Trump Budget Would Spike Deficits By Nearly 5 Times Harris Proposal, Says Penn Wharton

Jibran Munaf
Jibran Munaf August 28, 2024

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A recent analysis from the Penn Wharton Budget Model reveals stark differences in the fiscal impacts of economic proposals from former President Donald Trump and Vice President Kamala Harris. According to the studies, Trump’s plans would increase federal deficits by $5.8 trillion over the next decade, nearly five times more than the $1.2 trillion increase projected under Harris’s proposals.

Breakdown of Trump’s Economic Proposals

Trump’s economic agenda includes several key proposals that significantly contribute to the projected deficit increase:

  1. Permanent Extension of the 2017 Tax Cuts: This would add over $4 trillion to the deficit over the next ten years. The 2017 tax cuts, which were initially set to expire, primarily reduced taxes for corporations and high-income individuals. Making these cuts permanent would continue to reduce federal revenue.
  2. Eliminating Taxes on Social Security Benefits: This policy, which comes with a $1.2 trillion price tag, would relieve retirees from paying taxes on their Social Security income, further decreasing government revenue.
  3. Further Corporate Tax Reductions: Trump’s plan includes additional cuts to corporate taxes, projected to add nearly $6 billion to the deficit.

Harris’s Economic Proposals and Offsetting Measures

In contrast, Harris’s proposals, while still increasing the deficit, are accompanied by measures intended to offset some of the costs:

  1. Expansion of Tax Credits: Harris aims to expand the Child Tax Credit, Earned Income Tax Credit, and other tax credits, which would collectively raise deficits by $2.1 trillion over the next decade. These credits are designed to provide financial relief to lower- and middle-income families.
  2. First-Time Homebuyer Subsidy: Harris proposes a $25,000 subsidy for all qualifying first-time homebuyers, which would add $140 billion to the deficit over ten years.
  3. Corporate Tax Rate Increase: To help balance her spending, Harris suggests raising the corporate tax rate from 21% to 28%. This measure could generate $1.1 trillion in revenue, partially offsetting the costs of her proposed programs.

Additionally, Harris supports President Joe Biden’s budget proposal for the 2025 fiscal year, which includes $5 trillion in revenue-raising measures. However, implementing these changes would require congressional approval, presenting a significant hurdle.

Divergent Approaches to Funding Proposals

Trump’s approach to funding his agenda relies heavily on imposing tariffs rather than adjusting domestic tax policy. He has proposed a 10% tariff on all imports and a 60% tariff specifically on Chinese imports. These tariffs would not require congressional approval, allowing Trump to implement them unilaterally. He argues that such measures would spur enough economic growth to offset the short-term costs of his policies.

However, economic experts, including Moody’s Chief Economist Mark Zandi, estimate that Trump’s proposed tariffs would generate about $2.5 trillion in revenue—far less than needed to cover the projected deficit increases. Additionally, economists warn that such aggressive tariff policies could reignite inflation, undermining recent progress in cooling consumer prices.

Political Implications and Campaign Narratives

Both the Trump and Harris campaigns are leveraging these economic projections to critique each other’s fiscal responsibility. The Harris campaign has labeled Trump’s economic agenda as an “inflation and deficit bomb,” suggesting it would unfairly burden the middle class while benefiting the wealthy. In contrast, Trump’s campaign defends his track record by highlighting his experience as a businessman and his claim of having built “the greatest economy in American history.”

As the campaign progresses, both sides are keen to sway voters who are concerned about the economy, especially amid ongoing inflationary pressures and high living costs. With the economy proving a consistent vulnerability for the Democrats, the Harris campaign is working rapidly to present a fiscally responsible yet socially supportive economic platform.

The Penn Wharton Budget Model’s findings highlight a significant divergence in fiscal strategies between Trump and Harris. Trump’s plans could lead to a substantial increase in the federal deficit, driven primarily by tax cuts and tariffs, while Harris’s proposals, though still costly, include mechanisms intended to partially offset their impact. As the political discourse intensifies, the economic policies of each candidate will likely remain a central issue for voters.

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