How Do the Economic Agendas of Harris, Trump stack up? Heinz College Experts Share Pros and Cons
By Emma Folts and Jennifer Monahan
Voters are passionate about a lot of issues in this presidential election, but the majority say the economy is most important to their vote.
A recent survey of registered voters from the Pew Research Center shows that, on average, the economy was the leading issue for 81%. It was a very important issue for 93% of supporters of former President Donald Trump’s campaign for presidency and 68% of supporters of Vice President Kamala Harris’s bid.
The two candidates have touted proposals for strengthening the economy, some of which lack specifics and most of which would require congressional approval. To help voters make sense of the candidates’ economic agendas, economists from CMU’s Heinz College of Information Systems and Public Policy broke down the pros and cons of several key policies from each campaign.
Here’s what the experts shared on:
ON SUPPORTING AMERICAN BUSINESSES
Both Trump and Harris have talked about supporting American businesses. Trump is advocating for up to a 20% tariff on all foreign imports and a 60% tariff on imports from China. Harris has not called for tariffs on foreign imports. Her plan is to expand tax credits for people who launch small businesses and for companies that expand union jobs in manufacturing.
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Lee Branstetter, the James Walton Professor of Economics and Public Policy, offered his assessment of their proposals:
Trump’s tariff proposals would cost the typical middle-income household in the U.S. more than $2,600 per year, based on credible analysis by my colleagues at the Peterson Institute for International Economics. That’s actually a low estimate because they’re not taking into account how the rest of the world will respond to the U.S. ignoring its obligations under international treaties and unilaterally raising tariffs on friend, foe and ally alike. Other countries are going to raise their tariffs on U.S. exports, and those costs are going to be felt by American companies and American workers.
The increase in import costs is not just going to take money out of the pockets of consumers; it's going to raise the costs for American companies that use these imported components, materials and capital goods in their own production. If we increase their production costs, they’ll need to pass on those higher costs to their consumers.
The extent of the impact will depend on the retaliation the U.S. faces. However, we've seen this scenario play out before—when Trump implemented tariffs during his previous administration, the response from U.S. trading partners was immediate and substantial. One 2020 analysis estimated that the trade war cost the U.S.175,000 manufacturing jobs.
Economists were able to quantify the impact of Trump’s tariffs on prices and consumer welfare, as well as their overall economic impact. It's clear that they were a net negative.
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The economy is in pretty good shape, but there’s important context to consider. The U.S. is running a big budget deficit while unemployment is very low and job creation has been incredibly robust. When the economy is strong—as it is right now—we shouldn’t be running deficits this large. The budget should be closer to balance.
If we stay on our current course, running big deficits when the economy is good and gigantic deficits when it's weak, we're on a path to accumulating a much larger national debt. The nonpartisan Congressional Budget Office projects that we are on track to have a debt-to-GDP ratio that's almost 170% by the middle of the century (166% by 2054), higher than it's ever been in history.
Any proposal to substantially cut taxes for anybody, for any purpose, needs to be viewed carefully and with scrutiny, because any tax cut could make our long-term fiscal problems worse. If we value the well-being of future generations, then we have a moral obligation not to burden our descendants more than our ancestors have burdened us. We need to bring the federal budget closer to balance over the business cycle so that we can stabilize the debt-to-GDP ratio at a reasonable level.
The Economist recently called America's economy the envy of the world. While it may not feel that way for everyone, comparisons with other advanced industrial nations show that the U.S. economy has performed exceptionally well over the long-term. Unemployment is low, job creation has been spectacular, and the U.S. has outpaced other major economies in growth.
Tax cuts for small businesses will likely have a cost. They are likely to increase our deficit. Things that make the deficit worse need to have a good rationale behind them.
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Rather than tax cuts during an economic boom, I would love to see a future administration invest more in helping Americans build the skills needed to prosper in the 21st century. While it requires an up-front financial commitment, the payoff could be significant: a wealthier nation, increased tax revenue, a lower deficit, and people who are better off. Businesses would benefit from a more skilled, competent and productive workforce, and the advantages would extend not just to employers but to workers as well.
ON THE ECONOMIC IMPACT OF IMMIGRATION
Harris’s economic policy focuses on cutting taxes for middle-class Americans; lowering costs on health care, groceries, prescription drugs, and energy; investing in American businesses; and revising the tax code. Her immigration plan reminds voters that she supported the bipartisan border security bill and says that, if elected, she plans to bring it back and sign it into law. Harris has not drawn explicit connections between immigration and the economy.
Trump regularly includes mass deportation of immigrants when asked about his economic policy, attempting to create an unsubstantiated cause and effect relationship between immigration and a variety of economic issues such as housing, social security, and inflation.
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Here’s what Brian Kovak, Professor of Economics and Public Policy at Heinz College, had to say:
One of the central questions in the political debate over immigration is how it affects labor markets.
You often hear arguments that immigrants are taking our jobs, implying that each employed immigrant has displaced a native-born worker. At the other extreme, people claim that immigrants do jobs that native-born workers won't, implying that immigrants don't compete with other workers at all. Both of these arguments are inconsistent with the evidence.
In 2002, the most recent year of nationally representative data, there were 30 million foreign-born employed people in the U.S. If each of those employed people displaced a native-born resident, there should be at least 30 million unemployed people in the U.S. But the number is far lower than that. In January 2022, there were about 6.5 million unemployed people in the U.S. Simple arithmetic makes clear that immigrants are not displacing native-born workers one-for-one. It isn't even close.
On the other side, let's consider the claim that immigrants fill jobs that other workers won't do. The Pew Research Center, in a recent poll, found that about two-thirds of Americans believe this to be true. However, out of the 530 distinct occupations that the U.S. Census Bureau tracks, foreign-born workers are a majority in only three: manicurists, agricultural graders and sorters, and taxi drivers. In other words, there simply are not jobs that native-born workers won't do, but there are a few occupations in which immigrants are more concentrated.
These simple statistics indicate that the extreme arguments for the effects of immigration are not plausible, and that the truth lies somewhere in between.Professor Brian Kovak
These simple statistics indicate that the extreme arguments for the effects of immigration are not plausible, and that the truth lies somewhere in between.
Even if immigrants don't displace native-born workers one-for-one, to what extent do they compete? Does immigration affect wages and employment? There is a mountain of statistical evidence on these effects, and it clearly shows that immigration's effects are small. Other factors, such as technological change, international trade and offshoring, have much larger impacts on the U.S. labor market.
Immigrants do compete with other workers for jobs and, as a result, can drive increased unemployment and lower wages, particularly for workers who have very similar skills. In a famous example studied by George Borjas and Kirk Doran, when the Soviet Union collapsed and former Soviet mathematicians were able to move to the West, the new competition had a negative effect on American mathematicians working in similar specialties. They published less and were less likely to work at more prestigious institutions.
However, immigrants also increase the demand for products and services made in the U.S. This, in turn, expands the demand for workers, increasing the number of jobs in the economy.
In another famous study, Rachel Friedberg showed that when less educated Russian immigrants arrived in Israel, they had minimal effects on previous residents. The relatively favorable effect resulted in part because the immigrants themselves increased the demand for local products and services, which in turn increased local employment. Also, the prior residents of Israel benefited by taking on supervisory roles, managing those newly arrived workers, and in doing so ended up earning more and having more seniority in their jobs.
Immigrants do compete with native-born workers who have similar skills, reducing their employment and wages, but they also expand the local economy, which partly offsets the competition for existing jobs.Professor Brian Kovak
Immigrants do compete with native-born workers who have similar skills, reducing their employment and wages, but they also expand the local economy, which partly offsets the competition for existing jobs.
So, these two offsetting effects, one from competition and one from growing the amount of economic activity, explain the relatively small effects that we have seen immigration have, overall, on labor markets.
ON CORPORATE TAX RATES
Trump says he will lower the corporate tax rate to 15% from the current 21% rate established by the 2017 Tax Cuts and Jobs Act (TCJA). Harris says she will implement “common sense tax reforms” for corporations, raise the corporate tax rate to 28% (from 21%) and provide $100 billion worth of tax breaks and other incentives to build up U.S. manufacturing and emerging technologies. Many TCJA provisions will expire in 2025.
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Andrew Garin, Assistant Professor of Economics and Public Policy at Heinz College, shared his thoughts about these proposals:
Research shows that there were some investment gains and employee wage gains from cutting the corporate tax rate in 2017, but the benefits were minor compared to how big the cut was. Some TCJA provisions – rather than the rate itself – were particularly effective. The details really matter, and I don't think there's enough detail from either candidate to know which exact provisions they would extend or let expire.
The real question is how the U.S. can invest in its workforce without providing unnecessary or ineffective giveaways to wealthy corporations and shareholders. It’s clear that the corporate tax cuts did not pay for themselves. They may have increased activity to some extent, but not in a way that benefits working Americans enough to justify the lost revenue.
The 2017 tax bill increased the deficit, weakening the financial base needed for investing in kids and families – which really means investing in future generations, something that is important for maintaining robust growth and a healthy workforce.
When Harris says she will provide tax breaks and other incentives to build up U.S. manufacturing and emerging technologies, it’s really a continuation of Bidenomics. That plan is a callback to the government-led manufacturing push of World War II, though the context and challenges differ today.
Unlike World War II-era initiatives that created new sectors and boosted workforce mobility, many of today’s subsidies support U.S. manufacturing that has become increasingly reliant on low-wage work in efforts to stay internationally competitive. The strategy could succeed if carefully targeted. Strategies such as promoting infrastructure and workforce development – in emerging and advanced industries–particularly sectors like green manufacturing and chip production, that have broader importance to national security and sustainability – could lead to the emergence of new ecosystems sustaining high wage work.
But without a clear focus on job quality and skill development, there is not much reason to think merely funding firms to manufacture in the U.S. would yield widely shared benefits.