What economic challenges await Kamala Harris as US president hopeful?

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What economic challenges await Kamala Harris as US president hopeful?


As Democratic presidential nominee Kamala Harris overtakes her Republican opponent Donald Trump in opinion polls – she is now leading in five crucial swing states – experts warn she will face “a heavy road” when it comes to passing economic legislation should she become the next president of the United States.

The year 2025 will be one filled with political negotiations as several significant 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 nation’s debt limit, which was suspended last year.

But with voters choosing members of both houses of the US Congress – all of the lower House of Representatives and a third of the upper chamber, the Senate – in November as well, Harris’s 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 is Republican – a likely outcome – Harris will have a heavy road in getting any legislation passed,” Gary Clyde Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics, told Al Jazeera.

Among those major pieces of legislation are the individual provisions under the Tax Cuts and Jobs Act, which are due to expire at the end of next year when they will revert to the levels of a 2016 law.

The 2017 law, which was signed by Donald Trump, provided dramatic tax breaks to US corporations while families at all income levels saw a drop in income tax from 2018 with the largest benefits going to the rich.

“If Harris wants to extend any of the provisions on the individual side or make them more favourable to lower-income people, she will have to contend with the Senate. That will be a huge horse trade,” Hufbauer explained.

There will also be negotiations on the US government’s debt limit, including the perennial challenges of avoiding a government shutdown, said Bernard Yaros, lead US economist at Oxford Economics.

“In the low probability that Democrats fully sweep the elections, we don’t expect Harris’s economic agenda to change. She’s running on a platform of continuity, and she’s going to want to implement all the Build Back Better agenda that didn’t get enacted,” such as the caregiving and family support policies, Yaros told Al Jazeera. “We don’t see much difference between her and [incumbent President Joe] Biden’s policies. She will want to run to finish the job.”

‘Pivot to the centre’

Harris’s economic views and policies are so far largely unknown. While Trump is trying to seize on her statements before the 2020 Democratic presidential primaries when she had positioned herself on the left as she tried to win the ticket to be her party’s nominee, economists have largely dismissed those statements.

Her campaign in “2020 was under different circumstances,” Yaros told Al Jazeera. “Now she’s in a general election, so she has to pivot to the centre. She has to appeal to moderates in swing states who will not be enthused by a 35 percent tax rate, for instance,” Yaros said referring to Harris’s 2020 stance when she suggested hiking the corporate tax rate to 35 percent from the current 21 percent.

Medicare for All is another policy that the Trump campaign has seized upon to discredit Harris as a viable candidate for the top job but, again, one that economists are not worried about. “I wouldn’t take that seriously,” Yaros said. “She needs to pivot to the centre.”

The one thing that could hurt her chances is inflation. Even though the consumer price index is at 2.9 percent and finally within spitting distance of the US Federal Reserve’s target of 2 percent, compared with historic highs of 9.1 percent in June 2022, actual prices are still substantially higher than before the pandemic.

‘Carrying the baggage’ of inflation

“Her approval rating has been very co-related with Biden’s on inflation and fell like Biden’s in 2022 during high inflation,” Yaros said. “The Democrats and she will still carry that baggage. But now that people are starting to know her more, she’s now more out and front. If her approval rating is on the rise, voters may not penalise her for what happened under the Biden presidency in terms of inflation.”

Hufbauer added: “Inflation, immigration are just killer issues for Democrats, and I don’t think Harris could escape those.”

Harris’s “advantage is that she doesn’t have much of a record in the economic sphere, so that gives her freedom to manoeuvre and do things”, Hufbauer said. These could include political efforts like bringing down petrol prices by releasing US reserves in the run-up to the elections, capping rent hikes at 5 percent and lambasting everybody’s pet peeve – corporate greed.

Prices have gone up and “young people are really unhappy” because house prices have gone up 30 percent to 40 percent and that’s “way more than wages”, Hufbauer pointed out. He added that while Harris cannot really bring down those prices, she can offer sympathy and be forward-looking by addressing issues such as how to tackle the situation using rent control, help for new families coming into the housing market with tax deductions, “things that look like she’s actually addressing that”, Hufbauer said.

On Thursday, the Reuters news agency reported that Harris would announce 3 million new housing units in a speech on Friday and outline new tax incentives for builders who construct properties for first-time homebuyers.

Trade, another big economic issue

Trump has proposed imposing a 10 percent across-the-board tariff on all imported goods and levies of 60 percent or higher on Chinese imports, an idea derided by economists. “That would be a shock to the world system,” Hufbauer warned. Biden, for his part, has kept many of Trump’s tariffs in place and added targeted ones.

Businesses typically pass higher tariffs on to their customers, raising prices for consumers. That could also affect businesses’ decisions about how and where to invest.

The one area that could really hurt Harris is an expanded war in the Middle East as that will also stoke inflation and send prices skyrocketing again.

“If the US gets on more of a war footing, that’s her danger point on inflation,” Hufbauer said.



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