Impact of Kamala Harris and Donald Trump's Economic Strategies on the National Deficit

Diccon Hyatt is a seasoned financial and economic journalist who has extensively covered the pandemic-era economy through numerous articles over the past two years. He specializes in simplifying complex financial topics, focusing on how economic trends affect personal finances and the broader market. His experience includes work at U.S. 1, Community News Service, and the Middletown Transcript.

Key Insights

• Both Vice President Kamala Harris and former President Donald Trump have introduced spending and tax proposals that would increase the federal deficit.
• Harris proposes tax hikes on high-income earners to offset some or all of her spending initiatives, according to expert analyses.
• Economists express doubt that Trump’s suggested tariffs would generate sufficient revenue to balance his favored tax cuts.

The economic plans put forth by Vice President Kamala Harris and former President Donald Trump stand to significantly influence the federal deficit.

Independent evaluations by the Committee for a Responsible Federal Budget and the Penn-Wharton Budget Model at the University of Pennsylvania suggest that Harris's policies could raise deficits by up to $2 trillion, while Trump’s proposals might increase deficits by as much as $4 trillion.

These analyses do not cover every tax cut, spending program, or tax proposal recently advanced by the candidates but highlight their fundamentally different approaches to managing the federal budget and the escalating $35 trillion national debt.

Harris, representing the Democratic Party, supports tax credits and cuts aimed at middle- and lower-income families, funded by increased taxes on the wealthy. Conversely, Republican Trump advocates for broad tax reductions coupled with tariffs on imports to generate revenue.

Michael Gregory, senior economist at BMO Capital Markets, summarizes: "Harris and the Democrats are comfortable increasing both spending and taxes, relying on tax hikes to control the deficit. In contrast, Trump and the Republicans prefer cutting taxes and limiting spending, using spending constraints to manage the deficit. This clear divide will become more evident as the campaign progresses and more policies are introduced."

Enacting these ambitious economic plans would require legislative support. Current polls indicate Democrats may struggle to maintain Senate control, while Republicans are unlikely to secure a House majority. A divided government is the most probable scenario, implying that significant compromises will be necessary for any economic legislation to pass.

Analyzing Kamala Harris's Economic Proposals

Harris’s most impactful budget proposal is expanding the child tax credit to $3,600 annually per child, up from the existing $2,000, mirroring the temporary expansion implemented by President Joe Biden in 2021 as pandemic relief. Additionally, she proposes a $6,000 annual credit for newborns during their first year.

Combined, these measures would cost approximately $1.2 trillion over a decade, according to the Committee for a Responsible Federal Budget. Other initiatives increasing the deficit include expanding the earned income tax credit for low-income workers, a $25,000 tax credit for first-time homebuyers, and enhanced Affordable Care Act subsidies to reduce premiums for Obamacare enrollees.

Harris’s suggested tax increases on wealthy individuals and corporations could offset most or all associated costs. The most significant tax hike is raising the corporate tax rate from 20% to 28%, projected to generate $1 trillion. Additionally, a 25% "billionaires tax" on income and unrealized investment gains exceeding $100 million could raise another $500 billion.

Examining Donald Trump's Economic Proposals

Trump’s most expensive proposal involves eliminating the tax on Social Security benefits, which could reduce federal revenue by $1.6 to $1.8 trillion, according to the Committee for a Responsible Federal Budget. He also proposes lowering the corporate tax rate to 15%, further decreasing revenue by about $200 billion.

Trump plans to finance these tax cuts and reduce the national debt by increasing tariffs on imported goods. However, multiple economists estimate that these tariffs would not generate enough revenue to cover the tax breaks, let alone reduce the debt. The Committee for a Responsible Federal Budget estimates that a 60% tariff on Chinese imports could yield up to $300 billion or possibly decrease revenues by $50 billion due to negative economic impacts.

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