Spending binges: Trump, Harris on the economy
Both proposals would add trillions to the deficit
As the Nov. 5 presidential election draws closer, the weight of the decision we all have to make takes on additional urgency. For some of us, it’s not a close call. Others, for reasons unknown, still haven’t made up their minds. You have to wonder about that crowd. But the mysterious “undecideds” is a topic for a different column.
If there are any true undecideds out there reading this column, maybe Red Meat For Mushy Moderates can help you make up your minds.
According to the most recent Pew poll on issues of concern to voters, the state of the economy, cited by 81% of respondents, sits at the very top, with healthcare, Supreme Court appointments, foreign policy, immigration and crime trailing by anywhere from 15 to 20 points. A recent CNN poll found much the same thing.
Let’s take a look at the economic proposals — such as they are — of Donald Trump and Kamala Harris. It’s worth noting that this is the first modern presidential election where the two major-party candidates both have undergraduate degrees in economics.
Below are the economic issues on the Harris-Walz campaign site. Most of the items on the full list are focused on the economy (her campaign reads the same polls we do!):
BUILD AN OPPORTUNITY ECONOMY AND LOWER COSTS FOR FAMILIES
In a nutshell, Harris’ key proposals are:
Cut taxes for middle class families by expanding the Earned Income Tax Credit and expanding the Child Tax Credit “to provide a $6,000 tax cut to families with newborn children.”
Harris wants to “roll back Trump’s tax cuts for the wealthiest Americans” but she’s “committed to ensuring no one earning less than $400,000 a year will pay more in taxes.” It’s worth noting that she did not use the words “pledge” or “promise.”
Provide first-time homebuyers with up to $25,000 for a down payment but — and in a belated recognition of supply and demand — the money will only be provided after she “cuts red tape” to “build three million more rental units and homes that are affordable.”
“Expand the startup expense tax deduction for new businesses from $5,000 to $50,000” and “cut red tape” to make it easier to start a small business.
Proposes the “first-ever federal ban on corporate price gouging on food and groceries, which will build on the anti-price gouging statutes already in place in 37 states.” In other words, she wants to make the emergency powers states have to ban price gouging during, say, the aftermath of hurricane, permanent, presumably on the federal level.
Harris also wants to provide a “pathway to the middle class” and “provide nearly $170 billion in student debt relief for almost five million borrowers.” Nowhere does she address the root cause of all this debt: the outrageous increases in the costs associated with higher education over the past few decades. Hint: tuition and fees have increased at about twice the rate of inflation since the early 1990s.
Finally, Harris is expected to make a major address in Pennsylvania today on the economy “that is expected to weave various proposals into a broader, thematic message,” according to the New York Times. Perhaps not coincidentally, Harris has also agreed to be interviewed tonight at 7 p.m. Eastern by MSNBC’s Stephanie Ruhle after the financial commentator rose to Harris’ defense recently on Real Time With Bill Maher. See below:
For live fact checking of the interview, go to this page at Politifact.
Here is the Trump economic platform as listed on his campaign website, along with with several other themes. It’s an incoherent mess and some of it’s in “shouty-caps.”
End inflation, and make America affordable again
Make America the dominant energy producer in the world, by far!
STOP OUTSOURCING, AND TURN THE UNITED STATES INTO A MANUFACTURING SUPERPOWER
Large tax cuts for workers, and no tax on tips!
Keep the U.S. dollar as the world's reserve currency
That’s it. No details beyond a link to a PDF of the “Trump Republican Platform.” I’m not sure which of those bullet points covers his harebrained scheme to enact a 10% tariff on all goods and services incoming from outside our borders. So I will address them one by one.
First of all, you cannot “end inflation.” The current annual inflation rate is 2.5%, the lowest since February 2021 and not far from the Federal Reserve Board’s target of 2%.
As for energy, the U.S. ranks second to China in overall world energy production and is number one in oil output, “producing more crude oil than any country, ever,” according to the U.S. Energy Information Administration.
I’m not exactly sure what he means by “stop outsourcing.” I assume it’s a reference to Trump’s 10% border tax (60% on Chinese goods), which almost all economists say would be passed on to U.S. consumers in the form of higher prices on goods from China and popular automobiles made in Japan and Korea. Unless you want a return to the high inflation of the COVID-19 pandemic recovery, you should be opposed to the this idea. But it appears Trump supporters who still decry “Bidenflation,” are good with the Trump tariffs.
As for “Large tax cuts for workers, and no tax on tips!”, the latter is a gimmick designed to harvest votes from hospitality workers in Nevada, a key swing state. Don’t fall for it.
Both Harris and Trump stand opposed to the acquisition of US Steel by Nippon Steel of Japan — a subject I covered last month. If you don’t feel like clicking the link, spoiler alert: I am not against the transaction.
Which is worse?
I would look first and foremost at how much the proposals cost.
The best analysis I’ve seen comes from Jason Furman, an economics professor at Harvard, a Democrat and chairman of the White House Council of Economic Advisers from 2013 to 2017.
In an op-ed published last week in the Wall Street Journal (free link), Furman agreed with me on tariffs and concluded that Trumps’ proposals would add $5 trillion to the deficit, while Harris’, if she chooses to stick to her “commitment” not to raise taxes on families earning less than 400,000 per year, would add merely $1.5 trillion.
So pick your poison, and it could get even worse, says Furman:
Mr. Trump’s deficit increases are more likely than Ms. Harris’s to materialize. Betting markets suggest that if he wins, there is a two-thirds chance he will have a Republican House and Senate — a combination that typically results in substantial tax cuts. If Ms. Harris wins, she would have only about a one-third chance of a unified Democratic Congress, with the best case being 50 Democratic senators.
The long and the sort of it is that no matter who wins, a return to fiscal sanity is unlikely. For the foreseeable future, we will continue to spend more than a trillion dollars a year, or 17% of total federal spending, on debt service alone.
I certainly worry about the world our grandchildren will inherit.