President Biden announced on Sunday that he is stepping back from the Democratic presidential nomination race, responding to increasing calls for him to withdraw following a shaky debate performance against Republican candidate Donald Trump. In his announcement, Biden endorsed Vice President Kamala Harris, who confirmed her intention to continue her candidacy and has already received several key endorsements from influential figures, including California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy.
Despite this shift in leadership, analysts at Goldman Sachs believe that there will be minimal changes to the Democratic economic agenda if Harris becomes the nominee. In a note released on Sunday, chief economist Jan Hatzius and his team stated that they do not expect significant alterations to the Democrats’ fiscal and trade policies in the event of a Harris nomination.
Goldman Sachs indicated that the odds of the Democrats securing the White House have slightly increased but remain under 40%. They noted that taxes will likely become a central fiscal issue in the coming year, especially with the expiration of certain provisions of the Tax Cuts and Jobs Act set for the end of 2025. This means that the outcome of the election will significantly influence decisions regarding potential tax extensions or new tax policies.
The firm also provided specific forecasts for fiscal policy under a Biden victory, including a proposed tax rate of 39.6% on individuals earning $400,000 or more, an increase from the current rates of 35% and 37%. They suggested that Biden’s proposed corporate tax rate might rise to 28%, though they expressed skepticism about Congress supporting this change, predicting that a 25% rate could be more realistic. Additionally, Biden’s plan includes a proposal to raise the Social Security and Medicare tax rate on incomes exceeding $400,000 from 3.8% to 5%.
Should Harris secure the nomination, prediction markets suggest that potential candidates for the vice presidential spot include Governors Shapiro (Pennsylvania), Roy Cooper (North Carolina), Andy Beshear (Kentucky), or Senator Mark Kelly (Arizona).