The Kamala Harris–Tim Walz presidential campaign declares: “We Won’t Go Back.” They believe that progressivism’s advance should not be reversed, something they claim Donald Trump would do.
No one need worry about a second Trump presidency reversing the “gains” of progressivism, but the Harris-Walz campaign’s chosen slogan is ironic, given that Harris is reaching back a half century for her economic programs. For all the talk of “new ideas” and the “freshness” of the Harris candidacy, much of her economic platform echoes the same progressivism that has been driving the US economy toward a repeat of the 1970s stagflation—but with the added “bonus” of $35 trillion of national debt. The future Harris administration wants to further increase
Donald Trump’s economic plans, on the other hand, reach back to the nineteenth century for tariffs, which he mistakenly believes were responsible for American prosperity.
This article covers the candidates’ economic platforms to examine their possible effects. Unfortunately, neither candidate has a realistic view of the US economy, in which the government’s programs of borrowing, spending, and using the Federal Reserve System to underwrite vast military expenditures, unwise political schemes, and other wish list items, abound.
Kamala Harris
We begin with Harris, since she seems to be leading in the polls. If the trends hold, she will be sworn into office in January, and then she will try to make her campaign rhetoric our economic reality.
Harris is part of an administration that has an economic track record that can be described by one word: intervention. She has not put forth a single initiative that even a moderate freemarket advocate could endorse. Looking at the proposed policies on her campaign website, there are few, if any, proposals that address the causes and effects of massive inflation, borrowing, and spending.
Other than her tax credit proposal—which would require an act of Congress to implement—her agenda is simple campaign rhetoric. Here are some of her plans:
- a national program of rent controls
- a national plan to build three million new housing units to “ease the housing shortage”
- a “$40 billion innovation fund—doubling a similar pot of money created by the Biden administration—for businesses building affordable rental housing units”
- $25,000 down payment grants to first-time home buyers
- preventing investors from purchasing rental housing
- anti-price-gouging laws that force food producers to lower prices
- negotiating with drug companies to lower prescription drug prices
- increasing the Child Tax Credit to $3,600 per child and expanding it to include a $6,000 tax credit for newborn children
Harris also has floated new taxes, including a 25 percent tax on unrealized capital gains of more than $100 million. Her tax proposals include raising the top individual income tax rate from 37.0 percent to 39.6 percent, as well as increasing the corporate income tax from the current rate of 21 percent to 28 percent.
What is more significant is what she has not said in her campaign. Other than to claim her “values have not changed,” Harris has not recycled the proposals from her short-lived 2020 primary campaign. In 2019, she called for the elimination of private health insurance (to be replaced by a government “Medicare for All” plan) and for a ban on fracking, a process used to extract natural gas and oil, which is responsible for making the US a world leader in energy production.
The hard Left supported those proposals, and if Harris had her way, Americans would have to deal with mass confusion in medical care and massive energy shortages. If Harris didn’t understand that point then, she probably does now, especially given that almost 5 percent of all employment in Pennsylvania, a swing state, is tied to fracking, but one is left wondering if President Harris would later pursue those disastrous policies anyway.
Her most recent public economic declaration came, ironically, on August 15, the same day President Richard Nixon announced wage and price controls and officially disconnected the dollar from gold in 1971. That Harris would call for similar policies should not be lost on Americans that still remember the economic stagnation and inflation of the 1970s.
Even though she didn’t call for official price controls, they were implied, and according to the Wall Street Journal, her message “electrified” her Democratic Party base. That point should be significant because if economists understand one thing, it is that price controls have a disastrous economic impact over time. One would assume that even Harris’s own economic advisers understand that point.
But as Ryan McMaken noted:
We shouldn’t be surprised that the Harris campaign is planning to enthusiastically announce its plans for price controls. The Harris people can claim she is “doing something” about the economy. This will all be couched in terms of “greedflation” and corporate windfalls and other economic myths used to claim that today’s rising prices—fueled by monetary inflation, massive deficit spending, and a runaway regulatory state—are actually the fault of “too much capitalism.”
Then there are the potential devastating effects of the so-called climate policies that a Harris administration would impose. Harris cut her political teeth in California, which has the most draconian CO2 emissions goals in the country, and where the sale of new gasoline- or diesel-powered vehicles will be banned after 2035. Her hostility to energy companies is reflected in her actions when she was California’s attorney general: according to ABC, “Harris investigated Exxon Mobil over concerns that the company misled the public and its shareholders about the risks of climate change and whether its public statements violated securities laws and other statutes.”
There was no smoking gun to validate her claims, but Harris showed she would have no problem imposing huge costs on energy firms to further the Green New Deal. One cannot underestimate the importance of oil and gas in the US economy, and there is no way to fully transition to an “all-renewable” energy economy, especially in the short time windows set by Democratic politicians.
Under the Biden-Harris administration, the US has seen the highest rates of inflation since the early 1980s, yet Harris continues to insist that the inflation is due to “corporate greed,” not the fact that since 2020 monetary policies have vastly expanded the amount of money in circulation. Harris’s “plan” to reduce inflation can be summed up as follows: increase business costs through regulation, threats, and litigation from “corporate crackdowns.”
As McMaken pointed out, most people on the Harris team, save a few true believers, know that one cannot reduce inflation by using legal threats to force up business production costs or by imposing price controls. While Harris has declared her fealty to Fed “independence,” the truth is that she will need every dollar the Fed can print to offset the negative effects of the new taxes and regulatory initiatives that will reduce the capital investment that results in real economic growth.
The Biden-Harris administration claims that it has revitalized the US economy, but the Fed’s recent rate cut raises questions about what really is happening. If the economy is as good as Harris claims, then why the need for drastic Fed action?
Harris’s business initiatives, such as building three million housing units and aiding American companies, are a continuation of the Biden “Build Back Better” program that supposedly was going to revitalize moribund sections of American manufacturing and create alternative energy sources. Unfortunately, as one can see, the centerpiece of the Biden program, the Inflation Reduction Act, was little more than crony capitalism, in which business owners direct resources to less-than-profitable venues that benefit politically connected investors.
Harris’s business policies will bring back stagflation, where people get further behind while prices for housing and consumer goods rise. In the 1970s, Washington laid new burdens on private enterprise, and firms choked under the regulatory environment. There is nothing in Harris’s plan to prevent a repeat of this scenario. Her tax and regulatory plans will force up business costs and then will have to be offset by monetary expansion by the Fed, just as happened a half century ago.
There is one important difference between then and now, however. In the late 1970s, the Jimmy Carter administration, with support from a Democratic Congress, went on a huge deregulation program, allowing more competition in transportation, finance, energy, and telecommunications. Contrary to popular belief, Carter, not Ronald Reagan, was the Great Deregulator.
But Harris and the Democrats in Congress today are much more to the left than the Democrats in 1980, and, if anything, they favor vastly expanding the regulatory umbrella. Thus, when stagflation grows under a Harris administration, their response will be to impose more government controls.
Donald Trump
At this writing, Trump will have to fight an uphill battle to win the presidential election—but the odds were against him in 2016 as well. Thus, we should take a hard look at his economic proposals to see if they will help or hurt the US economy.
It is not easy to find specific policy proposals from the Trump campaign. His official campaign site exists solely for fundraising, while the Republican Party platform consists of general statements like “Carry out the largest deportation operation in American History” and “Stop outsourcing and turn the United States into a manufacturing powerhouse.”
Certainly, the biggest negative of Trump’s plan are the tariffs he advocates, which would add to the tariffs he implemented during his presidential administration. He wants to impose a tariff of at least 60 percent on Chinese goods and a 10 percent overall increase for all tariffs.
Anyone familiar with Austrian economics knows that no nation ever has built a prosperous economy through tariffs, and Trump’s 2018 tariffs were no exception to that fact. A recent National Bureau of Economic Research paper notes that Trump’s tariffs harmed agricultural interests, benefited only some manufacturing firms, and had no positive net employment effects in the affected industries. On top of that, as noted in the New York Times,
the tariffs did incite other countries to impose their own retaliatory tariffs on American products, making them more expensive to sell overseas, and those levies had a negative effect on American jobs, the paper finds. That was particularly true in agriculture: Farmers who exported soybeans, cotton and sorghum to China were hit by Beijing’s decision to raise tariffs on those products to as much as 25 percent.
The US government made up some of these agricultural losses by issuing extra subsidies, but that also expanded the economic deficit.
However, as the paper also notes, the tariffs were popular, particularly in the areas most hurt by Trump’s policies. While their popularity might seem ironic, McMaken’s point about the popularity of Nixon’s price controls applies here as well:
Politically . . . Nixon’s price control scheme was a big success. Following the administration’s announcement on price controls, the Dow went up nearly 33 points, the largest one-day increase up to that time. Naturally, The New York Times showered praise on Nixon’s plan. Moreover, Nixon and his surrogates claimed that Nixon< was “doing something” about rising prices. The public loved this “activist” president who was intervening to stop the fat cats from profiting off rising prices.
Thus, should Trump be elected, and his tariffs become official policy, we can expect two things to happen: the overall economic effects will be negative, but they will also give Trump a political boost. People will support the policies and blame free markets when they fail.
While a strong argument can be made for immigration controls, Trump’s proposal for “the largest deportation in American history” raises concerns for which neither he nor his supporters have answers.
First, this is not a costless endeavor. The administrative portion itself will require hiring thousands of government agents—unless the goal is to stretch out the deportation process over several years.
Second, deporting a million or more people will create serious problems in numerous workplaces where—like it or not—illegal aliens make up the bulk of the employees.
Third, Americans also hire illegal aliens for home repair work, landscaping, and many other services, and the sudden loss of these workers would have a significant impact upon our economy. Even if one believes mass deportation is a good thing for the US economy, the short-term costs cannot be ignored.
Both Trump and Harris support raising the Child Tax Credit to $6,000, although both have also called for ending taxes on tips. These actions would require congressional approval, so the new Congress would have a say in these tax proposals.
Regarding energy and climate change, Trump has been much more realistic than Harris, who has been hostile to the gas, oil, and coal industries throughout her career. As president, Trump promoted the oil and gas industries and pulled the US out of the Paris Climate Accords, and his position on these issues has not changed. He also opposes the electric vehicle mandates favored by Harris. The media happy talk notwithstanding, it is fantasy to claim that the US can meet the “renewable” energy goals in the time frame set by US politicians. At least Trump understands that point even if he is inarticulate in expressing his views.
The Candidates and the Fed
The unhappy truth is that both platforms will need the Federal Reserve System to expand its easy money policies, despite the massive damage the Fed has already done by bringing back inflation. While Harris claims to defer to the “experts” at the Fed, Trump wants the president to have more power to set interest rates.
Obviously, neither candidate is acknowledging the economically perilous situation in which the government ramps up spending, which distorts the markets, and then depends upon the Fed to monetize the resulting federal deficits.
As the debt grows and the economy becomes progressively less responsive to financial stimulus, the threat of stagflation grows. The present path of government borrowing and spending all but guarantees this outcome, and the candidates have neither the political will nor the economic understanding to do what needs to be done.
Conclusion
In summing up the Trump and Harris proposals, we point out again that neither candidate knows how to deal with stagflation. Instead, they call for more government intervention—Trump for tariffs and Harris for more individual and business taxes and for energy policies that will rapidly make life much more difficult for most Americans.
The stagflation of the 1970s was ended by Jimmy Carter’s deregulation initiatives, Paul Volcker’s end to inflation, and Ronald Reagan’s income tax rate cuts. The economy rebounded nicely and grew to astounding levels. Unfortunately, the lessons of the early 1980s have been lost, and all of us will pay a price.
