Uncovering Kamala Harris’ Economic Agenda

It is widely believed that the U.S. economy is not only vital to the long-term prosperity of the United States, but also to global stability. The whole world directly or indirectly benefits from the United States’ extensive market infrastructure, deep financial system and sound regulatory framework. With a nominal GDP of $28.8 trillion and a global economy of $109.5 trillion projected by 2024, the U.S. operates on a scale unmatched by any other major economy.

Projected share of global nominal GDP in 2024
(% of total) Source: Haver, IMF, QNB analysis

Therefore, it is important to understand the impact of the US election on the global economy, especially because the two main candidates (Donald J. Trump and Kamala Harris) have different economic agendas.

This week, we look at the economic agenda of Harris, the current Vice Presidential candidate who is seeking to become the 47th President of the United States and the first woman to hold that office.

Harris is currently the 49th Vice President of the United States, a position she has held since President Joe Biden took office in 2021. This makes her a candidate to succeed the outgoing president and present a plan familiar to investors and analysts as “continuity”: a plan focused on social justice, equality, sustainable development, and the industries of the future that aims to improve, deepen, and update the traditional platform of the Democratic Party. In other words, Harris advocates for stricter regulation of corporations, more benefits for workers and the middle class, higher taxes on corporations and high-income households, a more open politics on immigration, and a more traditional approach to foreign trade.

We believe Harris’ economic agenda should emphasize three key points.

The Development of High-Rate Corporate Tax in the United States
(%, 1980-2024) Source: Haver, IRS, QNB analysis

First, if elected, Harris would favor allowing for a more progressive tax policy, one that supports income and wealth redistribution by taxing higher-income households more while increasing spending on lower-income households. In fact, the Democrat has proposed raising the corporate tax rate from 21% to 28%, a midpoint between the current rate and the higher rate before Trump’s 2017 tax cuts.

This is in stark contrast to Trump’s proposal to further cut corporate income tax to 15%. In addition, in a possible Harris administration, taxes are also expected to increase for individuals earning more than $400,000 per year, as the Democratic Party seems unwilling to extend the 2017 temporary tax breaks to this group of people. However, this does not mean that a Harris presidency will implement fiscal austerity. Part of his plan also provides for increased spending on health care, social security, infrastructure, energy transition and subsidies for strategic sectors. Together, these fiscal measures could lead to a further widening of the budget deficit, which is currently at a critical level of 6.7% of potential GDP. Although the potential increase in public debt issuance could lead to an increase in long-term yields, the net impact on growth is expected to be positive.

Second, Ms Harris seems determined to take a tougher regulatory approach, further tightening conditions across sectors. Environmental legislation will be a priority, with a comprehensive climate policy aimed at reducing emissions through stricter industrial and vehicle standards. Ms Harris is expected to further streamline the permitting process for green energy projects, while imposing stricter regulation on the fossil fuel industry. Antitrust enforcement will also be more aggressive, with possible measures to break up large companies and discourage anti-competitive behavior. So while some targeted industries will benefit, such as renewable energy and electric vehicles, the ultimate impact may be an additional burden on competitiveness.

Third, Ms. Harris’s stance on immigration could also have important implications for the country’s demographics and labor market. Ms. Harris has consistently supported immigration reforms that balance border security with humane treatment and provide a path to citizenship for long-term undocumented immigrants. This is important because approximately 4% to 5% of the U.S. population is undocumented. In addition, this sector is critical for supplying labor and hourly wage contracts to the service sector, thereby preventing an excessive tightening of the labor market and offsetting demographic trends. In the medium term, this could help moderate average wage growth and inflation. A more positive demographic profile would also be good for economic growth.

Overall, a possible Harris presidency would bring some continuity to the current U.S. economic agenda, especially in terms of taxes, regulation, and immigration. Overall, the proposed plan is expected to be a pro-growth mix, as tax and immigration policies would boost economic activity, while stricter regulations would be a drag on GDP expansion.