Just consider Harris' proposal for housing affordability. Anyone who has had Econ 101 knows that the primary reason for the housing affordability issue is basic supply and demand. Supply is lagging demand and pushing prices higher. Much of the corrective action needed is found in local zoning regulations that restrict the supply of housing and regulatory sluggishness that delays the permitting process. Harris' proposal for an up to $25,000 down-payment support for first-time homebuyers will simply further bid up the price of housing. It is counterproductive. She says she will also incentivize supply but supply significantly lags demand. Unless the underlying issues affecting supply are fixed, simply subsidizing builder to build starter homes will do little.
And, then there is Harris' proposal for price controls on food. Price controls were tried by Richard Nixon and failed. They have been tried in country after country and they always lead to shortages and higher inflation. The problem with high food prices is not price gouging. This is an appeal to the worst instincts of people to find a scapegoat.
One of the worst proposals is coming from Donald Trump and that is to replace the income tax with across-the-board tariffs. This will increase the cost of almost everything we buy. Lumber and appliances and other components of housing are often imported products. Even cars made in America contain imported components. Much of the food one buys in the grocery store is imported. Tariffs will in effect be a massive sales tax on the American people. Anytime a tax is imposed on a producer, it is a cost of production and incorporated into the price and is paid for by the consumer. As import tariffs increase the price of the things we buy, people will buy less of those things and so the tariffs will bring in less money and have to be raised even higher. Higher tariffs on imports will mean America will export less also. America exports a lot of stuff. Other countries will retaliate and impose tariff on America's exports. This will likely lead to America exporting less and resulting job losses. This will not work. It could lead to a worldwide depression. This is just an insane policy proposal.
Another insane proposal from Donald Trump is to end the autonomy of the Federal Reserve. We need an independent Federal Reserve to tinker with interest rates to cool the economy when inflation occurs. Durning Trump's time in office he was critical of the Fed and at one time advocated zero interest rates. The public always wants lower interest rates, but sometimes higher rates are necessary. The proposal by Donald Trump to politicize the Fed would be an absolute disaster.
To compound this insanity of massive tariffs and a trade war and ending the Feds autonomy, Trump is proposing to expel 15 million immigrants. This will result in increased labor cost and labor shortages. There are not Americans standing by waiting to fill all of those construction jobs, service jobs and agriculture jobs being performed by immigrant labor. However, the tariff policy, if enacted, will likely lead to a depression so his proposal to cause a labor shortage may not be a problem at all since by destroying the economy we will have many fewer jobs anyway.
Neither camp is addressing the most pressing economic issue facing us. We are rolling downhill like a snowball headed for hell. We are fast approaching a financial cliff. With government Debt to GDP in the United States reaching an all-time high of 126% and with interest on the debt exceeding the total defense budget and being almost as much as we spend on Medicare, runaway inflation is a real possibility. Unless we get a handle on this, runaway inflation is predictable. That portion of income needed to service the debt will continue to take a greater and greater share of the federal budget.
We had GDP of 113% at the end of World War II and survived it and recovered but things were much different then. A larger share of the budget went to defense and when the war ended defense cost drastically dropped. Also, we had been on a war footing and many things from nylons to automobiles had been rationed or not produced and there was a lot of pent-up demand. Also, we were not facing a large cohort of the population entering retirement. We were able to produce our way out of the situation. Maybe, there will be some new technology breakthrough that will spur massive GDP growth, and we can grow our way out of this mess this time too, but I wouldn't count on it. Some economists say the way we are going we have only about 20 years before it will be impossible to service the debt. The longer we wait to start reducing the national debt, the harder it will be to take the corrective actions we need to bend the curve.
A more immediate concern is the pending Social Security crisis. According to the Social Security Administration, the Social Security Trust Fund's reserves are expected to be totally depleted by 2037. After that, taxes well be enough to pay only 76% of scheduled benefits. That means a required cut of 24%. This is fixable, but neither party is willing to propose a fix. Social Security could be means-tested, FICA taxes could be increased, retirement age increase, or the income cap subject to taxation could be increased or some combination of these things. All politicians of either party can offer is a pledge not to touch Social Security.
I am disappointed that neither party is addressing our pending economic collapse. I would be hopeful that Congress would take the advice of the Congressional Budget Office and not pass disastrous or counterproductive policies, but I am not so sure members of Congress are ready to listen to experts anymore. While Trump seems to be an economic illiterate, it is worth recalling that it was only a few years ago when Democrats were touting something called Modern Monetary Theory. MMT said debt doesn't matter and the government can just monetize the debt for as much and as long as they like with no consequences. No orthodox economist believes that, but many Democrats apparently do.
I see both campaigns as proposing bad economic policies. As bad as Harris' policy proposals are, Trump's I fear are worse. It is hard to wrap my head around the concept that a Republican candidate could have worse economic policies than a Democrat, but these are not normal times. Kamala Harris's proposals are bad; Trump's are insane. Some Republicans will discount any wild crazy thing Trump proposes. They will say that Trump won't be able to do things like abolish the income tax and replace it with massive tariffs so we should not be concerned. I don't know why Trump's biggest supporters do not take him seriously, but they don't.
For me, this election unfortunately is not about policy differences. Even if Trumps economic policies made sense, I could not vote for him. When one candidate on the ballot has tried to stage a coup, and the other hasn't, you choose the latter.
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