How the 2024 U.S. Presidential Election Could Shape Economic Outcomes

Fady Nakhla

Staff Writer

 

As the 2024 U.S. presidential election approaches, the economy remains one of the top concerns for voters. The election will offer voters two contrasting economic visions from Donald Trump and Kamala Harris. Each candidate has proposed distinct tax policies, spending priorities, and approaches to tariffs, all of which could shape the U.S. economy in different ways over the next decade. This article explores their respective plans and analyzes the potential impacts on economic growth, sectoral performance, and public debt. 

 

The Broader Economic Context 

Trump’s tenure saw steady GDP growth of 2-3% before the COVID-19 pandemic which led to a 28% contraction, while Biden-Harris experienced a recovery-fueled GDP boost, averaging 3% in early years, with growth moderating to 2.5%.  

Stock market performance was strong under both administrations, with roughly 48% growth during Trump and 49.6% under Biden-Harris, driven by low interest rates and stimulus; however, inflation remained low under Trump, peaking at 2.9% before dropping during the pandemic, while Biden-Harris faced surging inflation, reaching nearly 9% in mid-2022. 

In terms of employment, Trump’s gains were wiped out by pandemic-related job losses, while the Biden-Harris administration added 16.4 million jobs due to a rebound fueled by COVID deregulations as the pandemic became less of a threat. Regardless, real wage growth was higher under Trump (6.4%) than Biden-Harris (1.4%) due to inflationary pressures. 

Both administrations added significantly to the national debt—Trump by $8.4 trillion, mainly due to tax cuts and COVID relief, and Biden-Harris by $4.2 trillion from early pandemic recovery measures. Consumer sentiment was higher during Trump’s tenure but fell sharply during the pandemic, while Biden-Harris struggled with persistently low confidence due to inflation and ongoing pandemic effects, despite broader economic improvements. Overall, each administration’s economic outcomes were shaped by different challenges and policies. 

 

Donald Trump’s 2024 Economic Plan 

Trump’s economic agenda builds on the 2017 Tax Cuts and Jobs Act (TCJA), proposing tax extensions, lower rates for domestic production, and higher tariffs. Key components include: 

 

• Permanent Extension of the TCJA: Trump proposes making the individual and business tax provisions of the TCJA permanent, including lower income tax rates, a larger standard deduction, and the 20% pass-through income deduction. This move aims to boost economic growth by providing more certainty to businesses and taxpayers, reducing tax burdens, and encouraging investment. However, it is projected to reduce federal revenue by $5.3 trillion over the next decade​.

• Restoring the Full State and Local Tax (SALT) Deduction: Removing the $10,000 cap on SALT deductions would cost roughly $1 trillion in revenue but could increase GDP by an additional 0.7%​. 

• Lowering the Corporate Tax Rate for Domestic Production: By lowering the effective tax rate on domestic manufacturing to 15%, Trump aims to boost U.S. production and long-term GDP by 0.2%​. 

• Exemptions for Social Security Benefits, Tips, and Overtime Pay: Trump proposes exempting these income sources from federal taxes, which could enhance disposable income but would cost another $2.1 trillion over a decade​. 

• Imposing a 20% Universal Tariff and a 60% Tariff on Chinese Imports: These measures aim to protect domestic industries and raise $3.8 trillion in revenue over 10 years. However, they are expected to shrink long-run GDP by 1.7% due to reduced trade and retaliatory tariffs from other countries​. 

 

Projected Outcomes 

• Economic Growth: Trump’s plan could increase GDP by 0.8%, create 597,000 jobs, and raise wages by 0.8% over the long run. However, tariffs could offset much of these gains. 

• Public Debt: Trump’s tax cuts, combined with tariffs, could add $7.5 trillion to the deficit over the next decade, with long-term implications for interest rates and government borrowing​. 

• Distributional Impact: The tax cuts primarily benefit higher-income earners, with the top quintile seeing after-tax income gains of up to 4.2%. Lower-income households may face a net tax increase due to the regressive nature of tariffs. 

 

Kamala Harris’s 2024 Economic Plan 

Harris’s economic agenda emphasizes increased taxes on corporations and high-income earners, along with expanded tax credits for low-income and middle-income families. Her plan aims to address income inequality and improve access to housing, healthcare, and childcare. Key componenets include:

 

• Higher Corporate Tax Rate: Harris proposes increasing the corporate tax rate from 21% to 28%, aligning it with Biden’s FY 2025 budget. This would generate significant revenue but could reduce GDP by 0.6%​. 

• Expansion of the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC): These credits would be expanded and made permanent, benefiting lower-income households. However, the expanded CTC alone is estimated to cost $1.6 trillion over 10 years and could raise marginal tax rates for workers​. 

• New Housing Incentives: Harris plans to introduce tax credits for first-time homebuyers and expand the low-income housing tax credit. These measures aim to improve housing access but could also increase federal spending by $200 billion over a decade​. 

 

Projected Outcomes 

• Economic Growth: Harris’s plan could shrink GDP by 2.0% over the long run, primarily due to higher taxes on capital and reduced business investment. Employment could decline by 786,000 jobs, with a 1.2% reduction in wages​. 

• Public Debt: Harris’s tax and spending proposals could add up to $3.4 trillion to the deficit over 10 years, particularly if the Tax Cuts and Jobs Act (TCJA) is extended for middle-income households​. 

• Distributional Impact: The plan aims to increase after-tax incomes for the bottom 60% of earners, with the lowest quintile seeing gains of up to 16.5% in 2025. However, the top 40% would face higher tax burdens, with after-tax income declines of up to 7.3%​. 

 

Comparing Trump vs. Harris: Economic Implications 

Trump’s plan emphasizes lower taxes across the board, with a focus on business incentives and income exemptions. Harris’s approach prioritizes tax increases on corporations and high earners to fund expanded credits for lower-income households. The strategies reflect different economic philosophies Trump’s growth-centric model vs. Harris’s redistribution-focused model. 

While Trump’s plan is projected to boost GDP in the short term, it could add substantially to the national debt. Harris’s plan could slow economic growth but aims to create a more equitable distribution of income. Both plans could contribute to higher public debt but through different means. Trump’s tax cuts vs. Harris’s increased spending. 

 

Conclusion 

The 2024 election presents a stark choice for voters regarding the direction of the U.S. economy. Trump’s plan seeks to stimulate growth through tax cuts and tariffs, favoring high-income earners and businesses. In contrast, Harris’s plan aims to address inequality through higher taxes on corporations and expanded social programs. Both plans carry risks and potential benefits, with significant implications for growth, income distribution, and public debt. Ultimately, voter decisions will shape the economic policies that define America’s next chapter. 

 

Contact Fady at Fady.Nakhla@student.shu.edu