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Inside Trump's and Harris' starkly different visions for the economy
Paul Davidson, USA TODAY
Updated 11 min read
If the economic visions of President Joe Biden and former President Donald Trump were starkly divergent, the contrast between Trump and Vice President Kamala Harris is nearly blinding.
Since Harris replaced Biden as the Democratic nominee, she has unveiled a wish list of proposals that go further than Biden’s in aiding low- and middle-income Americans by making housing more affordable, reducing the cost of child care, cracking down on price gouging and lowering prescription drug costs, among others.
“She’s doubling down on efforts to support lower- and middle-class families and small businesses and pay for it with tax increases on the wealthy and corporations,” said Mark Zandi, chief economist of Moody’s Analytics.
Trump’s and Harris’ blueprints for the economy are expected to be spotlighted in their first and possibly only debate Tuesday evening, hosted by ABC News.
U.S. Vice President Kamala Harris at the White House, Washington, U.S., July 22, 2024 and former U.S. President Donald Trump in Bedminster, New Jersey, U.S., August 15, 2024 in a combination of file photographs.
A divided Congress could stonewall many of Harris' proposals, economists say, though some ideas on housing and child care could be approved.
Some of Harris’ stances seem to defy perceptions by nearly half of likely voters that she’s “too liberal,” according to a New York Times-Siena poll. She has shown a willingness to tack to the center by dropping her support for a fracking ban and favoring a lower capital gains tax rate than Biden for very wealthy Americans.
What does Kamala Harris support? What about Donald Trump?
On the biggest economic issues facing the nation - trade, immigration and taxes – Harris’ policies largely mirror Biden’s and their effects on economic growth, jobs and inflation would be similar, according to analyses by Moody’s, Goldman Sachs and the Penn-Wharton Budget Model.
Trump, meanwhile, is also doubling down on his first-term agenda.
Harris would extend some of the Trump tax cuts − but not for wealthy individuals and corporations – raise taxes even higher for the richest Americans, impose more targeted tariffs on Chinese imports and toughen immigration curbs but not nearly as sweepingly as Trump.
Predictions for the 2025 economy?
“The economy under Trump would grow more slowly and will suffer higher inflation and interest rates,” Zandi said.
In a Trump presidency, “the hit to growth from tariffs and tighter immigration policy would outweigh” the positive effects of tax cuts, Goldman Sachs wrote in a report in early September.
Harris’ new spending and middle-class tax reductions would “slightly more than offset lower investment due to higher corporate tax rates,” Goldman said. But in a split government, any effects likely would be small.
Trump’s plan would spark a recession by mid-2025, Moody’s said. The economy would grow an average 1.3% annually during his four-year term versus 2.1% (in line with average gains before the pandemic) under Harris.
Under a Trump administration, inflation would rise from 3% this year to 3.5% in 2025, compared to 2.4% under Harris, the Moody’s analysis shows. At the end of a Trump tenure the U.S. would have 3.1 million fewer jobs than under Harris and a 4.5% unemployment rate, a half percentage point higher.
Goldman Sachs predicted a less dramatic impact from a Trump term, with the economy growing a half percentage point slower next year and inflation about four-tenths of a percentage point higher.
The estimates are based on assumptions by both Moody’s and Goldman that a Harris administration would probably work with a Democratic-majority House and Republican Senate, reversing the current party set-up. By contrast, Trump probably would be swept in with a Republican House and Senate, according to election models.
Polls, meanwhile, continue to show Americans view Trump as a better steward for the U.S. economy. About 45% trust him on the economy and inflation, compared to about 37% who trust Harris, according to an ABC News/Ipsos poll in late August. But the gap between the public's views of the Republican and Democratic nominees on this key issue has narrowed since Harris replaced Biden as the nominee in late July.
A look at how their plans could affect the economy.
Tariffs
Trump’s plan
In his first term, Trump slapped tariffs on a tenth of U.S. imports, chiefly steel, washing machines and solar panels, as well as many goods from China. Long term, the $80 billion in tariffs are projected to cut the nation’s gross domestic product, or output, by 0.21% and reduce employment by 166,000 jobs, according to a study by the Tax Foundation.
Trump would go much further this time. He has proposed a 10% tariff on all U.S. imports and a 60% levy on Chinese shipments in a bid to prod manufacturers to move production to the U.S.
Harris’ plan
Harris' campaign didn't immediately respond to a message seeking comment on her economic policies. But a campaign spokesperson told the New York Times last month she would enact "targeted and strategic tariffs" to support workers and strengthen the economy.
Biden similarly has used narrowly tailored tariffs to help U.S. companies compete with Chinese rivals that are subsidized by the government, including a 100% levy on Chinese electric vehicles and solar panels.
Impact
Harris' tariffs would have little effect on the nation's economy, Zandi says.
But Trump’s 10% levy would boost annual inflation by nearly three-quarters of a percentage point next year and a half point in 2026 as businesses pass their increased costs to consumers, the Moody’s estimate shows.
In her Democratic convention speech, Harris said Trump's higher fees would cost middle-income families an additional $4,000 a year. The Peterson Institute for International Economics estimated the added costs at $2,600.
In the end, Goldman figures new Trump tariffs likely would be more measured, focusing on Chinese imports and vehicles from Mexico and the European Union. That likely would boost inflation by half a percentage point, Goldman estimates.
Yet instead of narrowing the U.S. trade gap, the levies likely would strengthen the U.S. dollar by reducing imports and sparking higher inflation that pushes up interest rates, Moody's says. That would make the nation's exports more expensive overseas, widen the trade deficit and hurt American manufacturers. Other countries almost certainly would retaliate with their own tariffs, further dampening U.S. exports.
On the positive side, the stronger dollar would partly offset the added cost of the tariffs for U.S. consumers by making imports less costly, Goldman notes.
Overall, the economy would suffer and there would be 2.1 million fewer U.S. jobs by 2028, Moody's says.
Taxes
Trump’s plan
Trump and a Republican Congress would extend his 2017 Tax Cut and Jobs Act for households at all income levels and for corporations. The lower rates are set to expire next year.
Trump also has said he wants to reduce the corporate tax rate from 21% to 15% for companies that make their products in the U.S. The 2017 tax legislation lowered the rate from 35%. And he has advocated ending taxes for Social Security earnings and tips.
Extending the tax breaks would add $5.2 trillion to deficits over the next decade, according to the Committee for a Responsible Federal Budget.
Harris’ plan
Harris would extend the lower personal income tax rates only for individuals earning less than $400,000 a year, trimming the deficit and curtailing inflation, Zandi says.
Like Biden, Harris separately wants to raise the corporate tax rate from 21% to 28%. But she also aims to hit the wealthiest households with a 25% minimum tax. And she would increase the capital gains tax rate for people earning more than $1 million a year from 20% to 28%, softening Biden’s plan to hike it to the top income tax rate of 39.6%.
She also has embraced Trump’s proposal to end taxes on tips.
Impact
Lower corporate taxes rates tend to juice investment and economic growth. But the bang for the buck would be limited, Moody's says, because the nation is already near full employment, signaled by a robust economy in which everyone who wants to work and can work is employed. Further tax cuts would drive inflation higher.
As a result, the Fed would leave interest rates higher for longer, increasing corporate borrowing costs and partly offsetting the benefits of lower taxes.
Still, the lower taxes for individuals and companies should lift spending and generate about 450,000 more jobs than Harris' plan, Moody's says.
But while extending the 2017 tax cuts are likely, Goldman doesn’t expect any of Trump’s new proposals, such as exempting Social Security income, to pass even a Republican Congress. And Moody’s figures Harris’ proposed tax hikes on the wealthy wouldn’t be approved by a split Congress.
Immigration
Trump’s plan
Trump vows to deport millions of immigrants who lack permanent legal status. He also would reinstate programs that forced asylum seekers to wait in Mexico while their cases are resolved or quickly return to that country.
The Biden-Harris administration has been criticized by Republicans for a surge in illegal immigration that has created a crisis at the southern border.
Harris' plan
Harris has touted the current border policies, including an executive action signed in June by Biden that beefed up enforcement, as working and has been talking tougher about pursuing criminals who enter the U.S. without legal permission.
“I was attorney general of a border state," she said at a rally in Glendale, Arizona, in August, according to Roll Call. "I went after the transnational gangs, the drug cartels and the human traffickers...I prosecuted them in case after case and I won, so I know what I’m talking about.”
At the same time, she said she wants to provide migrants an earned pathway to citizenship.
For the longer term, Harris is seeking funding from Congress for more border patrol agents, immigration judges and asylum officers to handle higher volumes of undocumented immigrants and asylum seekers.
Impact
Trump’s policies would reduce net immigration to the U.S. from about 3.3 million last year to about 750,000 annually, assuming a Republican-majority Congress, Goldman estimates. Harris’ plan, the firm says, likely would double that figure. Net immigration averaged about 1 million a year before the COVID-19 health crisis.
Immigrants, both legal and those lacking proper authorization, have helped alleviate severe labor shortages, slowing wage growth and inflation.
Trump's proposed crackdown and deportations would undo the gains, especially in industries such as agriculture, construction, restaurants, hotels and retail, Moody’s says.
The smaller labor force, Moody's says, would dampen economic growth and stoke inflation again as wages rise and companies rely on fewer workers to churn out products and services.
Trump likely would seek to roll back grants and subsidies promoting green energy in the Inflation Reduction Act, Moody's and Goldman say.
Impact
While it would save $369 billion, the cost is to be funded by stricter tax enforcement by the Internal Revenue Service.
Such a move would cut economic growth by a half percentage point and wipe out 450,000 jobs in 2026, Moody's estimates. Goldman says there's little support even among Republicans for a wholesale repeal of the clean energy policies.
Social service policies
Harris’ plan
Harris has unveiled a litany of proposals to help low- and middle-income consumers. Among them, she would:
Crack down on food and grocery companies that charge excessive prices during an emergency and landlords who collude to raise rents.
Continue Biden’s push to increase the child tax credit to $3,600 per child under 6 and $3,000 for older children. She has also proposed a $6,000 credit for babies in their birth year.
Provide $25,000 in downpayment assistance to first-time homebuyers, more than the $10,000 proposed by Biden.
Create a $40 billion fund to help developers build more affordable rental units for low-income people, double the amount Biden floated.
Expand a monthly $35 cap on insulin and $2,000 yearly limit on out-of-pocket spending from seniors to all Americans.
Provide a $50,000 tax deduction for small business start-ups, up from the current $5,000.
Impact
Such programs would be offset by higher taxes on the wealthy and companies, and so wouldn't add to the deficit, Zandi says.
Most, though, have little chance of being approved by a divided Congress, Moody's and Goldman say. A $25,000 payment for home buyers could come with a big downside because it would juice home sales and drive up prices, Zandi says.
But some type of increase in the child tax credit is likely even in a divided Congress, the economists say. And Moody’s expects more funding for low-income housing.
