You’re reading the Prompt 2024 newsletter. Sign up to get it in your inbox. Vice President Kamala Harris is out with her economic plan “to bring down costs for American families.” There’s already a lot of buzz about her proposals to go after corporate “price gouging,” cut taxes for families with kids and offer $25,000 in aid to first-time home buyers. And those are just a few of the ideas.I discussed the good, the bad and the big picture with my fellow columnists Eduardo Porter and Megan McArdle.
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Heather Long: What’s your biggest takeaway from the plan? What is your early read on “Kamalanomics,” and how is it different from Bidenomics?Eduardo Porter: Kamalanomics seems to be much more focused on prices than Bidenomics, which put a lot more emphasis on creating manufacturing jobs. But a similar populism rings through.Megan McArdle: President Joe Biden promised, improbably, to bring back loads of manufacturing jobs. Harris is promising, even more improbably, to simply command things to be other than what they are. I have been cringing watching intelligent commentators who know better pretend that maybe there’s something to this price-gouging plan. Like, who can really say whether inflation is caused by an excess of money sloshing around the system, or by corporate greed? Gotta hear both sides!Follow Heather LongHeather: Okay, are there any parts of the overall plan that you like? It does include more than the price-gouging part.Eduardo: Well, the expanded child tax credit sounds like a good idea! Harris is leaning heavily on being “popular.” We should remember that this is a political document, not an economic blueprint. Hopefully, the crazier bits will fall by the wayside over the coming months.Megan: I think that is a really, really dangerous strategy.Heather: That’s an interesting question — is this a winning economic platform? Some are arguing that most of these policies won’t be enacted, but this is good messaging to beat Donald Trump. Do you buy that?Megan: The problem is, if you get elected promising to lower prices by punishing price gougers, voters will want you to actually do it. Ditto the subsidies for first-time home buyers.Eduardo: In this sense, it is amazing how Trump moved the Overton window. He is setting the terms for the economic policy conversation.Heather: The price-gouging part of the plan is an especially interesting example. Clearly there’s a lot of hate about high prices in America. And many do blame companies for that. Harris’s plan is pretty nebulous on it. What would it really take to trigger federal action to go after a grocery chain?Megan: I’m sure Federal Trade Commission Chair Lina Khan would be happy to have a go.Eduardo: Maybe Harris doesn’t have to go after grocery stores. An investigation into collusion by meatpackers or poultry producers might do the trick. But that could be just a standard antitrust move, subject to all the regular constraints.Heather: I think Eduardo is likely right that Harris really means to target collusion. But the FTC already has that power. So it’s not so much a new idea here, but a signal it will be more widely enforced and tried.Megan: The Biden administration has been pushing this line since the avian flu epidemic raised the price of eggs. It failed, both politically and economically. Concentration in the meatpacking business is high for certain products, but arguably that holds down consumer prices, as massive processors are able to squeeze suppliers. If you broke up Tyson and Perdue, chicken farmers might get a little more breathing room, but chicken prices would rise.Heather: Let’s talk about housing. There’s a lot of fear among young Americans that they will never be able to buy a home. The very first part of the plan released Friday is housing. Do we think any of it makes sense? Megan, I know you were criticizing the idea of a $25,000 credit or aid for first-time home buyers. Something similar was in place in the early 2010s, and it did boost demand (back when we had way too many homes for sale!).Megan: Yes, but I was shopping for a house then, and my experience was that bidding wars to buy a house before the credit expired transferred pretty much all the value — and then some — to existing homeowners, a group that doesn’t really need Harris’s help.Heather: Right. We clearly need more supply of homes right now. But I think people are missing that Harris’s plan is more than just the $25,000 credit idea. There are also some smart ideas here on tax credits/incentives to encourage builders to build smaller homes for first-time buyers. And this ambitious goal of 3 million new homes in the next four years seems a good start.Megan: It’s hard to say what the effect will be without more details, but I’m skeptical this moves the needle much.Heather: There’s also $40 billion in incentives for local communities to rezone to allow more townhomes and condos and more density generally (a.k.a. stop the NIMBY stuff!). This seems wise.Eduardo: Any thoughts on pharmaceutical prices? I’ve long wondered what would happen if the United States followed Europeans and started putting a lid on drug prices.Megan: I mean, it’s pretty clear what would happen: We would get fewer lifesaving drugs. Pharma is already moving R&D away from the stuff that’s most likely to get price-controlled and toward other products. You can argue that’s good because we waste too much money extending lives, but I don’t think it’s a mystery what happens when you reduce the return on a product that requires billions of dollars in upfront investment.Heather: Overall, do you see this plan as anti-business?Megan: Yes, of course. It’s hard to read it any other way.Eduardo: It’s tailored to fit an anti-business mood that’s been out there for some time.Megan: It’s quite reminiscent of the famous Ronald Reagan line about Democratic governing philosophy: “If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.”Eduardo: This plan is not the description of an economic strategy. It’s a “we’ll make things right by bashing the bad guys” proposition.Heather: Do we think any of this proposal gets enacted in the first year if Harris is elected?Megan: I fear that the worst part — the price-gouging nonsense — might be the easiest to enact, because it’s free. (Or rather, it appears free under congressional budgeting forecast rules.)Eduardo: The child tax credit will depend on what happens in the election for Congress. That’s harder.Heather: You’re probably right. Harris’s background as a prosecutor also makes it easier for her to focus on the FTC going after companies. I think the child tax credit has a decent chance just because the whole tax code will basically have to be rewritten by the end of 2025 with Trump’s tax cuts expiring.Megan: One interesting difference between her plan and Biden’s is its comparative modesty, and that’s because the government can no longer borrow money for free. Passing housing subsidies will require Congress to raise taxes or cut other spending, and that won’t be popular.Heather: It’s important to remember that this is only a part of her economic plan. It clearly says so at the top of the document released Friday.Megan: Fair enough. But I don’t think she’ll be doing anything on the scope of Build Back Better or the Inflation Reduction Act. Her coalition does not want to raise taxes on anyone who makes under $400,000 a year, and that makes it hard to fund significant new spending.Eduardo: The $400,000 limit is staggering. Harris is not going to raise taxes on anybody under the roughly 95th percentile?Heather: What’s notable to me is no mention of the green economy. And it’s still unclear if she’ll continue to lean hard in the “care economy” agenda that she has heavily supported in the past. That may come this fall.Eduardo: You don’t need another IRA when the IRA will keep on giving.Megan: I think all of the care-economy stuff runs into an expense problem: It is the most labor-intensive sector of the economy, which means it’s fantastically expensive to subsidize. What we have seen in the past with these initiatives is that they’re quite popular when described in abstract, and quite unpopular when you attach price tags to them.Heather: It’s clear that Harris’s plan is trying to address the deep anger over higher prices. But I have to ask, is this plan fighting the last battle? The inflation battle has been won. We just came down to 2.9 percent inflation in the past year.Eduardo: But the perception that “prices are too high” persists. That’s what she is aiming at.Megan: I agree that inflation is no longer as big an issue as it was a few years ago, but it is striking that we are sighing with relief because inflation is only 50 percent over target.Eduardo: There are some of us who think 2 percent is too low a target.Megan: I’m not particularly wedded to 2 percent over, say, 2.5 percent, but what’s striking is how hard it has been to hit whatever the target is.Eduardo: Still, aiming your policy proposals at that perception is a losing battle. No matter what Harris does, she will not force prices to come down to 2019 levels.Megan: Indeed. What will be interesting to me is how this plays. Price gouging polls well in abstract, and voters do not follow abstruse economic arguments. But in the past, they’ve often proven to have a common-sense skepticism of easy promises.Heather: All right, to wrap this up, what’s your advice to Harris on the economy?Eduardo: Push back against the protectionism of the past eight years. Not that this will happen. But it would help with inflation!Megan: Stop trying to micromanage your way into the hearts of focus-grouped targets like first-time home buyers, and instead pursue a broad abundance agenda that would give you genuine accomplishments to point to when you’re running for reelection.Heather: My 2 cents: Keep talking about “build, build, build” on housing and Federal Reserve independence. That’s truly how we keep inflation in check.