2024 election economic policy showdown

Now that we have some details about each Presidential candidate’s economic plan, there are a few interesting finds. In some cases, the policies are not too different or are even the same. But on most issues, the approaches are wildly different, and with many of the 2017 Trump tax cuts expiring in 2025, next year will be pivotal in determining tax policy for the next five to ten years.

Trade

Kamala Harris has had a meandering position on trade issues throughout her time in the Senate, as a candidate in 2020, and now as the Vice President. She opposed the Transpacific Partnership negotiated by former President Barack Obama, along with the USMCA negotiated by Trump, on the grounds that they did not do enough to protect American workers and provide workplace and environmental protections for our trade partners. Despite this, as a candidate she supported reductions in tariffs and has specifically said she is not a trade protectionist. Meanwhile, as I’ve covered in the past, President Biden’s trade positions, which Harris is at least partially linked to, have trended fairly protectionist and industrialist, maintaining many Trump tariffs on China and passing legislation bolstering U.S. industrial development. Based on this, our expectation is that Harris will be slightly more pro-trade than Biden but is unlikely to dramatically shift from current policies.

Former President Donald Trump has a well staked-out position on trade: he hates it. He has tapped into populist opposition to trade, offshoring of American jobs, and what he says are trade partners taking advantage of the United States. He started several trade wars with China and the EU while he was President, and the Harris campaign has hit him relentlessly on his proposal to implement a 10% across-the-board tariff on most imports, which would almost certainly lead to a deleterious trade war. It’s difficult to know how much bluster is, but we expect Trump to follow-through on his campaign promise, at least for a short period of time, if he is elected in November.

Taxes

Harris has put forth several specific tax proposals that she would work to enact if elected. They include raising the corporate tax rate from 21% to 28%, increasing the Child Tax Credit, expanding the Earned Income Tax Credit and providing significant assistance to first-time home buyers and small business entrepreneurs. She has also proposed a new tax on unrealized capital gains for those earning more than $100 million per year. Lastly, she has mirrored former President Trump’s plan to eliminate income tax on tipped wages, though economists and tax policy experts argue that it is impractical and would be difficult to implement.

Trump’s tax agenda is largely to repeat and extend what he passed in 2017. These include the existing tax brackets for individuals, limits on deducting mortgage interest and local and state taxes and maintaining the significantly increased standard deduction. Trump’s two new proposals would exempt Social Security income from federal income tax, as well as lower the corporate tax rate from 21% to 15%.

What is really feasible?

This is the harder question and one that we really can’t answer until after the November election. If Democrats manage to keep the Senate, while also taking the House and winning the White House, then they could probably muster the political will to enact much of Harris’ plan, passing it through the Senate with the expedited ‘reconciliation’ process that allows tax bills to advance with a simple majority vote. The devil will be in the details, however, and we would expect some nibbling at the edges of Harris’ plan to raise the corporate income tax.

If Republicans manage to sweep the election, the pathway is much less clear for President Trump’s proposals. The Republican Party has gotten significantly more fiscally conservative, and the increased deficits proposed in Trump’s plans will face an uphill battle in getting through Congress, especially if the margins are narrow, which they would likely be in this scenario. Instead, an extension of the 2017 Trump tax cuts is more realistic, with few new changes being enacted, and potentially a much shorter tax deal that lasts for two years with the hopes that Republicans win a larger margin in 2026.

Trade, however, is an area that is largely in the purview of the Administration, and if elected, Trump could implement many of his proposals very quickly. Harris is more of an unknown, but we don’t expect her proposals to represent a significant shift from President Biden’s current policies, at least in the near term. If Harris is elected, we will be watching Harris’ cabinet and top trade official nominations closely, as they could have a larger impact on her future trade positions, given her relatively fresh position on these issues.