U.S. Election and its economic policies: Is there a lesser of two evils?

Editor’s note: While the topic of policies and their true intents is heavily polarizing, this article aims to distill the sea of campaign material into succinct, concrete policy measures, and their short- and long-term effects on the U.S. and global markets. As always, debate is encouraged! Whichever political party you associate with, I implore you to objectively and independently assess the policies mentioned and derive your own conclusions, in spirit of long-term prosperity and knowledge. Best regards, Nikita

The big day is here. Today, November 5^th (morning of November 6^th in Europe), the US will know their next president, and the world will either sigh in relief or fasten their seatbelts - depending on where you’re from. In the process of watching the campaigns unravel however, the economists’ itch inside of me was longing to be scratched. In pursuit of capturing the voters’ hearts, economic policy was solely used as a supporting element to the broader narrative of both candidates, as opposed to a focal point. The future of the world’s most important and biggest economy had been drowned out by more click-grabbing contemporary political issues. In aims So, I started digging. 

This article is structured as follows: Each candidate will be presented together with their three most important economic policies, starting with Kamala Harris, followed by former president Trump. The implications of these policies will be laid out as objectively as possible, with evidence firmly grounded in empirical statistics and mathematical forecasting.

The reason for me starting with Ms. Harris’ policy suggestions is a practical one: As she had only entered the presidential race in July 2024, less is known about her economic plans by proxy of her focusing on more impactful and politicized topics to quickly swing democrat voters, priorly supporting president Biden, in her favor. Broadly speaking, Harris positioned herself as the defender of lower-income households and the lower-middle-class. Here are the measures proposed by her campaign team to enforce their beliefs:

1. Child Tax Credit: CTC for short, is a measure of easing the burden on parents, especially those that are economically forced to return to work immediately after giving birth. The Child Tax Credit system allows for tax breaks oof various sizes for families with qualifying children. Currently families are entitled to receive up to $2000 per child under the age of 16. Harris’ team vies to increase this to $3600 for children under the age of five, and then $3000 up to age 17, raising maximum age by a year from the status quo. Additionally, Harris proposed a $6000 one-time receivable for newborns. The policy is a significant step up in financing support for lower income households and would elevate the U.S. to the approximate level of Germany, Luxembourg and Belgium, as far as governmental child support goes. The leaders have been, and remain Switzerland and certain Nordic Countries (Denmark, Sweden, Finland.)
2. Affordable Housing: As a further means to help low-income families, Harris aims to attack the inflated U.S. housing market. Her administration aims to offer credits for new homeowners, and down-payment assistance for those unable to cover the initial 20%. Such programs already exist, offered by private firms and banks. Harris, however, aims to governmentalize such practices.
3. Corporate Taxation: To finance the aforementioned two measures, Harris’ administration leans on increasing the corporate tax rate from the current 21% to 28%, as well as raising capital gains tax. This suggestion is logically coherent with her message of supporting low-income households and 

The Bottomline:

Harris’ economic measures are in congruence with her political aspirations – there is no doubt about that. The risks, however, become apparent as the U.S.’ tower of governmental debt starts to cast its shadow over the country. The U.S. has been running a budget deficit the magnitude of no country ever before, for as long as no country ever before has been able to. The reason the U.S. is in the unique position to invoke such unprecedented policies is the power of the dollar, and the global markets’ reliance on its strength. While still in the distant future, we have seen attempts, most notably from the BRICS union, to dethrone the dollar as the main currency of global trade. Regardless of whether these attempts will be successful, sooner or later, the U.S.’ trade deficit will need to be reduced. This usually happens through currency depreciation, increased exports, or lower imports, all leading to rising domestic prices and inflation. Economic stagnation is a common effect of such policies, and, considering the size of the deficit and its growth rate, will undoubtedly lead to a major recession, undermining the stability of the dollar even more.

As far as Mr. Trump’s stance goes, it is largely similar to his 2020 campaign goals, which, in turn were piggybacking off his first term policy decisions. Broadly speaking, Mr. Trump advocates for a stronger national identity, and mirrors this through imposing import taxes of foreign goods, as well as sealing the borders in hopes of combatting illegal immigration. Here are the main points of Trump’s economic policy:

1.  Tax cuts: As a means of stimulating the economy, Mr. Trump’s administration heavily emphasizes the importance of tax cuts; more specifically capital gains and income taxes. The former is to be lowered across all tax brackets, whereas the for the latter, solely the top tax rate is to be lowered. This would increase individual disposable income and stimulate spending, while lowering the state’s budget – in line with Trump’s commitment to deregulation.
2. Smaller state & Deregulation:As mentioned in the above point, Trump believes in the U.S. economy’s capacity to function smoothly with less regulation than what is currently the case. The energy sector in particular is ought to be granted more liberties, such as more land available for oil drilling and lower restrictions on fossil fuels. This policy aims to reduce costs, and thereby increase domestic production.
3. Tariffs: By claiming “tariffs” as his “favorite word”, Mr. Trump leaves no ambiguity about his stance on the topic. Tariffs are to be used as a form of protectionism to shield the U.S. industrial complex from the dangers of excessive reliance on global partners, more specifically China. Trump’s first set of imposed tariffs date back to 2017, during his first term. A policy which was criticized by democrats at the time, yet consciously kept under the Biden administration. This round of tariffs is in many ways more radical, imposing general taxes on imports, as well as an up to 60% tariff on all imports from China.

The Bottomline:

The viability of tariffs is a very opaque topic, as based purely on empirical data, and in the short to medium run, they tend to do more harm than good. While it is true that tariffs implore companies to open production facilities domestically, as to avoid import costs, the order of magnitude compared to the number of companies refusing to incur the costs at all, and exiting the market, is incomparable. An argument is to be made for rising domestic prices, as it is not China that will have to pay the tariff, but the American importer, thereby incurring costs domestically. As for tax cuts, it is to be assumed that, should they happen, the U.S. will experience an output boost in the short term (a heads up for anyone owning shares.) Long term, however, lower taxes necessitate reforms in governmental budgeting and resource allocation as to not allow governmental structures and public sectors (healthcare, police, etc.) to deteriorate. In addition to that, the growing wealth inequality will be exacerbated through lower top-line income taxation. The proposed policies will indeed provide a short-lived economic boom; however, their long-term effects are all but certain.

In conclusion, one is left with a feeling of emptiness regarding the U.S. economy. Oftentimes, we as humans all strive for the same things: Health, prosperity, happiness. It is the means by which we attain these ends that differentiate us, and put us into camps, whether religious, political or otherwise. Why the philosophical tangent, you may ask? When assessing the proposed policies of both candidates, it feels like the broad ambitions are identical: (1) Induce economic prosperity in the short to medium run by (2) consciously and continuously disregarding the long-term economic issues caused by said policies. In practical terms: make the next four years as prosperous as can be, and leave the aftermath to whomever it may concern – more specifically the next president, and Jay Powell (or his successor.) Whether it be tariffs or unsustainable government spending, probabilistically speaking all roads lead to an eventual recession which will echo all around the world. The only question that remains is: By what means will the U.S. get there?

I do not mean to sound overly grim. Realistically speaking, the U.S. will be able to weather most economic storms with flying colors, as it has all throughout the last century. The approach of continuously pushing back the inevitable, however, is not one that works long-term, and unfortunately, is seems that politicians have mastered this art. I implore you, the reader, to not grow oblivious to the long-term implications of policy. Depending on your time horizon, the same factors that lead to success may end up being the demise of a decision, an investment or a nation. And I implore you to not relegate this issue to politicians, but to take accountability over your long-term success into your own hands, in whatever form this success may come.