As Democratic presidential candidate Kamala Harris leads Republican opponent Donald Trump in opinion polls (she now leads in five key states), experts warn she will face “a tough road” when it comes to passing economic legislation if she becomes the next president of the United States.
The year 2025 will be filled with political bargaining, as several major pieces of economic legislation are set to expire, including tax cuts for individuals under the Tax Cuts and Jobs Act and the reinstatement of the country's debt limit, which was suspended last year.
But with voters electing members of both chambers of the U.S. Congress — the entire House of Representatives and one-third of the upper chamber, the Senate — also in November, Harris' ability to push through any legislation will depend on how Democrats perform in those elections.
“The House is up for grabs, but if the Senate goes Republican – a likely outcome – Harris will have a tough road to getting any legislation passed,” Gary Clyde Hufbauer, a non-resident senior fellow at the Peterson Institute for International Economics, told Al Jazeera.
Among those major pieces of legislation are individual provisions of the Tax Cuts and Jobs Act, which are set to expire at the end of next year, when they will revert to the levels of a 2016 law.
The 2017 law, signed by Donald Trump, provided dramatic tax breaks for American corporations, while families at all income levels saw a drop in income tax starting in 2018, with the biggest benefits going to the wealthy.
“If Harris wants to expand any of the provisions at the individual level or make them more favorable to low-income people, she will have to face the Senate. That will be a big mess,” Hufbauer said.
There will also be negotiations over the U.S. government's debt limit, including the perennial challenges of avoiding a government shutdown, said Bernard Yaros, chief U.S. economist at Oxford Economics.
“In the low likelihood that Democrats sweep the election, we don’t expect Harris’ economic agenda to change. She’s running on a continuity platform and will want to implement all of the Build Back Better agenda that wasn’t enacted,” such as caregiving and family support policies, Yaros told Al Jazeera. “We don’t see much difference between her and Harris.” [incumbent President Joe] Biden's policies. She will want to run to finish the job.”
'Pivot to the center'
So far, Harris's economic views and policies are largely unknown. As Trump tries to build on her statements before the 2020 Democratic presidential primaries, when she positioned herself to the left as she tried to win her party's nomination, economists have largely dismissed those statements.
Her campaign in “2020 was run under different circumstances,” Yaros told Al Jazeera. “She’s in a general election now, so she has to pivot to the center. She has to appeal to moderates in key states who won’t be thrilled with a 35 percent tax rate, for example,” Yaros said, referring to Harris’ stance in 2020 when she suggested raising the corporate tax rate from the current 21 percent to 35 percent.
Medicare for All is another policy the Trump campaign has seized on to discredit Harris as a viable candidate for the top job, but again, it’s one that economists aren’t worried about. “I wouldn’t take it seriously,” Yaros said. “She needs to pivot to the center.”
The only thing that could hurt its chances is inflation. Although the consumer price index stands at 2.9% and is finally within touching distance of the US Federal Reserve's target of 2%, compared with the all-time high of 9.1% in June 2022, real prices are still substantially higher than before the pandemic.
Carrying the baggage of inflation
“Her approval rating has been highly correlated with Biden’s on inflation and fell like Biden’s in 2022 during a period of high inflation,” Yaros said. “She and the Democrats will continue to carry that burden. But now that people are starting to get to know her more, she is now more open and direct. If her approval rating is rising, voters may not penalize her for what happened under Biden in terms of inflation.”
Hufbauer added: “Inflation and immigration are deadly issues for Democrats, and I don’t think Harris can escape them.”
Harris’ advantage is that she “doesn’t have a lot of experience in the economic realm, which gives her freedom to maneuver and get things done,” Hufbauer said. These could include policy efforts like lowering gas prices by releasing U.S. reserves in the run-up to the election, capping rent increases at 5 percent and railing against everyone’s favorite topic: corporate greed.
Prices are up and “young people are really unhappy” because home prices are up 30 to 40 percent and that’s “a lot more than wages,” Hufbauer said. He added that while Harris can’t actually reduce those prices, she can offer sympathy and look to the future by addressing issues like how to address the situation through rent control, helping new families entering the housing market with tax breaks — “things they seem to be really addressing,” Hufbauer said.
On Thursday, Reuters news agency reported that Harris will announce 3 million new housing units in a speech on Friday and outline new tax incentives for builders who construct properties for first-time home buyers.
Trade, another major economic problem
Trump has proposed imposing a blanket 10% tariff on all imported goods and levies of 60% or more on Chinese imports, an idea that has been ridiculed by economists. “That would be a shock to the global system,” Hufbauer warned. Biden, for his part, has kept many of Trump’s tariffs and added specific ones.
Companies often pass on higher tariffs to their customers, which raises prices for consumers. That could also affect companies' decisions about how and where to invest.
The only area that could really hurt Harris is an expanded war in the Middle East, as that would also stoke inflation and send prices soaring again.
“If the US becomes more bellicose, that will be its danger point in terms of inflation,” Hufbauer said.
