A very “Republican” friend sent me an article from a group called “Red Right Updates”. It called the Harris economic plans a “disaster” and a “collection of misguided policies that threaten to stifle investment, cripple our economy, and ultimately weaken America…”. He challenged me to explain “the Left’s” position. So here’s my point-by-point “rebuttal”. My guess is that we won’t ever agree, but we can have a civil discussion. (Note – section headings are from the Red Right article).
A National Debt Nightmare
Red Right predicts that the Harris program will create a $1.7 trillion deficit over ten years. According the them, “…(That) represents a massive burden on future generations and a dire threat to the economic stability of the United States”.
A $1.7 trillion increase in the National debt over ten years is hardly staggering. In the last Administration, Trump raised the debt by at least $6.5 Trillion in four years (Heritage Foundation), and as much as $8.4 Trillion (Newsweek). Biden added $4.3 Trillion in his term (Newsweek) . So $170 Billion a year really isn’t quite as “staggering” versus $1.1 Trillion a year under Biden or $2.2 trillion a year under Trump. And Trump’s alma mater, the Wharton School, predicts that his program for the next four years would add another $6 Trillion to the deficit (Wharton).
Stifling Investment and Economic Growth
Red Right is troubled that “…Harris’s plan (will) stifle investment”.
Red Right seems concerned that if lower income workers get an increase in the Child Tax Credit and the Earned Income Credit, that would somehow remove incentives for them to “work” and cause them to “…drag down economic output”. It’s as if folks wouldn’t work as hard if they had some more of their earnings instead of losing them to taxes. There’s a basic fallacy here: that the government somehow needs to hammer the working class to pay for something so they “work hard”. But the reality is, that, according to the Tax Foundation, the bottom half of income earners paid only 2.3% of taxes anyway. So those that would benefit most from child and earned income credits, don’t impact the amount of taxes collected.
Is opposition to this is really about making sure workers have to “struggle” to take care of their kids and their insurance? As you know, there are lots of people who are working hard just to make it at all. If they have some additional amounts of their own earned money, they’ll likely spend it, encouraging economic growth. Why should those people pay what turns out to be a small fraction of the overall tax load? Is that what this is about – keeping the poor impoverished?
The $25000 First-Time Homebuyer Incentive is a Vote-Buying Scheme
First, let’s be clear. Both Harris and Trump are proposing ideas that would be, in their view, good for the country. They hope that voters agree, and show that agreement by casting their ballot for one or the other. So, in a sense, it’s all “vote buying”.
Harris is proposing a $25000 first time home buyer credit. She’s also proposing government incentives to build three million new homes (National Low Income Housing). The reality is, that the entry cost into the housing market is so high, a substantial number of Americans can’t look forward to ever owning a home. A “starter” home here in Pataskala, is well over $200,000 (Rocket).
Instead, they are locked into a cycle of rental, putting money into something that has no financial return. Here in Pataskala, rent is over $1300/month, a mortgage payment’s worth for a two bedroom apartment that used to cost $700 (Apartment Guide) . It used to be that parents would help their children with down payments. It was a way to pay their wealth “forward”. But, with current housing costs and inflation, for many it’s not possible. Owning a home is a way to create generational wealth, that can change the financial life for whole generations of people.
The Absurdity of Taxing Unrealized Gains
Speaking of generational wealth – let’s talk about “unrealized gains”. (Unrealized gains example: when a stock is bought at $100, but goes up to $1000. The “gain” of $900 is only realized when it’s sold). Before we go farther, put that into context: this is an issue for those with over $100 million in wealth (Smart Asset): serious “generational wealth”.
Having gains of multiple millions in stock or real estate (or art or old Babe Ruth jerseys) is not really “unrealized”, even if it’s not sold. The value is used to leverage other profit-making measures (as collateral for example). The point is pretty simple: we have a tax system designed to allow “hiding” of wealth. So those in the $100 million plus category might have to pay a bit more of their fair-share. “Unrealized gains” is an income “hiding” scheme, that should be “outed”. One of the folks that agree with that is Warren Buffett, with a net worth over $142 Billion (White House – The Buffett Rule).
Raising the Corporate Tax Rates – A self-inflicted Wound
The corporate tax rate is currently 21%, a percent less than the rate paid by families making from $100,000 to $200,000. Raising the corporate tax rate, especially when some of the inflationary pressure was caused by corporations taking windfall advantage of our economy, not only seems “right”, but also fair. The corporate tax rate was in the 50% range in the 1950’s, and even 30% in the Reagan era (Economic Policy Institute).
Corporations, benefit from living and operating in the United States. They should share in the tax burden .The United States did well over the last half of the twentieth century with higher rates; 28% isn’t a “load” too great to bear. Corporations making millions and billions shouldn’t pay a rate less than a middle class family.
Stealing Trump’s Proposal: Eliminating Taxes on Tips
Yes, I’ll admit it, Trump actually did have a decent idea; not taxing tips (though that certainly looks like a “vote getting scheme”, especially Nevada’s votes). It is important to note that the Trump proposal might include lawyers and hedge fund managers as “tipped” workers, folks “looking for a loophole”. But for lower paid workers who depend on tips, it could be a good idea, especially as they are still being taxed on their base wages. So Harris stealing it doesn’t make it a bad idea, as long as my lawyer and broker can’t call their fees “tips” too (Axios).
Price Controls on Food: A Communistic Approach
What Red Right (and others) calls price controls, Harris calls anti-price gouging. This has happened especially in the grocery industry, where prices climbed 25% post-Covid, helping drive inflation without a commensurate increase in the supply cost. Harris is not calling for “price controls” like the 1970’s, Richard Nixon style. (The Republican President actually issued an order freezing prices and wages – what Red Right would call a “Communistic Approach”).
But she is calling for Post-Covid profiteers to be reined in, through “anti-gouging” legislation (CBS). A huge share of the grocery market is down to just four stores: Walmart, Kroger, Costco, and Albertsons control over 50% (and Kroger and Albertson’s want to merge). They can get away with gouging because there’s not enough competition to pressure prices down. Red Right complains that this kind of legislations “stifles competition”, but that competition already is stifled for much of the country with access to only one “brand” of grocery.
Final Thoughts
People of “good faith” can have different views on American economics. Hyperbole like “Communistic”, “disaster”, and “crippling” doesn’t further the discussion, it just enflames passions. As I see it, the Trump plan is for unfettered capitalism, with corporations and the wealthy “cashing in”. Harris tries to temper that capitalism and direct some of that wealth to the lower and middle classes, so they can share in the economic prosperity.
Democrats and Republicans have had this same argument since the 1960’s; without Communism, or crippling disasters. America will survive either way, economically. While I clearly favor the Democratic economic view, the more important issues this year are about Democracy and Freedom.
But that’s for a different discussion.
