Economy: Harris and Trump clash at debate

( NewsNation ) — Former President Donald Trump clashed with Vice President Kamala Harris while discussing the economy during the first hour of their first presidential debate.

Harris laid out her economic pitch that’s gradually taken shape since her campaign launched in mid-July.

The Biden-Harris administration took over the White House in January 2021, a year into the pandemic, and oversaw the reopening of the economy in which inflation skyrocketed to 9% and hiring soared.

“What we have done is clean up Donald Trump’s mess,” Harris said.

Trump mocked Harris’s economic plan as the rivals sparred over the topics on the debate stage.

“She doesn’t have a plan. She copied Biden’s plan, and it’s like four sentences, like “Run Spot Run.” Four sentences that it’s just, ‘Oh, we’ll try lower taxes,’” Trump said.

Harris brought up the rising cost of housing, the difficulties families face in paying for child care and her passion for supporting small businesses. The vice president brought up her proposal to give a $50,000 tax cut to small businesses getting started up.

She attacked Trump on policies she said would raise the cost of living for the middle class to pay for tax cuts for billionaires.

Trump denied having a sales tax, characterizing his proposed tariffs as those that would be paid by other countries like China and not be passed on to consumers. Tariffs are typically paid by American importers, and studies have found the cost is usually passed on to consumers.

Trump then pivoted to immigration, accusing immigrants of taking jobs from the Black community and unions, suggesting immigrants are taking over towns in America. Trump then said he created the best economy ever.

Trump claimed that the only jobs created under the Biden-Harris administration were from recovering jobs that were lost under Trump amid the pandemic recession.

Trump said, “The only jobs they got were bounce-back jobs,” though there have been some 6.5 million additional jobs on top of that claim.

When asked about the Biden administration’s decision to keep some of Trump’s tariffs, Harris said Trump left the country with a trade deficit and accused Trump of selling the U.S. out when it comes to supplying computer chips that China used to update its military.

Here’s what Trump and Harris have said and done beyond the debate:

Pitches to the middle-class

Trump and Harris have different ways of trying to help the middle class.

The former Republican president sees tax cuts for businesses and the wealthy as essential for promoting more investment, with those who’ve previously advised him saying average growth would top 3%. Mind you, overall economic growth never hit 3% a year when Trump was president. But between 2018 and 2019, the median household income jumped by $5,220 to an inflation-adjusted $78,250, according to the Census Bureau.

“What I tell people all the time: The Trump policies were designed to lift middle-class wages, re-onshore and re-industrialize,” said Joseph LaVorgna, an economist who worked in the Trump White House. “The intention is to get wages higher.”

By contrast, Harris wants to upgrade the middle-class promise of home ownership and ease the high costs of parenthood. She also wants tax breaks for entrepreneurs. It’s a message meant to show that Harris can address the problem of prices as people are still recovering from inflation spiking to a four-decade high in 2022.

First-time homebuyers could get $25,000 in down payment assistance that would be coupled with broader policies to encourage the construction of 3 million additional homes in four years. New parents could get a $6,000 tax credit and an expanded child tax credit.

“When working- and middle-class Americans have the opportunity to earn more, to build a business, to buy a home, to climb the economic ladder, it strengthens our economy and helps us grow,” said Brian Nelson, a Harris adviser.

No taxes on tips, social security

Trump has proposed no taxes on tips paid to workers or Social Security income. Harris has embraced the idea of not taxing workers’ tips.

As Ernie Tedeschi at the Yale Budget Lab noted, excluding tips from taxes is unlikely to provide much of an economic boost even if some individuals feel better off. He noted that just 2.5% of workers receive tips and that many don’t earn enough money to owe income taxes to the federal government.

Trump would also exclude Social Security payments from taxation, which could cost $1.2 trillion over 10 years. The risk is those taxes help fund Social Security. Without those revenues, the program would be unable to pay full benefits starting in 2033, or two years earlier than currently forecast, according to an analysis by Brendan Duke, senior director of economic policy at the Center for American Progress, a liberal think tank.

Tariffs

How much would the tariff be? No one really knows. Trump has proposed a broad tariff of 10%, but at an August event in North Carolina suggested it could be as high as 20%. Against Chinese products, he would like a tax of somewhere between 60% to 100%.

The Republican insists his tariffs wouldn’t jack up inflation, but the whole goal of the tax is to make imports more expensive so that more manufacturing occurs domestically. The Harris campaign says the middle class would face a higher tax burden, with the 20% tariff applied broadly costing a typical household $4,000 annually.

The Trump campaign did not answer questions about how the tariffs would work. If the goal is to bring jobs back from overseas, the tariffs would presumably be phased in over time so that manufacturing jobs could return to the U.S. But if the goal is to raise revenues, then they would be implemented immediately.

Trump is not afraid of debt

It’s not clear that Trump could pay for his ambitious tax cuts.

He wants to extend the expiring provisions of his 2017 tax overhaul. He’s floated the idea of chopping the 21% corporate tax rate to 15%, in addition to no taxes on tips and Social Security income. The estimated price is close to $6 trillion, but it could be higher. And the Congressional Budget Office already estimates $22 trillion in deficits over the next decade without the tax overhaul being extended.

Growth would not appear to cover the price tag. The Committee for a Responsible Federal Budget surveyed economic analyses and found that Trump extending his tax cuts would have roughly no impact on overall growth over 10 years because of the additional debt.

“The overall agenda doesn’t seem to be all that pro-growth,” said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget.

Harris is more cautious with deficits

According to the Harris campaign, all her spending plans would be funded. Officials with her campaign have suggested that her sources of revenue would largely mirror Biden’s 2025 budget proposal.

Still, the Penn Wharton Budget Model estimates that her policies would add $2.3 trillion in spending. It forecasts that her plan to increase the corporate tax rate to 28% would produce $1.1 trillion in tax revenues. But the group did not include other proposals such as taxing the unrealized income gains of people worth $100 million or more, as there are not enough details to produce an accurate number. Nor did it include other revenue increases.

The Penn Wharton Budget Model suggests that the Harris plans would hurt growth more than Trump’s would through 2034, though it excluded his proposed tariffs from the analysis.

The real difference of the plan is how tax burdens would change starting in 2026.

Under Trump’s plans, someone in the top 0.1% of earners would after taxes get on average $376,910 more in income. The poorest 20% would get just $320 more.

Harris’ policies would reduce the average incomes of the top 0.1% by $167,225. But the bottom 20% get $2,355 more in income and benefits.

“Bigger picture: both Harris and Trump are causing the debt path to rise even faster than the fast pace under current law,” said Kent Smetters, the faculty director of the Penn Wharton Budget Model.

The Associated Press and NewsNation partner “The Hill” contributed to this report.

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