Biden Bows Out: What’s Next for Harris and the Democratic Agenda?

Kamala Harris’ economic strategies are unlikely to differ significantly if she becomes the Democratic presidential nominee, according to Goldman Sachs.

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In a significant political move, President Biden announced on Sunday that he is withdrawing from the Democratic nomination race. His decision comes amidst mounting pressure to step aside following a tepid debate performance against former President Donald Trump, the Republican candidate.

Soon after his announcement, Biden expressed support for Vice President Kamala Harris, who affirmed her intention to proceed with her candidacy. She has garnered notable endorsements from prominent figures such as California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy. However, analysts believe that this transition will not lead to major policy changes.

Goldman analysts, led by chief economist Jan Hatzius, stated in a report that they do not anticipate any significant alteration to the Democrats’ fiscal and trade policy agenda if Harris becomes the nominee.

The prospect of Harris replacing Biden has tentatively increased the likelihood of a Democratic win in the presidential race by a few points, although it is still estimated to be less than 40%, according to Goldman.

In a previous note, Goldman highlighted that taxes will be a major focus in the coming year, particularly with the impending expiration of personal income tax cuts from the Tax Cuts and Jobs Act set to end in 2025. This implies that the victor of the upcoming election will influence the future of tax cuts and potential new tax legislation.

Goldman’s forecasts for fiscal policy in the event of a Biden victory include a potential tax rate of 39.6% for individuals earning $400,000 or more, an increase from the current rates of 35% and 37%. Additionally, President Biden’s suggested corporate tax rate is 28%, up from the current 21%. However, Goldman expresses skepticism about Congress agreeing to this rate, suggesting a more pragmatic outcome might be around 25%. Furthermore, Biden proposes raising the Social Security and Medicare tax rate on incomes above $400,000 to 5%, an increase from the present rate of 3.8%.

If Harris does secure the nomination, prediction markets have indicated high odds for governors such as Pennsylvania’s Shapiro, North Carolina’s Roy Cooper, Kentucky’s Andy Beshear, or Arizona Senator Mark Kelly to potentially fill the vice presidential role.

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