As President Biden steps back from the race for the Democratic nomination, Vice President Kamala Harris is poised to take the lead, a move that Goldman Sachs believes will not significantly alter the party’s economic policies.
Biden’s announcement on Sunday follows increasing pressure for him to withdraw, especially after a lackluster debate performance against Donald Trump. Shortly after his statement, he endorsed Harris, who has since expressed her commitment to running. She has garnered support from notable figures, including California Governor Gavin Newsom and Pennsylvania Governor Josh Shapiro.
Goldman Sachs analysts, led by chief economist Jan Hatzius, indicated that the fiscal and trade policies under Harris are expected to remain largely unchanged. Although this transition increases the Democratic Party’s chances of securing the presidency slightly, they still estimate it remains below 40%.
Looking ahead, Goldman highlighted that the primary focus for the Democrats will be tax policy, especially as certain provisions from the Tax Cuts and Jobs Act are set to expire in 2025. The next administration will face decisions on tax cuts or new tax implementations.
Economic forecasts from Goldman Sachs under a potential Biden victory include a proposed tax rate of 39.6% for individuals earning $400,000 or more, and an increase in the corporate tax rate to 28%, though they express skepticism that Congress would agree to this rate, suggesting a more likely outcome of 25%. Additionally, Biden has proposed increasing the Social Security and Medicare tax rate on high earners.
Should Harris secure the nomination, speculation about her choice for vice president highlights several potential candidates, including Governors Shapiro, Roy Cooper of North Carolina, Andy Beshear of Kentucky, and Senator Mark Kelly of Arizona.