Updating our Harris and Trump scenarios

Vice President Kamala Harris has released the first part of her economic plan. In it, she proposes an expansion of tax credits, lower prescription drug costs, and affordable housing initiatives. We consider this first tranche of her fiscal agenda in isolation and estimate that these policies would boost the level of real GDP by as much as 0.8% in the medium term. Stronger growth is accompanied by inflation, which is 0.2ppts higher relative to the baseline.

What you will learn:

• While this is only one part of her economic plan, we have a better sense of what a broader tax and spending agenda would look like under a Harris presidency and a Democratic Congress. We revamped our scenario of full Democratic government control, which assumes Harris signs into law expansions to federal social benefits and higher taxes on corporations and high earners.
• On net, these policies lead to faster growth and inflation over the medium term. Longer term, inflation is modestly lower relative to the baseline, but the economy ends up larger thanks to the positive supply-side responses from the collection of family-support policies.
• We also updated our scenarios around a second presidency of Donald Trump. Most notably, we no longer expect a full repeal of the Inflation Reduction Act’s clean energy tax credits.

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