A Wild Election is Near - Let's Compare Harris and Trump Policies

Incumbent vice presidents who run to succeed a fellow party member face two challenges:

• Explain why they will govern better.
• Own what occurred under their watch.

This is not impossible for Democratic nominee and current Vice President Kamala Harris. She is now up on Republican nominee Donald Trump in most polls and America awaits coming debates over Harris and Trump policies. But the clock is ticking on Harris’ larger proposals as the nomination honeymoon is nearly over.

Source: The Economist. August 15, 2024. “Our new forecast for America’s presidential election.”

As expected, Harris and Trump policies differ on several issues. Moreover, the American public already have some newsworthy proposals:

• Eliminate taxes on tips (Trump & Harris)
• Federal ban on grocery price gouging (Harris)
• Eliminate taxes on social security (Trump)
• $25,000 down payment for first-time homebuyers (Harris)

Needless to say, this November is shaping up to be an election for the ages.

Vice President Harris has yet to release a full tax agenda. She recently expressed interest in increasing the corporate tax rate from 21% to 28%,1 and had voted against former President Trump’s 2017 Tax Cuts and Jobs Act (TCJA).

Should the former President prevail in November, he would make the TCJA expiring cuts permanent.2 President Biden had pledged to extend tax breaks only for those making $400,000 or less3, and Harris expressed similar sentiments.4 Moreover, Harris has been on record as favoring capital gains taxes at the same rates as ordinary income and made news in mid-August with two family-proposed tax credits:

• $3,500 permanent per child tax credit
• $6,000 tax credit for those with newborns

Harris would push to make the credits fully refundable which means they’d also apply to people who are not employed. The expected cost over a decade would be $1.2 trillion.5

Unlike President Biden, the Vice President has little trade policy experience. Some pundits suggest she might consider pushing the US back to a more aggressive international digital trade policy with a particular emphasis on Californian tech company interests, her home base.6 Optimists are hoping that Harris could introduce some much-needed dynamism to trade negotiations, as the past four years have been uncharacteristically stagnant.

Meanwhile, Trump is expected to wield his favorite negotiating stick - the tariff.

Source: Farran, Reda. July 16, 2024. “What Trump 2.0 Would Mean For The Economy.” Finimize.

A 10% across-the-board tariff coupled with a likely proposed levy of 60% on Chinese imports would cost the typical middle-class household approximately $1,700 a year.7

Defenders of the former President’s policy will point to the leverage tariffs provide when protecting national security. It’s an extraordinarily difficult variable to measure, and while a case could be made for tariffs on steel or aluminum from China, for example, tariffs might not be the best instrument. Moreover, they could even undermine the administration’s ability to form a larger multilateral alliance to challenge adversarial nations.8

Regardless of who wins, Harris and Trump policies will be tested on Israel and Ukraine. The Vice President has expressed more sympathy for the Palestinian victims of the war in Gaza than President Biden. Moreover, her selection of Minnesota Governor Tim Walz for Vice President, instead of Pennsylvania Governor Josh Shapiro, a staunch supporter of Israel, might be the first signal that her administration will push for a permanent ceasefire.

This will delight some and anger others. Former President Trump is a stronger supporter of Israel but has called for Israeli Prime Minister Benjamin Netanyahu to “get it over with … get back to peace and stop killing people.”9

Source: USA Facts Team. March 7, 2024. “How much money has the US given Ukraine since Russia’s invasion?” USA Facts.

The Russia/Ukraine war, the world’s worst land war in over 80 years, will likely cause either future administration to be supportive of Ukraine. Yet, former President Trump’s pick for Vice President, JD Vance, is not good news for Ukrainian interests. Vance is viewed as an isolationist on the right who is skeptical of the US’s role in international rules-based order and more interested in the country charting a nationalistic path.10

The U.S. has spent a lot of resources to help the Ukrainians, and should Vice President Harris follow President Biden’s policy, these expenditures will continue. The only thing that could potentially turn off the funding spigot is a U.S. recession.

Some believe the election will come down to health care, abortion to be specific. Former President Trump is not your average Republican when it comes to reproductive rights, but he is also not as progressive as Vice President Harris. In a nutshell, Trump would prefer to leave the issue of abortion to the states.

Source: Kekatos, Mary. June 22, 2024. “A state-by-state breakdown of abortion laws 2 years after Roe was overturned.” ABC News.

Harris, on the other hand, supported a 2019 measure that would have moved beyond Roe by limiting state-level abortion restrictions.11 While Harris will certainly get supporters to the polls on abortion, she will need to walk a fine line on the issue of private health care coverage.

Source: Gallup. August 15, 2024. “Healthcare System.”

During a 2019 CNN townhall, former senator Harris announced her willingness to eliminate private health insurance in favor of “Medicare-for-all.”12 The problem for Harris is most Americans enjoy their health insurance plan, making this a very tough sell.

Harris and Trump policies on energy and the environment differ greatly. Crude oil production under President Biden hit a record 12.9 million barrels daily in 2023. Despite the strong green flank of the Democratic party, fossil fuels are still the number one energy game in town, but the issue to watch for is fracking.

Good politicians ditch unpopular ideas, so Harris is now backtracking on her 2020 presidential campaign vow of banning fracking.13 Since 2021, Harris has followed President Biden’s fracking agenda, which permits it to take place but with more stringent Environmental Protection Agency measures to limit methane emissions. Former President Trump would like nothing more than to tie Harris to her 2020 position. Yet, that may be difficult if she clearly communicates that she analyzed the issue and has shifted positions.

On the issue of climate change, Harris is far left from President Biden, who pitched a $10 trillion plan during her campaign compared to Biden’s $1.6 trillion plan. Harris scored key settlement wins over oil and gas firms when she was California's attorney general,14 and her California background will also likely help her with young, environmentally-minded, voters.

On the other side, Trump would open up the Artic to drilling and attempt to undo much of the funding that went to clean energy projects and electric vehicles within the Inflation Reduction Act.15

Stock markets tend to perform positively in the first year of a Democratic presidency.

Source: Nair, Deepthi. August 1, 2024. “What a Donald Trump or Kamala Harris win will mean for your investments.” The National.

Yet, chatter has shifted to whether the U.S. will be in a recession come November. This is not good for incumbent politicians. The argument is getting stronger by the day that regulations, misallocated green energy subsidies, and other political handouts stalled what should have been a virtuous growth cycle post-COVID.

Other fingers will point to the Fed and Jerome Powell, but the Harris/Walz ticket needs a decent economy to secure a victory.

As we navigate the intricate and ever-changing landscape of policy proposals and geopolitical tensions, it becomes increasingly evident that the upcoming election will wield considerable influence across various sectors. For investors, this period of heightened uncertainty and volatility poses both challenges and opportunities. Historical evidence suggests that specific hedge fund strategies, notably multi-strategy, market-neutral and global macro funds, have demonstrated resilience and performed well under volatile conditions. As you begin to position your clients’ portfolios around the impending election, now might be an opportune time to explore the potential benefits of incorporating election-resilient strategies into the equation.

Sources:

1. Dore, Kate. August 20, 2024. “Trump vs. Harris: Here’s how the election could affect your taxes.” CNBC.
2. Tax Foundation. July 22, 2024. “Where Do the Candidates Stand on Taxes?”
3. Dore, Kate. June 13, 2024. “Biden economic advisor unveils ‘key principles’ for tax policy plan ahead of expiring Trump tax cuts.” CNBC.
4. Gleckman, Howard. August 2, 2024. “Kamala Harris Favored Taxes To Raise Revenue and Change Policy.” Tax Policy Center.
5. The Editorial Board. August 16, 2024. “Kamala Harris Endorses Nixonomics.” The Wall Street Journal.
6. Reinsch, William Alan. July 29, 2024. “Don’t Hold Your Breath for a New Democratic Trade Policy.” CSIS.
7. Clausing, Kimberly A., and Lovely, Mary E. May 2024. “Why Trump’s Tariff Proposals Would Harm Working Americans.” Peterson Institute For International Economics.
8. Gertz, Geoffrey. September 10, 2020. “Did Trump’s tariffs benefit American workers and national security?” Brookings.
9. Narea, Nicole. June 1, 2024. “What Trump really thinks about the war in Gaza.” Vox.
10. Ward, Ian. April 18, 2024. “The Grand Strategy Behind J.D. Vance’s Latest Push to Kill Ukraine Aid.” Politico.
11. Gaffney, Adam. July 31, 2024. “What Happens to American Healthcare After November?” The Nation.
12. Luhby, Tami and Krieg, Gregory. January 29, 2019. “Harris backs ‘Medicare-for-all’ and eliminating private insurance as we know it.” CNN.
13. Milman, Oliver. July 30, 2024. “Kamala Harris will not ban fracking if she wins White House, campaign says.” The Guardian.
14. Barakett, Elysee. August 2, 2024. “Young climate advocates think Harris can do more for the environment than Biden, despite his big wins.” NBC News.
15. Milman, Oliver and Noor, Dharna. February 6, 2024. “’In a word, horrific’: Trump’s extreme anti-environment blueprint.” The Guardian.