It has been a challenging few years for the American economy in recent years after it took a huge knock due to the global coronavirus pandemic, sending growth and unemployment deep into the negative.
Then, as the economy and employment surged when lockdowns ended, restrictions lifted, and the world reopened for business, inflation sent prices skyrocketing, squeezing hard on the incomes of Americans.
So it’s no wonder that polling ahead of the 2024 election by both Gallup and Pew found that the economy—and the desire for a stronger one—was at the top of American voters’ minds.
Harris’s economic plan pledges to cut taxes for middle class families, lift housebuilding to reduce rents and increase home ownership, tackle inflation through a “federal ban on price-gouging”, and help startups by expanding their tax deductions for expenses.
Trump’s economic platform promises to “end inflation”, to “stop outsourcing” and protect American manufacturing through import tariffs, lift energy production by cutting green regulations, cut taxes for workers such as no tax on tips, and extend his 2017 tax cuts.
As voters go the polls, headline metrics suggest the economy is ticking along steadily. According to the Bureau of Economic Analysis, the economy grew by 2.8 percent in the third quarter of the year. And inflation has stabilized, coming in at 2.4 percent in September.
But the unemployment rate is creeping up, reaching 4.1 percent in October, per the Bureau of Labor Statistics, compared to 3.8 percent a year before.
So whose plan is better for the U.S. economy between Trump and Harris? Newsweek put the question to economists for their views. Here’s what they said.
Mark Zandi, Chief Economist, Moody’s Analytics
The U.S. economy will perform better and working Americans will fare better if Vice President Harris wins the presidency, as economic policy will remain largely unchanged.
As president, Harris will almost certainly be dealing with a divided Congress which will severely limit any changes to economic policy.
The first two years of her Administration will be characterized by the policy status quo. This suggests the current tax cuts for individuals which expire at the end of next year will be extended as will enhanced Affordable Care Act subsidies.
There may also be some smaller tax law changes, which include R&D tax credits and accelerated depreciation for businesses, something Republicans favor, and expanded child tax credits and earned income tax credits for working households, something Harris and the Democrats favor.
There is an outside chance at comprehensive immigration reform given the bipartisan support for such legislation earlier this year, which will stem the flow of unauthorized immigrants at the southern border but allow for more legal immigration of those with the workforce skills that are needed.
Former President Trump will likely impose higher broad-based tariffs and engage in immigrant deportations, as he will do this under executive order and thus it doesn’t matter if Congress is controlled by Republicans or is divided. These policies will result in some combination of higher inflation and interest rates and slower economic growth.
Left, Donald Trump, who is pledging to extend his 2017 tax cuts and protect American manufacturing with tariffs. Right, Kamala Harris, who is promising tax cuts for middle class families and to tackle housing costs and grow home ownership through house building.
Getty Images/Win McNamee/EVELYN HOCKSTEIN/POOL/AFP
If the Republicans sweep the election, then there will likely also be more tax cuts, including for corporations, which will be deficit-financed to a significant degree. Deficit-financed tax cuts in a full-employment economy, like the current one, are also inflationary and would lead to higher interest rates and slower growth than otherwise would be the case.
The U.S. is currently strong and resilient and thus should be able to weather most storms in the coming year, including the presidential election and its outcome.
Of course, this assumes the election isn’t so contentious that it results in significant social unrest, and that the next president and Congress are able to agree on a timely increase or suspension of the Treasury debt limit before the Treasury runs out of cash and defaults on its obligations sometime next summer.
Brett Ryan, Senior U.S. Economist, Deutsche Bank
Our analysis suggests a modest boost to growth at best from the candidates’ economic plans.
Our base case assumes full extension of the 2017 Tax Cut and Jobs Act and against that baseline Trump’s additional tax cuts would boost growth by roughly 0.4 percent to 0.5 percent over the next couple of years.
For Harris, her calls for expansion of the child tax credit and earned income credit could be worth 0.2 percent to 0.4 percent over the next couple of years.
The caveat with assessing Trump’s plans is tariffs. In our view, a 10 percent global tariff would act like a consumption tax that subtracts from growth and could depress business spending in the short term.
We project a full trade war would negate any positive growth impact from Trump’s other policies and would subtract from growth relative to our baseline.
Unfortunately, neither candidates’ proposals address the unsustainable trajectory for federal deficits and debt.
Strikingly, they ignore the looming cuts to social security that would have to occur if the trust fund is depleted within the next ten years as currently projected.
In short, the winner of the 2028 presidential election will have to be the one to do the hard work to shore up social security given that neither party appears willing to seriously address the issue.
Claudia Sahm, Chief Economist, New Century Advisors
With inflation-adjusted growth well above the pre-pandemic trend and unemployment near historic lows, the U.S. economy will enter the new administration from a place of strength.
Even so, the past four and a half years highlighted economic problems like the lack of affordable housing. Vice President Harris’s proposal to support the building of millions of new housing units would be an important corrective. Typically, the federal government does not lead in housing construction, so there are hurdles to success.
Higher productivity growth is the ‘Holy Grail’ of economic prosperity. Labor productivity growth has picked up notably in recent years.
Policies that can support new technologies, more inclusive workplaces, and business formation are essential to extending higher productivity growth. There is no single policy to point to. Details will matter. Implementation will matter.
The US economy is almost $30 trillion. No one, including the president, controls the economic outcomes. The U.S. will enter the new administration from a position of strength, but we should not take that for granted.
Recent growth is no guarantee of future growth, and radical new policies, such as mass deportation, would almost certainly reduce growth.