As presidential campaigns race to the close, the electorate moves past gauzy themes and adversarial finger-pointing, which tell us little about candidates’ plans, to examine differences in goals and policies.
Previously, we analyzed the paradoxical positions of Donald Trump’s pro-business, laissez-faire, global burden-sharing presumptions—and the realities of the contrasting MAGA-Marxist pronouncements they conceal: record fiscal deficits, interventionist and politically motivated attacks on companies, threats to Fed independence, the dismemberment of global alliances protecting the sovereign security of trade partners, xenophobic immigration bans choking the flow of talent to the U.S. workforce, and protectionist trade practices with soaring inflationary consequences.
Similarly, as the Democratic National Convention balloons and confetti have cleared, there are some conflicts to resolve between the rhetoric and realities of the emerging Harris-Walz economic agenda. The philosophical challenge in the Harris-Walz agenda is to balance advancing U.S. economic growth with securing fair worker wages, providing affordable education opportunities, ensuring affordability of basic goods, and offering childcare support for employed parents.
Slogans like “Which side are you on?” and anachronistic campaign pitches vilifying managers and professionals, while celebrating hourly workers, do not provide enough clarity to the Harris-Walz economic agenda and only create divisions. So far, Harris and Walz have been careful to avoid such class warfare—but some of their political advisors and surrogates are eager to echo such slogans reminiscent of the 1930s. One must wonder: Why make unnecessary, influential enemies when so few Fortune 500 CEOs are willing to support Trump? Instead, there are several key Harris-Walz policy positions that the Democrats must clarify.
Inflation and housing
Inflation has proven to be a persistent problem coming out of the pandemic. Inflation growth has leveled off to near historic levels, but the historic price effects are still widely felt. Significant price increases can be attributed to five sources.
First, there was an unusual pairing of limited supply with unprecedented demand due to the business surge of economic recovery from the COVID-19 pandemic. As Fed Chairman Jerome Powell acknowledged at Jackson Hole recently, “improvements in supply conditions and rotation in demand from goods to services [took] much longer than expected.”
Second, the yardstick for inflation measurement under President Biden relied upon the collapsed prices during the Trump-COVID recession, the deepest since the post-WWII history with oil prices actually going to zero!
Third, the Federal Reserve hiked interest rates an unprecedented 17 times over two years, increasing mortgage rates and shrinking the housing supply, as no prospective home sellers would be willing to trade in their historically low mortgage rates on existing homes for the much higher rates often required to purchase new ones.
Harris and Walz recently released a proposal to address housing affordability using both supply- and demand-side remedies. To increase demand, They would offer down payment assistance—on average $25,000 for qualifying first-time homeowners. While critics quickly noted the inflationary effect of down payment assistance and that the source of America’s housing problem is due to a lack of supply not demand, those same critics and industry leaders praised the supply-side incentives the campaign has suggested.
To promote supply, a series of more proven strategies, such as the expansion of the successful Low Income Housing Tax Credit program, incentives to home builders for constructing starter homes, and a $40 billion innovation fund to spur affordable housing development are promising.
Fourth, supply shocks in goods have been more prevalent. For example, the price of eggs has skyrocketed due to avian flu affecting 90 million poultry birds. This is fully one-third of the nation’s egg supply.
Fifth, to Harris’ credit, allegations of price-gouging could be attributed to a few dominant suppliers. Collectively, the three largest baked-goods conglomerates hold a market share of more than 50%—and some of these companies saw their net income increase by 75%. Some major fuel refiners saw net income increase by more than 1,000% and margins more than double—and pharmacy benefit managers continue to see rapid profit growth at the expense of patients.
However, it is ludicrous to blame grocery stores, which operate under the lowest profit in private industry (with margins of only 1.6% in 2023), for price gouging. Some major non-profits have better margins. Former Deputy Director of the National Economic Council under the Obama Administration, Jason Furman, quickly came out against the proposal stating, “This is not sensible policy, and I think the biggest hope is that it ends up being a lot of rhetoric and no reality.” Instead of attempting to restrict market dominance in luxury handbags and video games, targeted attention should be refocused on the everyday goods consumed by the average family.
Antitrust
Many CEOs and Wall Street bankers have criticized the highly restrictive regulatory environment established by President Biden’s appointees, Lina Khan and Jonathan Kanter. Corporate dealmaking reached a decade low in 2023. The strict regulatory posture has even limited competition, according to some experts. Soon after Harris became the clear nominee, business leaders, and major donors quickly pressed for a commitment to remove Khan from the FTC.
Harris has been notably silent on the topic—but a look into Harris’ record as state attorney general in California indicates that she may be more friendly to business than the current administration. Her priorities—global market access, technology innovation, data and child safety protections, and fair labor practices, among others—matched that of her state constituents, which included Apple, Meta, and Alphabet.
Harris even made a point to tell major donors during her 2020 campaign, “I am a capitalist.” And she warned against “shortsighted” antitrust enforcement during her 2010 campaign for state attorney general. In contrast, JD Vance has praised Chair Khan and suggested policies to limit the power of the tech industry.
Global trade
As vice president, Harris has had fewer opportunities to reveal her approach to global trade and international affairs. She will most likely maintain the status quo of the Biden-Harris administration. President Biden has reprioritized critical economic partnerships to not only boost trade and deepen alliances but also create a more resilient domestic economy. Harris has supported Biden in these efforts, attending the 2023 East Asia Annual Summit in Indonesia to promote regional security and expanded trade.
Biden and Harris have also adopted a tough stance on China, Russia, and others. They have targeted tariffs and export controls at those products and countries which threaten U.S. national and economic security. They have directed economic sanctions at those countries and autocrats that threaten global peace. This “small yard, high fence” approach matches the Harris-Walz campaign focus on low- and middle-income families by limiting the indirect costs tariffs place on consumers.
That tactical approach contrasts with the blunt approach adopted by a Trump-Vance campaign promising to place a 10% tariff on imports from all countries (and 60% on China), which would cost U.S. households an estimated $1,700 per year. Jason Furman contrasted the Harris-Walz approach as “populism lite” versus a more hardline populism under Trump-Vance.
Immigration
Under Biden, immigration has been a major challenge driven by a mixture of the president’s softer policy stance and factors outside of his control, such as COVID-19 and civil unrest in neighboring countries.
Republicans have tried to cast Harris as the failed “border czar,” despite Harris never being placed in charge of the border. In fact, President Biden tasked his vice president with improving the severe economic conditions of three Central American countries: El Salvador, Guatemala, and Honduras. Inbound immigration from the three countries did decline under VP Harris—to a level lower than under the Trump administration, in fact—but it is difficult to attribute full credit to her actions alone.
Harris has taken a more aggressive approach on the border for the presidential race. The Harris-Walz campaign recently announced support for the bipartisan border bill that Trump ultimately torpedoed for political gain. The bill provided money for the border wall as well as more border agents, asylum lawyers, and immigration judges.
The former state attorney general also has a track record to run on. In 2011, Harris established a task force with the Department of Justice and other law enforcement officials to crack down on drug smuggling and human trafficking across the U.S.-Mexico border by transnational gangs. The Harris team has ramped up messaging to showcase her commonsense tactics for securing the border.
The tough policy stance should be matched with a sensible policy to continue to attract hardworking immigrants. Plenty of data exists to show the economic benefit provided by a smart immigration policy. Harris knows this as a California native, as the tech industry is one of the biggest beneficiaries of foreign-born leaders—half of all startups with revenues of $1 billion or greater have immigrant founders or co-founders.
Taxation and fiscal policy
The Penn Wharton Budget Model released their latest estimates of the economic effects of the Harris-Walz and Trump-Vance plans. As noteworthy as it may be that Trump’s alma matter gave his latest economic package a poor grade, the low score given to Harris’ agenda seems to have involved an oversight.
Major media outlets have reported that the Harris-Walz campaign has adopted the Biden FY 2025 Budget Proposal. Strangely, the economists at Penn Wharton did not include the full Harris-Walz plan, citing a lack of public endorsement by the campaign for the wealth tax/unrealized capital gains tax, increased top marginal income tax rate, closed tax loopholes, and other measures in the Biden budget proposal. Notably, there is no mention of raising the corporate income tax rate in the source cited for Penn Wharton’s rationale, but this is the only source of revenue included in the Budget Model for the Harris policy analysis. The Penn Wharton Budget Model did analyze the Biden Budget Proposal when it was released in March 2024. Both estimates will be provided for transparency.
Under both sets of analysis, Democratic plans are estimated to be more fiscally responsible than Republicans, an important factor with the national debt at historic levels. The scaled-down Harris plan—which excludes some of the Biden tax proposals—would increase primary deficits by $1.2 trillion over the next 10 years on a conventional basis and cause GDP to fall by 1.3% by 2034. The full Harris plan would reduce primary deficits by $1.7 trillion and see GDP fall by 0.8%. The Trump-Vance policy proposals—an extension of the Tax Cuts and Jobs Act of 2017—would increase primary deficits by $5.8 trillion over the next decade on a conventional basis and cause GDP to fall by 0.4%. The deficit would be almost five times larger under Trump when compared to the more modest scaled-down Harris plan—and more than 10x compared to the full Harris plan.
Of course, many questions surround the ability of either Harris or Trump to pass their controversial policies. While fiscal responsibility is critical, the idea of a wealth tax and taxes on unrealized capital gains discourage capital formation and investment—from the largest Fortune 500 companies to the smallest startups. Unrealized capital gains taxes trigger another challenge: unrealized asset losses. Surely, the government shouldn’t pay the likes of Elon Musk billions to cover his $200 billion of recent unrealized asset losses. And unlike property taxes, wealth taxes are not based on an asset that can be easily valued, with little volatility, and for which there are often municipal services received.
Harris and Walz should continue to refine their policy to meet the needs of the people and maintain America’s unique competitive advantages. A modest increase in the top marginal income tax rate may be palpable but should be paired with disciplined spending. Higher corporate income taxes may be feasible if they remain competitive with global peers. For instance, an increase in corporate income tax rates from 21% to 28% would place the U.S. slightly above the GDP-weighted average of 25.2% for the European Union and 26.7% for the G7.
All presidents are to some extent subject to the economic hand they are dealt. Harris would inherit a good hand from President Biden, with more than 40 market highs in the stock market under his administration, average wage growth above 4% in the past 12 months, inflation falling to normal levels, the U.S. driving global growth in the latest World Bank estimates, and more equitable wealth distribution. The economic success realized by President Bill Clinton, who eliminated the federal deficit while maintaining robust GDP growth, could be a model for an eventual Harris-Walz administration to follow.
Rule of law
As a former prosecutor, Harris has embraced her grounding in the U.S. legal system and made public her respect for the law, drawing a stark contrast to former president Trump. The American public and the business community currently place a premium on stability. Much like Biden, Harris offers an inherent promise to respect the process guiding the rules of fair play. While many Trump surrogates boast that he will keep the government out of business, this claim is simply disproven by a review of his first term in office—a president inclined to serve his personal interests, instigate serial partisan interventions, inflict personal vendettas, and provide favors to business friends.
Kamala Harris gave the Democratic Party an unusual second chance in a presidential election. She has the right background to not only understand the problems that everyday families are facing but also genuinely speak to them. She has the fortitude to endure challenges and the humility to admit mistakes. In the days leading up to the first debate with Trump, Harris should continue to refine her economic agenda, filling in the gaps as needed.
While Thomas Carlyle referred to economics as the “dismal science,” the Harris-Walz embrace of joy and freedom furthers the discipline, spreading the wealth as well as the happiness.
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