Trump and Harris’ economic showdown

In the patchwork blanket of our lives, choices are the thread. From the seemingly inconsequential – ‘What do I wear today?’ – to the very consequential – ‘Who do I vote for?’ – each choice, and the subsequent decision we make, patches together the trajectory of our lives. And right now, the American people are hurtling towards a crucial fork in the road: on Tuesday 5 November, they will head to the polls to vote in this year’s presidential election.

For some, the choice is clear. Most of those in California, a Democratic stronghold, will be hoping that the Californian native, Kamala Harris, will become the 47^th President of the United States. Likewise, Florida, the nation’s largest former swing state that now sits at the heart of the GOP ecosystem, will be voting red on election day.

But the ultimate outcome of the election will rest on the shoulders of those yet to decide. The swing states – Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin – remain the sites of fierce political battle, with each candidate trying to win over the undecided voters caught in the middle of the two-party tug-of-war. And as they head into the eve of their campaigns, it would serve both candidates well to remember that in presidential elections, the economy is the factor that makes all the difference.

That Trump and Harris have drawn up strikingly different blueprints for the economy they’d seek to build is a given. But what policies have they proposed? And, importantly, what are their implications?

For better or for worse, the world has already seen Trumponomics. Characterised by tax cuts, deregulation, and protectionist trade policies, Trump’s first shot at economic management left an economistic hung jury. For big businesses, there was success: the 2017 tax cut saw corporate tax reduced from 35% to 21%. In the wider economy too: robust growth prior to the pandemic can only be credited as an economic success.

But as a history of ‘trickle down’ economics has demonstrated, the foretold financial flows that such policies engender trickled no further than the pockets of the already-wealthy, raising concerns about the expanding income inequality in the States. Similarly, import tariffs did little more than threaten international trade relationships.

Now, as the possibility of a second Trump term dawns, so does Trumponomics 2.0. Having proposed higher import tariffs, lower tax rates, and a blank cheque to coal and oil companies, Trump’s ‘new’ vision for the economy remains rather 2020.

Trump is doubling down on his all-American approach to industry, proposing baseline 10% or 20% tariffs on all imports

For example, at the centre of his 2024 agenda is an extension of the law passed in his first term and due to expire in 2025 – that saw tax rates for businesses and individuals slashed. Likewise, Trump is looking to lower the corporate rate even further – from 21% to 15%. Commenting on the election campaign, Maya MacGuineas, President of the Committee for a Responsible Federal Budget, said: “This is the Oprah tax environment: ‘You get a tax break, you get a tax break, and you get a tax break.’”

Elsewhere, Trump is doubling down on his all-American approach to industry, proposing baseline 10% or 20% tariffs on all imports, raising them to 60% if they come from China. Further tariffs have been threatened on cars from Mexico and any country that abandons the US dollar.

As for tackling the biggest threat to the US economy – inflation – Trump would open new land for oil drilling, offer coal and oil companies tax relief, and speed up the approval process for permits and pipelines, discarding the environment in favour of cheaper energy.

But as Harris sees it, a rebrand is required: for her, it is all about the ‘opportunity economy’

Harris, having picked up the presidential baton after Biden withdrew from the race, is also falling somewhat in line with the Democrats’ pre-established policies. Crafted as a response to Trump, Bidenomics rested on the pillars of enhanced public investment, worker empowerment, and the promotion of competition, all largely funded by tax hikes on wealthy individuals and corporations. Harris is likely to continue in line with these inherited principles, and for the most part has appeared to double down on them, touting policies that would raise corporate tax to 28%, whilst not signalling any major drift from Biden’s take on international trade.

But as Harris sees it, a rebrand is required: for her, it is all about the ‘opportunity economy’. Speaking to a rally in North Carolina, she said: “As President, I will be laser-focused on creating opportunities for the middle class that advance their economic security, stability, and dignity.”

To do this, Harris will boost the Child Tax Credit, first seen in the Covid-era American Rescue Plan, to as much as $3,600 per eligible child, and will implement a new $6,000 credit for newborns. She is also seeking to help first-time home buyers, with support worth up to $25,000 for deposits alongside a $40 billion fund to support innovation in housebuilding.

Simply put, the candidates have offered economics without the dreaded economising

At the heart of her economic policies lie her plans to tackle inflation, starting with grocery stores. Under her administration, a federal ban on price gouging will be introduced, with new penalties for corporations that violate pricing rules. Whilst this is by far the most popular economic policy floated by either candidate (in a Guardian poll, 44% of respondents believed this to be the best policy for strengthening the economy), it also suggests a willingness for the government to wade into the murky waters of the markets.

Of course, these are just campaign pledges. And like all campaign pledges, they have been speckled gold by the paintbrush of utopia. Simply put, the candidates have offered economics without the dreaded economising. But that has not stopped forecasters from sketching out the implications of each party’s policies.

According to an analysis from Bloomberg Economics, Trump, despite having a slim lead as to who’s the more trustworthy candidate to handle the economy (43% to Harris’ 41%), will not be the economy’s saving grace.

If fully implemented, Trump’s tariffs would end US-China trade: 0.8% would be wiped from GDP and prices would be pushed up 4.3% by 2028 if China alone were to retaliate. If other countries decide to fight back, it becomes -1.3% for GDP and 0.5% for prices.

The rush to regulate an ‘imperfect’ market may do more to reduce long-term competition than household costs

The US debt burden would also become heavier under Trump. Whilst it is expected to rise under both leaders, Trump’s tax cuts would lift debt to 116% of GDP by 2028. Harris, with her more modest approach to economic policy, would see debt rise to 109% in line with the Congressional Budget Office (CBO) baseline forecast for that period.

Economists are also particularly concerned about Harris’ price gouging policy. A study published in May by the Federal Reserve Bank of San Francisco found that “rising markups have not been a main driver” of inflation over the last three years. Instead, analysis shows that the profit margins of grocery stores have been almost flat – increased prices have been an attempt to preserve margins in the face of higher costs and supply-chain disruptions, and not to exploit customers. Whilst the Harris campaign’s willingness to tackle inflation is a net positive, the rush to regulate an ‘imperfect’ market may do more to reduce long-term competition than household costs.

And so, it is with the leaves already brown, and the twilight of campaigning upon us, that November’s election looms. Trump and Harris have their cards on the table. As for their hopes of a winning hand? Well, that may rest on how well their economic policies are received by voters in those crucial battleground states.