How Kamala Harris Sees the Economy
Her proposals would lead to slower growth, more inflation, and no relief from the debt crisis.
By: Michael J. Boskin Wall Street Journal August 18, 2024
Voters need to know much more about Kamala Harris’s economic policies. What would she do about spending, taxes, deficits, regulation, and trade? What are her views on monetary policy, and would she back the Federal Reserve if it again had to wring inflation out of the economy?
These issues deserve more than banal generalities, a few poll-tested specifics, and Democrat nostrums about greedy corporations and the rich not paying their “fair share” of taxes. (In fact, America has the most progressive tax system in the Organization for Economic Cooperation and Development.)
Voters have three sources of insight into her thinking:
· her positions when running for president in 2019,
· the Biden-Harris economic policies, and
· the economic program she rolled out Friday.
Start with the new policies. They have a $2 trillion deficit-financed cost, primarily to expand health subsidies and Biden-Harris child and earned-income tax-credit proposals. Ms. Harris wants to give first-time home buyers a $25,000 government check, which is more than the typical down payment on a starter home and would likely drive up home prices. She favors subsidies to developers of low-income housing and price controls on groceries. Joe Biden proposed national rent controls. Although perhaps briefly popular, price controls from ancient Rome to Richard Nixon’s era have had disastrous consequences, such as shortages and black markets.
The current administration’s policies and proposals are enlightening unless Ms. Harris repudiates them. Of note is the March 2021 $1.9 trillion American Rescue Plan, which led to the worst inflation in 40 years. The result: years of declining living standards for tens of millions of working families as wage hikes failed to keep up with price increases.
John Maynard Keynes said inflation is how the government steals wealth from citizens. It is shameless to deflect blame and then take credit for subsidies and price caps that help people pay for things they can’t afford.
As vice president, Ms. Harris cast the tie-breaking Senate vote for the misnamed Inflation Reduction Act of 2022, a potpourri of green-energy subsidies now estimated to cost more than $1,000,000,000,000 (trillion), or three times the original estimate. If these policies somehow remained in place until 2100, global temperature would be lower by 0.03 degrees.
The infrastructure bill addresses some federal needs but was so loaded with special-interest favors that it will get far fewer highway miles built and bridges repaired than advertised. Only eight of the half-million promised charging stations have been built in almost three years. Meanwhile, electric vehicle sales have stalled, and automakers are scaling back.
Mr. Biden and Ms. Harris seek to raise business and personal tax rates, tax unrealized capital gains, and even help foreign countries raise taxes on U.S. companies. They would let key provisions of the 2017 tax reforms expire. They dismiss these as mere taxes on the rich, but the measures would prevent millions of Americans from becoming richer and hinder economic growth.
The Biden-Harris budgets ran America’s largest peacetime low-unemployment deficits ever. Bill Clinton was the last president to have a surplus. Like Donald Trump, Mr. Biden and Ms. Harris ignored Social Security’s and Medicare’s impending insolvency. Unlike Mr. Trump, who increased military spending, they proposed real cuts every year despite growing threats from Russia, China, and Iran. While Mr. Trump talks about reducing deficits and debt, he also has some explaining to do. Other harmful Biden-Harris policies include those on illegal immigration, which has destabilized even non-border communities. In states such as New York, the economy would benefit from more legal immigration. The Biden-Harris administration has usurped Congress’s power of the purse for regressive student debt cancellation. It has blocked pipelines and natural gas export terminals that are cleaner than the alternatives.
In her 2019 presidential run, Ms. Harris said she would ban fracking, which has made America an energy superpower, added hundreds of billions of dollars to the economy, curbed Russia’s energy hold on Europe, and reduced the strategic power of the Organization of the Petroleum Exporting Countries.
As a senator, Ms. Harris co-sponsored Medicare for All. This government single-payer system would eliminate private health insurance for more than half the population, now with a 10-year cost of $43.9 trillion. It would force many hospitals to close, while others would have to lay off hundreds of thousands of employees and eliminate services. It would ruin the economy, requiring the equivalent of either raising the national debt to 210% of gross domestic product or raising all federal taxes by 70%.
Ms. Harris co-sponsored the economically, scientifically, and numerically illiterate Green New Deal, ostensibly designed to deal with climate risks, real and imagined. For one, it proposes retrofitting all existing buildings to total energy efficiency in 12 years, which would require completing an impossible 33,000 buildings a day. It would guarantee lots more government handouts, even some outright public ownership, of Green New Deal projects through financing such as public banks or community grants.
Harris’s aides now say she no longer supports a total fracking ban and supports less-costly additions to government health and climate regulation. Voters will have to discern her sincerity and willingness to buck the radical wing of her party—something Mr. Biden has seldom done as president.
If Ms. Harris wins, we must hope that, like Mr. Clinton, she seeks bipartisan compromise solutions. But he was a pragmatic Democratic governor of conservative Arkansas. She is a product of the deep-blue one-party rule that has put California deep in the red.
Mr. Boskin is a Hoover Institution senior fellow and economics professor at Stanford. He was chairman of the President’s Council of Economic Advisers, 1989-93.
”Voters will have to discern her sincerity and willingness to buck the radical wing of her party….” As her only sincerity is saying whatever she is told and those telling her are from the “radical wing of her party”, it is highly unlikely she will support “compromise solutions”.