure, DT plans to slash wasteful government spending while KH on the other hand will likely maintain the same spending level as a base case if elected.
Critique – Although DT plans to reduce spending, there is no clear definition of what that constitutes. In fact, DT’s intention to reduce the cost of higher education, energy and housing will likely come at the cost of subsidy payments of some sort since economic sectors in the US are heavily controlled by capitalist. KH is a quite upfront about spending more, but that means that the prevailing concerns on high debts and interest payment will continue if she is elected.
On immigration, clearly, DT is belligerently opposed to illegal immigrant. His plan is to complete the border wall, increase penalties for illegal entry and overstaying visa, reinstate the “Remain in Mexico” programme, begin the largest deportation program in American history, and stop sanctuary cities. KH wants an earned pathway to US citizenship, raise the standard for asylum eligibility, and increase the funding for detention centres holding illegal immigrants.
Critique – DT’s immigration plan is evidently more stringent compared to KH and his plans will likely trim the population of illegal immigrants in the US more than KH’s. Illegal immigrants are a source of cheap labour in the US, but have also been connected with higher crime rates. Therefore, DT’s immigration plan could impact cost of informal labour in the US, but it could also bring down the crime rate. The reverse is likely true for the impact of KH’s immigration plan.
On inflation and cost of living, KH plans to make housing affordable for first time home buyers by providing $25k down payment assistance, support the creation of more affordable rental units, reduce the cost of child care and implement a ban on price gouging. DT’s plan on inflation centres on reducing energy and healthcare costs. He intends to make roll back incentives like grants and subsidies to promote green energy at a subsidized cost.
Critique – KH’s plans, especially the crackdown on food and grocery companies and landlords, who charge excessive prices for food and rent, is quite plausible and could bring inflation lower. However, if not well-managed, it could also impact the supply chain as lower profits of grocery businesses affect their demand from producers. DT’s plan are somewhat unreal because in the real world, green energy is expensive except it is subsidized, which means more fiscal expenditure. Furthermore, food expense is a big slice of household expenditure and DT’s plan does not say much about that.
On tariff and trade relations, DT is for the America First Trade Policy. He wants America’s consumption met with home-grown produce and technologies. He plans to double tariffs on all Chinese imports if elected, revoke China’s Most Favoured Nation status and prevent the importation of critical imports from China. KH is bound to retain Biden’s current tariffs on China as there are no definite plans on tariff in her blueprint
Critique – DT’s proposed tariff will only foster the America First Trade Policy to the extent that it raises the domestic price of Chinese imports in America higher than American-made substitutes. This, however, is pro-inflationary and also threatens America’s export to China. Besides, a full blown China-US trade war has detrimental impact for global growth. KH’s plan, which may be relatively lenient compared to DT’s, may encourage Chinese imports (albeit lower), which may become difficult to control in the long term.
On foreign policy (war and interventions), DT is known for his alliance with Russia, Israel and Saudi Arabia. He is opposed to China, North Korea and Iran. He will likely open negotiations with Putin to end the war in Ukraine and with Netanyahu to end the Israel-Hamas war. It is very likely DT will reduce the use of US military abroad and compel NATO members to commit more to funding. KH will likely give more arsenals to Ukraine to defend itself, support Israel in the war with the Hamas, and expand NATO.
Critique – I think the difference is clear. DT will likely be rugged and KH will likely be restrained on foreign policy. There are pros and cons associated with both approached. DT’s alliance with Russia could mean more interference in US elections and politics. His approach could also mean a heated foreign policy landscape as he is known to be very vocal. With KH’s approach, we can expect less US-influenced wars and interventions, but that would come at a cost of other world superpowers attempting to invade their weaker neighbouring countries.
On climate change, KH is a protagonist of the cause. She intends to champion global cooperation aimed at preventing a climate crisis. She will likely continue to canvass for the Paris agreement and leading global efforts to reduce greenhouse gas emission and promote clean energy. DT, on the contrary, does not have specific plans on climate change in his blueprint. However, he plans to reposition the US as the leading oil and gas producer, which clearly negates supporting a climate change cause. Recall that DT pulled the US out of the Paris agreement when he was president.
Critique – climate change affects us all, and 2024 has been among the hottest year globally. There are no pros to climate change, and for that reason, DT’s plan gets a low score compared to KH.
On social security programs, DT’s intention is to preserve Medicare for Americans and limit its access to illegal immigrants. DT claims that he will not cut one penny from Medicare or Social Security. KH plans to get more funding for Medicare and Social Security from taxing millionaires and billionaires fairly. She plans to strengthen the Affordable Care Act and invest in affordable child care and long term care
Critique – KH’s plan on taxing the wealthy to fund social security could be a good initiative to expand funding. Both candidates are pro-social security, which is expected. However, one key missing element from both of their plan is the lack of specific (not general) steps to reduce the population of unemployed and by extension, government finances committed to paying unemployment benefits.
On the Artificial Intelligence (AI) war, DT promises to repeal Biden’s executive order on AI, which establishes new standards for the safety and security of AI systems, emphasizes the need for transparency in AI systems, support increased investment in R&D for AI, and promote international collaboration on AI governance and standards. DT claims the executive order is ‘dangerous’ and hinders AI innovation. There are no specifics on AI in KH’s blueprint, but it is safe to say she will retain the provisions of Biden’s Executive Order.
Critique – AI is the future and it is no wonder why China, Japan, UK among others are in the AI war. DT’s plan seems to monopolize the production of AI technologies, which is clearly unachievable at this time. With his plans, we foresee stringent regulations on technology transfer, technology theft and the application of AI in production of military weapons. If KH embraces Biden’s AI policies, we can expect softer AI wars and less monopolistic intent from the US.
To conclude, both DT and KH have good plans with pros and cons appealing to different class of the US population. KH is bound to take most of Biden’s policies further and whether or not that appeals to Americans will be their call. DT on the other hand will re-implement his policies from when he was a president, with the view of putting America ahead of its peers. While Americans would probably like this, DT’s approach to getting there may not be all that palatable.
Written by Michael Ogunremi
Featured image credit – iStock photos
References
- 2024 GOP Platform – Make America Great Again
- Harris Walz – A New Way Forward (Key Issues)
- Investopedia – What is Tax Cuts and Jobs Act (TCJA)
- USA Today – Inside Trump’s and Harris’ starkly different visions for the economy
- Los Angeles Times – The next-generation foreign policy of Kamala Harris
- PIIE – Trump vs. Harris on immigration
- Reuters – How Harris’ and Trump’s tax and spending plans affect US debt
- Tax Foundation – Kamala Harris Tax Plan 2024