Harris’s and Trump’s economic plans both promise utopia
GO TO ANY American high school holding an election for class president and inevitably one candidate will craft an agenda of alluring promises—free pizza at lunch, limitless recess after—well beyond their capacity to actually turn them into reality. The same impulse animates the latest economic-policy speeches delivered by Kamala Harris and Donald Trump in battleground states. Their competing visions offer utopia without trade-offs—economics without the economising—in which spending is higher, taxes are lower, deficits are unimportant, inflation is licked, jobs are protected and growth is high.
Speaking in Pittsburgh, Pennsylvania, on September 25th, Ms Harris branded herself a pragmatic capitalist who would double down on Bidenomics by expanding state subsidies for housing, child care and domestic manufacturing. In Savannah, Georgia, the day before, Mr Trump pitched his own “manufacturing renaissance” in which America would “take other countries’ jobs” through preferential tax rates, deregulation and punitive tariffs (including a new threat of a 100% duty on cars made in Mexico). Then in a stemwinder delivered in the town of Walker, Michigan, on September 27th, Mr Trump warned that the American auto industry would cease to exist unless he were elected.
Trumponomics has shattered the Reaganomic orthodoxy that guided Republican thinking for decades. Mr Trump has broken the party out of its free-trading ways, (at least notional) concern for the national debt and scepticism towards family subsidies and entitlement programmes. Droves of working-class Americans have become Republicans, prompting the party to adopt warmer attitudes towards unions, tax credits and low-wage workers—all of which were once chiefly Democratic concerns.
The new version of Trumponomics consists of enormous tariffs; even lower corporate taxes (the rate he has in mind is 15%); a bevy of individual tax cuts plus new exemptions by not taxing wages on tips and Social Security benefits. He now wants to remove ten regulations for every new one implemented (during his first four years in office, he pledged to rescind a mere two regulations for each one implemented, though the Brookings Institution, a think-tank, reckons he failed to live up to that). In addition to unlucky Mexico, Mr Trump has proposed a 60% duty on goods imported from China and a 20% broad-based tariff on goods imported from other countries. In total, the Tax Foundation, a non-partisan budget scorer, estimates that Mr Trump’s plans would cost $1.3trn over the coming decade, while other analysts reckon they could end up costing closer to $4trn depending on how the ensuing trade war escalated. In either case, it would wipe out the economic gains from the tax cuts.
Bidenomics was itself developed as a reaction to Trumponomics. It co-opted its urge to protect prized industries, but married that to the Bernie Sanders- or Elizabeth Warren-style agenda that aspired to a Green New Deal, Medicare for All and no student debt, all funded by large taxes on the wealthy. Throughout these sweeping changes to economic thinking, Ms Harris has been passive. In 2019 she embraced the ideas of the progressive left and then backtracked as the political winds shifted. In her recent campaign speeches—and a newly released 82-page policy document that aims to describe Kamalanomics—she has not sought to break new ground.
Having resisted filling in policy details, Ms Harris has begun to elaborate on what she means when she promises an “opportunity economy” and “a new way forward”. Like Mr Biden, she wishes to “finish the job” on Build Back Better, the grand plan for reorganising the American economy, by passing the tax increases—on corporate income, the capital gains of the wealthy (including, for the first time, unrealised ones)—that he could not. This would in theory be used to pay for generous, permanent expansions of the annual child tax credit, which would be as high as $6,000 for newborns, and to provide cheaper care for children and the elderly while care workers would receive larger paycheques (how exactly is left as an exercise for the reader).
There would be new tax credits, too: a new promise of $25,000 in downpayment assistance for first-time homebuyers, an expanded credit of $50,000 to startup founders, and a new “America Forward” tax credit that seems to be a catch-all for expanded industrial policies for, among other things, clean steel, biotechnology, data centres needed for AI, and semiconductors. There are also gestures towards the supply-side reforms that would be needed to ensure these expenditures do not just drive up costs—such as expediting permitting and removing zoning laws that are barriers to homebuilding. Ms Harris is pitching the state as the saviour of the people against the depravations of the wealthy and of large corporations.
In a sign of how both parties have morphed, she repeatedly criticises Trumponomics for being too meek. Ms Harris has taken to attacking the USMCA, the trade deal negotiated under Mr Trump that superseded NAFTA, for not doing enough to protect American workers. She argues that Mr Trump was too soft on China, by ceding production of semiconductors and “cars of the future”. And she castigates Mr Trump as “one of the biggest losers of American manufacturing in our history” because net manufacturing jobs declined by 200,000 over his term. This is a bit of statistical slipperiness—under Mr Trump, manufacturing jobs increased from 12.4m to 12.8m before collapsing during the covid-19 pandemic. Ms Harris also quickly copied Mr Trump’s promise to not tax tipped wages. And although she criticises Mr Trump’s proposed new tariffs as a new national sales tax on the American people, she would keep the tariffs that Mr Trump imposed on China.
Nonetheless, Mr Trump and Ms Harris do offer distinct visions for the economy. Although both present themselves as champions of manufacturing, their strategies differ. Whereas Mr Trump wants to slap tariffs on all imports, Ms Harris hopes to finetune subsidies for green technologies. Whereas Mr Trump believes that sweeping tax cuts will rev up the economy, Ms Harris wants higher taxes on the rich and more handouts for the poor to reduce inequality. And whereas Mr Trump dreams of slashing regulations, Ms Harris thinks the state should steer growth in the desired direction. Yet there is one thread that runs through both of their plans: they see no need to weigh the costs of their proposals when the benefits are, to their minds, so vast and obvious.■