Most of the media reports that Democrat presidential candidate Vice President Kamala Harris is not specific about her future economic plans should she be elected. The Harris camp says the same thing about Republican candidate and former President Donald Trump. The truth is that Harris has offered virtually no specifics just very broad statements about opportunity. Trump, on the other hand is very specific.
The first problem the next president will have to solve is inflation. Harris talks about corporate greed and price controls, which every economist will say lead to product shortages and even higher prices. Price controls never solve an inflation problem.
Since energy, in total, accounts for about 30% of the consumer price index (CPI), Trump says he will act to increase the supply of energy. More specifically, he will approve the Keystone pipeline, which can be completed in about a year that will add 900 million barrels of oil per day to the market.
Additionally, Trump will allow drilling on federal lands, streamline the regulations process, and ensure energy companies that there is a future in fossil fuels. We all know that the length of that future largely depends on the time it takes alternative energy sources to become competitive. (That’s the way markets work.)
The increase in supply will result in energy prices falling substantially, putting downward pressure on the CPI.
Trump wants lower taxes for all Americans. That means he will make the 2018 Trump tax cuts permanent. Harris says she will let those expire. The Trump tax cuts, which I believe were exceptionally fair, cut taxes by 10% for all taxpayers.
If Harris allows them to expire, every taxpaying American will see a 10% increase in the amount of taxes they pay each year.
Trump is also very specific when it comes to government spending and the treatment of the deficit. He recognizes that he must save Social Security and Medicare, which currently account for about 35% of government spending. While raising taxes is out of the question, reducing benefits is also not an option.
Trump has yet to determine a specific solution, but by making the system more efficient and ensuring only those entitled to benefits are receiving them, he may be able to at least reduce administration costs.
About 7% of the budget goes toward interest on the debt, which must be paid. Just over 13% is for defense spending, which Trump says he may have to increase to rebuild the military.
A whopping 44% of total government spending is for discretionary domestic programs. In 2023, the federal government spent $2.7 trillion on those programs. With the cost-cutting measures Trump has promised in partnership with billionaire Elon Musk applied, along with making government much more efficient, hundreds of billions of dollars can be saved. Trump says he will save that money.
To increase tax revenue in order to further shrink the deficit, Trump plans a tax policy that will incentivize households and business to grow, increasing total economic growth. This, in turn, increases taxable income.
For business, Trump wants to lower corporate tax rates (after all corporate profits are taxed twice), which will give corporations more incentive to invest and more capital to do so.
The 2018 Trump tax cuts help ensure that people can keep a larger share of what they earn. He has suggested that individual tax rates may be too high. He has offered specific policies designed for lower wage workers to keep more of what they earn.
Many people work in the hospitality industry where wages are extremely low. The workers survive based on the quality of their service and the tips they receive. It is extremely difficult to keep accurate records of tips which the Internal Revenue Service requires. The tips are subject to federal income tax. Trump wants to eliminate that tax.
He also wants to encourage workers to take advantage of whatever overtime they may be offered. Today there is some reluctance to work overtime, because overtime pay may put the worker into a higher tax bracket. That means his take-home pay does not fairly reflect the extra hours worked.
Trump will not make any of the overtime pay subject to federal income tax. Then the take-home pay will truly reflect a worker’s effort. That will be a tremendous incentive for workers to increase their effort and for business to increase output, leading to higher growth.
Trump is specific. He wants lower tax rates, higher economic growth, increased tax revenue, reduced taxes for lower-income service workers, and increased overtime pay for workers.
Specifically, he wants a growth economy and he knows just how to do it.
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Michael Busler is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.