Editor's note: This year's election will impact companies in every industry. That’s why Harvard Business School’s Institute for Business in Global Society (BiGS) is launching its first-ever election guide for business leaders, offering insights from experts to help you navigate. In the coming weeks, we’ll publish a series showing how the Harris and Trump agendas will affect everything from trade and labor to diversity and environmental regulations. After the election, we’ll package these insights into a comprehensive guide showing what to expect in the months ahead. we hope you enjoy it.
This presidential election has been characterized as the most consequential in modern U.S. history — not only a choice between two candidates or two different political parties but also two drastically different worldviews. Yet while there are surely two starkly different Americas on offer, one theme is constant: The era of the battle over big government has ended, or at least the rules of engagement are changing.
Despite the vast differences in their policy prescriptions, both Democrats and Republicans, as well as Vice President Kamala Harris and former President Donald Trump, are proposing agendas that give the federal government a more muscular and far-reaching role than seen in the recent past. They differ in how and in what areas of personal and commercial life the state will flex its power.
The stakes for the business community are high, partly because of the uncertainty. Will companies face a new onslaught of regulation and mandates? Or will they have to adjust to high tariffs on foreign goods, renewed attacks on diversity, equity, and inclusion (DEI) initiatives, and unbridled artificial intelligence (AI)?
Political uncertainty and upheaval are, on their own, a risk to companies. In fact, 89% of company executives call polarization and extremism a threat to the business climate, according to a study by the Conference Board. It is increasingly difficult for executives to stay above the political fray at a time when both employees and consumers are calling on companies to take a stand on social issues such as racism and climate change. Some companies already have scaled back their DEI efforts in response to political pressures, and 68% of executives in the Conference Board survey said they feared retribution from federal elected officials in the next three to five years.
Growing federal power
No matter what happens in November, the next president is likely to use the federal government as a powerful force, with significant implications for business.
At first glance, the Trump-vs-Harris approach to the role of government looks like a textbook, side-by-side display of the governing philosophies of the two major political parties. Democrats want to use government programs, funding, and regulations to influence society and business. Harris wants to continue Medicaid expansion under the Affordable Care Act, provide mortgage relief to first-time homebuyers, guarantee paid health and family leave for all American workers, and impose clean-power regulations on new federal buildings. Medicare would be expanded to include dental, vision, and hearing services.
Republicans, meanwhile, are on a mission to cut mandates and regulations — whether for electric vehicles or cryptocurrency — that they see as burdensome to business and stifling to the economy. A Harris administration would ban voice impersonations and "provide heightened protections" in uses of AI; Republicans say they will repeal President Joe Biden's executive order on AI safety and security, replacing it with a policy that is "rooted in free speech and human flourishing." The Democratic National Committee’s platform backs statehood for the District of Columbia; Republicans want to assert greater federal control over the district, which won home rule in 1973.
A populist thread
Underpinning both the Harris and the Trump visions for America's future is a strong populist thread and a robust role for the state.
Democrats would use the state to impose a universal background check law for gun owners and have vowed to pass a law guaranteeing the right to an abortion nationwide. Republicans would use government muscle to conduct a "mass deportation" of immigrants, and—if the provisions of Project 2025, a document prepared by the Heritage Foundation, come into effect—would require detailed monitoring of abortions by the Department of Health and Human Services. Harris has vowed to expand and protect voting rights and raise the minimum wage, while a second Trump administration promises to "keep men out of women's sports," and cut funding for schools that are "pushing critical race theory, radical gender ideology, and other inappropriate racial, sexual or political content on our children." Both visions, from fundamentally different directions, implicitly involve widening the role and ambit of the federal state.
Meanwhile, on labor and trade policies, the parties are stumbling over each other to cast themselves as champions of working-class America, using government as the agent of change. Harris would strengthen workplace and union-organizing protections for workers and demand that billionaires pay a minimum tax rate of 25%. Republicans — who featured Teamsters Union president Sean O'Brien at their political convention in July — have lined up behind a conservative group called American Compass, which challenges the old GOP idea of completely free markets and small government, arguing instead that government should focus more on helping American workers. Again, very different policies, but both involve a substantially larger role in state intervention.
A similar shift appears to be underway in trade policies, where Republicans and Democrats alike are considering far more restrictive measures than in earlier eras. Trump, for instance, has called for an across-the-board, tariff of up to 20% on imported goods, with a 60% tariff for China — hardly the stuff of a free-market state. Harris has expressed skepticism about trade deals and is likely to use trade policy as a tool to fight climate change.
Even on energy, where Democrats and Republicans have often clashed, there is a common goal of using government to achieve certain ends. The Trump team wants to support the fossil fuel industry, roll back regulations, and de-escalate renewable energy policies. Harris's camp wants active, state-directed investments in clean energy research and development, building on historic investments by the Biden administration. Different perspectives, but both want to use the government to direct and fund America's energy future.
In his 1989 farewell address, President Ronald Reagan, the old-school conservative hero, reiterated his belief in smaller government with a memorable line. “Man is not free unless government is limited,” he said. “There's a clear cause and effect here that is as neat and predictable as a law of physics: As government expands, liberty contracts.” In 1996, Democratic President Bill Clinton embraced a similar sentiment, declaring that, "the era of big government is over." This year, neither leader is following in those footsteps.