The Economic Implications of Kamala Harris' Presidency
It is widely recognized that the American economy is not only crucial for the long-term prosperity of the United States but also essential for global stability. Directly or indirectly, the entire world benefits from the United States' extended market infrastructure, deep financial system, and robust regulatory frameworks. With a nominal GDP estimated at $28.8 trillion in 2024, out of a total of $109.5 trillion for the global economy, the United States operates on a scale unmatched by other economic powers.
Projected Share of Nominal Global GDP in 2024 (%)
It is therefore important to understand the implications of American elections on the global economy, especially since the two main candidates (Donald J. Trump and Kamala Harris) have different economic programs.
This week, we focus on the economic program of candidate Harris, the current Vice President of the United States, who is attempting to become the 47th President of the United States and the first woman to hold the office.
Kamala Harris' Economic Program
Harris is currently the 49th Vice President of the United States, a position she has held since 2021 under the presidency of Joe Biden. This makes her the candidate for presidential succession, suggesting a program of "continuity" well-known to investors and analysts: with a program focused on social justice, equality, sustainability, and future industries, she intends to improve, deepen, and update the traditional Democratic Party program. In other words, Harris is in favor of stricter business regulation, more social benefits for workers and the middle class, higher taxes for high-income households and businesses, a more open immigration policy, and a more traditional approach to foreign trade.
According to us, three key points should be highlighted regarding Harris' economic agenda.
Evolution of Corporate Tax Rate in the United States (%), 1980-2024
Firstly, if elected, Harris would tend to implement a more progressive tax policy, i.e., a policy that supports income and wealth redistribution, by taxing high-income households more and spending more on low-income households. In fact, Democrats propose increasing the corporate tax rate from 21% to 28%, a midpoint between the current rate and the higher rates that prevailed before Trump's 2017 tax cuts. This contrasts sharply with Trump's proposal to reduce the corporate tax rate to 15%. Moreover, taxes on individuals earning over $400,000 per year would also increase under a potential Harris administration, as Democrats do not seem willing to extend the 2017 temporary tax relief to this segment of the population. However, this does not mean that a Harris presidency would implement a fiscal tightening. Part of her program also includes additional spending on healthcare, social security, infrastructure, energy transition, and strategic sector subsidies. Together, these budget measures could contribute to widening the budget deficit, which currently stands at a critical level of 6.7% of potential GDP. The net effect on growth should be positive, even if the potential increase in public debt issuance could lead to higher long-term yields.
Secondly, Harris appears determined to adopt a stricter regulatory approach, tightening conditions in various sectors. Environmental legislation would be a priority, with global climate policies aiming to reduce emissions through stricter standards for industries and vehicles. Harris would rationalize the authorization process for green energy projects while imposing stricter regulations on fossil fuel industries. Antitrust legislation enforcement would also be more aggressive, with potential measures to break up large corporations and block anti-competitive behavior. Consequently, even if certain targeted sectors would benefit, such as renewable energy and electric vehicles, the net effect would likely add an additional burden to competitiveness.
Thirdly, Harris' stance on immigration could also have significant implications for the country's demographics and labor markets. Harris has always supported an immigration reform that balances border security with humane treatment and a pathway to citizenship for undocumented immigrants who have lived in the country for a long time. This is important because around 4-5% of the American population consists of undocumented immigrants. Moreover, this segment is essential for providing labor to the service industry and hourly wage contracts, preventing an excessive tightening of the labor market and counterbalancing demographic trends. In the medium term, this contributes to moderating average wage growth and inflation. A more positive demographic profile would also be favorable to growth.
Conclusion
In summary, a potential Harris presidency would bring a certain continuity to the current economic program of the United States, particularly in terms of fiscal, regulatory, and immigration policies. Overall, the proposed program would be a mix of both for growth, as fiscal and immigration policies would stimulate activity, while stricter regulation would weigh on GDP expansion.
