Kamala Harris has a 'Bidenomics' dilemma on her hands

As Kamala Harris replaces President Joe Biden atop the Democratic ticket, she faces a delicate balancing act in articulating her vision for the US economy.

On one hand, Harris has been an ardent defender of the Biden administration’s “Bidenomics” agenda, promoting the benefits of landmark legislation like the American Rescue Plan and the Inflation Reduction Act.

On the other, her past policy positions as a senator and presidential candidate suggest a more progressive economic approach than the president’s, one that could prove challenging to reconcile with the realities of the current inflationary environment.

Bidenomics: A closer look

At the heart of the Bidenomics framework lies a fundamental shift in the Democratic Party’s economic philosophy. Whereas previous administrations embraced a “trickle-down” approach focused on tax cuts and deregulation, Biden and Harris have championed a more interventionist model aimed at strengthening the middle class and addressing longstanding inequities.

This has manifested in a flurry of legislative activity, including massive investments in infrastructure, clean energy, and social programs.

The $1.9 trillion American Rescue Plan, enacted in 2021, provided direct financial assistance to struggling households, extended unemployment benefits, and channelled resources to state and local governments. Harris has been a vocal proponent of this legislation, arguing that it helped “create millions of jobs” and “rebuild American manufacturing.”

The Inflation Reduction Act, signed into law in 2022, represents another key pillar of Bidenomics. This sweeping bill includes provisions for climate change mitigation, prescription drug pricing reform, and corporate tax increases. Harris has hailed it as a “historic investment” that will “lower costs for families” and “create good-paying jobs.”

Kamala Harris’s Economic Vision

While Harris has embraced the Bidenomics agenda, her past policy positions suggest a more progressive economic outlook. As a senator and presidential candidate, she pushed for higher taxes on the wealthy, more generous tax credits for the middle class, and ambitious housing and education initiatives.

Harris has been vocal about her desire to roll back the Trump administration’s 2017 tax cuts, which she has criticised as a “giveaway to the rich.” As a candidate, she proposed replacing these cuts with a refundable tax credit worth up to $500 per month for individuals earning less than $100,000. She has also called for increasing the corporate tax rate and estate taxes on the wealthy.

Housing affordability has been a key focus for Harris, who has proposed the Rent Relief Act. This legislation would have provided refundable tax credits to renters earning less than $100,000, allowing them to recoup housing costs in excess of 30% of their incomes. She has also advocated for $100 billion in emergency relief funding for the homeless and increased investment in communities that have historically faced discrimination in the housing market.

Education has been another priority for Harris, who as a candidate called for the “largest federal investment in teacher pay in U.S. history.” Her $300 billion plan would have provided the average teacher with a $13,500 pay increase. She has also emphasized the importance of workforce development, particularly in emerging industries like clean energy, where she sees opportunities for small businesses and entrepreneurs.

Navigating the Inflation Challenge

The economic landscape that Harris would inherit as a potential president is vastly different from the one that existed during her previous political endeavours. Inflation, which has proven to be a persistent thorn in the Biden administration’s side, poses a significant challenge for any Democratic leader aspiring to build on the Bidenomics legacy.

Recent data paints a concerning picture for American households. A Morning Consult survey found that only 46% of respondents could cover a $400 unexpected expense without going into debt, while the Lending Club’s Paycheck-to-Paycheck Report revealed that a majority of consumers, including those earning $50,000 to $100,000 per year, are living paycheck to paycheck. This underscores the strain that rising costs of living have placed on family budgets, even among the middle class.

To make ends meet, many Americans have been forced to dip into their personal savings, which have declined by nearly $5 trillion since Biden took office. Additionally, credit card debt has risen to a record $1 trillion, with over half of consumers unable to pay off their entire balance each month, further exacerbating the financial burden.

Exacerbating the problem, wage growth has failed to keep pace with inflation, increasing only 13% since Biden took office compared to a nearly 17% rise in the Consumer Price Index. This disparity has eroded the purchasing power of American households, undermining the tangible benefits of Bidenomics.

Reconciling Progressivism and Pragmatism

As Harris contemplates her economic vision, she must grapple with the realities of the current inflationary environment and the need to balance her more progressive policy inclinations with the pragmatic demands of governing. This delicate balancing act will be crucial in determining the future direction of Bidenomics and its ability to resonate with a financially-strained electorate.

One potential avenue for Harris could be to double down on her previous proposals for tax credits and housing assistance, framing them as a means of providing immediate relief to struggling families. By emphasising the need to address the cost-of-living crisis, she could position herself as a champion of the middle class and distinguish her approach from the perceived failures of Bidenomics.

At the same time, Harris would need to articulate a long-term economic strategy that builds on the foundational elements of Bidenomics, such as the focus on clean energy, manufacturing, and workforce development. By highlighting the potential for these investments to create well-paying jobs and bolster economic resilience, she could strike a balance between addressing present-day concerns and laying the groundwork for sustainable growth.

Ultimately, Harris’s ability to reconcile her progressive instincts with the pragmatic demands of the current landscape will hinge on her political acumen and willingness to forge consensus. This may require tempering some of her more ambitious proposals or finding creative ways to finance them, all while maintaining a clear, coherent narrative that resonates with voters.

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