Battle of Economic Programs: Who Will Make the US and the World Richer – Harris or Trump

The well-being of not only the United States, but the entire world depends on the outcome of the American elections. Many ordinary Americans believe that Donald Trump will do a better job of increasing the nation's wealth. Most serious economists support Kamala Harris and consider Trump a threat to the global economy. The columnist investigated why the consequences of the November 5 elections have nothing to do with the economic programs and teams of Harris and Trump with the BBC Alexey Kalmykov.

Photo: L9871456 | Dreamstime.com

Why Economics is More Important than Politics

Most of the scandals and loud statements of the current election campaign – from mutual accusations of fascism and Marxism to talk of a crisis of democracy and an impending civil war – were mainly about politics.

The economy was barely discussed. However, it is precisely this that is of decisive importance in these elections.

First, when Americans are asked what would most influence their decision to vote for Trump or Harris, most rank the economy first.

Secondly, the US is the financial engine of the planet, the most important market and the largest producer of oil and gas. The dollar is the main reserve and settlement currency in the world. Problems in the US are fraught with a recession in Europe (the second largest economy after the US) and will hit China and other developing countries even harder, as was clearly demonstrated by the financial crisis that began in the US in 2008, the consequences of which the world is still experiencing.

On the subject: Trump vs. Harris: Candidates' Positions on Voters' Biggest Issues

Breaking - not building

Trump's economic program is more radical than Harris's, but the checks and balances of the American political system preclude abrupt moves. Radical tax cuts or budget spending would require congressional approval.

"The most important conditions for a thriving economy are the rule of law and certainty, economic and political. Trump threatens both," warned twenty Nobel laureates in an open letter.

The basis of the modern economy is consumption and investment. Uncertainty makes people spend less, businesses postpone projects and lay off people.

The rule of law and democratic institutions guarantee the safety of private property. They have ensured the prosperity of the collective West and its advantage over autocracies, as one of the letter’s signatories, Daron Acemoglu, winner of the 2024 Nobel Prize in Economics, has scientifically proven.

Trump represents uncertainty for economists. He never acknowledged defeat in the previous election and has repeatedly promised radical changes during the current campaign. It is not clear what will become reality from what he proclaimed at rallies. But this uncertainty does not add to the certainty.

Trump's assurances

Trump promises to massively cut taxes, drastically cut social spending, reduce government regulation, repeal Biden's "green" laws, and lift all restrictions on oil and gas workers.

There is no doubt that he is capable of using the powers of the presidency to fulfill two major campaign promises that are of critical importance for the American economy and the world as a whole.

The first is the trade war with China and Europe. During his first term as head of the White House, he imposed a 25% tariff on all Chinese goods and raised a number of tariffs on European goods. It was not possible to punish China and the European Union, since American consumers paid for everything.

Now Trump promises to go further and raise the tariff to 60%, and at the same time restrict the import of cars and other goods into the United States made in Chinese factories in neighboring Mexico, which would put an end to free trade in North America as well. Moreover, Trump threatens import tariffs in Europe, as well as American companies that move production abroad, and countries that do not want to use the dollar in international transactions.

Economists at Bloomberg Economics have calculated that Trump's tariffs could potentially cause the US economic damage in the amount of 0,8-1,3% of GDP by the end of the next presidential term in 2028. This is a huge amount of money: American GDP is now almost $30 trillion, and in 4 years, according to IMF forecasts, it will exceed $34 trillion.

The second promise is to deport migrants. Economists have calculated that expelling illegal immigrants would deprive the United States of several hundred billion, if not trillions, of dollars.

Bloomberg Economics modeled three scenarios for combating migrants if Trump wins: 1) close the border and let no one else in; 2) deport recently arrived illegal immigrants; and 3) deport all migrants who once arrived without permission, even if they have since received documents.

"The fewer workers, the smaller the GDP," the economists write. "In the second scenario, the overall size of the economy, according to our calculations, will be about 3% smaller than it would have been without deportation. At the same time, the population will not shrink as quickly, so the average income per capita will decrease."

That means Americans will become poorer.

For now, immigration has been good for the country, allowing the US to grow faster than Europe and other developed countries despite inflation and rising borrowing costs after the pandemic.

The recent record influx of migrants will increase U.S. GDP by $7 trillion from 2023 to 2034 and generate an additional $1 trillion in revenue for the Treasury, the Congressional Budget Office estimates.

Why Harris Is Losing to Trump on the Economy

Harris is now in office as vice president, and if she wins the election, she is generally expected to continue the old tax and budget policies.

Her campaign platform includes tax cuts for the middle class, support for small businesses and startups, affordable housing and healthcare.

Under Biden, the American economy has avoided recession and is growing steadily, exceeding forecasts, but Americans believe they were better off under Trump.

The Covid pandemic is largely to blame. For entire generations, post-Covid inflation of 10% and higher was a shock experienced for the first time in their lives. They remembered it forever and now remind Biden and Harris that “this didn’t happen under Trump.”

"What is more surprising: that America has so far outpaced other developed countries in economic growth while avoiding higher inflation, or that Biden has not been praised for it?" wrote economist Paul Krugman.

A dozen of his American colleagues in the elite club of Nobel laureates supported Harris in an open letter.

"We each have our own views on this or that economic policy, but we generally believe that Harris' economic program will improve the health of the nation, the resilience of the economy, spur investment and job creation, and ensure social justice in our country. It is far superior to Donald Trump's counterproductive economic program," the letter says.

Life is too expensive

Which campaign promises Trump and Harris can keep depends not only on their willingness to stand by their words, but also on the Senate's consent. The balance of power in the Senate could change after the November elections, when a third of the senators are up for reelection.

But regardless of the outcome of the November 5 vote, America will continue to live beyond its means.

Neither Trump nor Harris are talking about reducing the gigantic US debt, which is creeping up to 100% of GDP, or reducing the hole in the budget, the current deficit of which is more typical of times of crisis or war than peaceful periods of economic growth.

The head of the International Monetary Fund, Kristalina Georgieva, reminded Americans of this just before the elections.

"When the sun is shining, it's time to fix the roof. But there's always a temptation to put off the problem of deficits and debt until later," she said.

Georgieva recalled that the US budget deficit and debt were high before, but in recent years the problem has worsened as the White House has had to spend extra money to combat two crises - the pandemic and inflation.

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"Now that the economy has returned to strong growth, it's time to stop and reverse this trend," she said, but quickly acknowledged that doing so would be politically difficult because it would require cutting spending and raising taxes.

There is nothing about this in the Trump and Harris platforms.

True, Trump promises to appoint his sponsor Elon Musk as the head of state savings if he wins, and Musk, for his part, threatens to cut the budget by almost a third. However, this requires the consent of Congress, which is traditionally conservative in matters of reducing social spending.

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