American progressives are out of ideas. Instead of a bold economic agenda, all they have to offer is reruns of policy failures. Vice President Kamala Harris’s recent proposals are notable examples. Behind the facade of joy hides an alarming indifference to the immense costs her schemes would create if she wins the presidency. Economists have a duty to point out just how destructive these proposals are.
Exhibit A is her call for price controls on groceries. Ignore the rhetorical sleight-of-hand from the campaign and its defenders, who insist they only want to clamp down on “price gouging.” This is clearly a call for the government to crack down on retailers who are selling food at any price Harris and other progressive elites deem excessive.
Perhaps no policy has a record as consistently bad as mandatory price caps. While Econ 101 doesn’t always tell the full story, it does an admirable job in this case. Expect shortages, portion shrinkages, and discriminatory sales practices if Harris gets her way. Price controls are such bad policy that other prominent Democrats almost immediately promised that they will never happen. Yet the very fact Harris proposed them is appalling. It is too dangerous to give her the benefit of the doubt.
Next is her growth-killing tax plan. Harris is among those calling for the rich to “pay their fair share.” For starters, the rich tax skimps narrative is ridiculous. The top one percent of income earners already pay more than 40 percent of all federal income taxes. Yet she wants to raise rates anyway. This will dampen incentives to produce and innovate.
The same is true for corporate taxes. Raising the corporate tax rate from 21 percent to 28 percent would inhibit capital formation, resulting in smaller returns for owners, higher prices for consumers, and lower wages for workers. This last point should dispel the myth that Harris and the progressive elite are concerned about economic opportunity.
Finally, and most egregiously, is her endorsement of President Biden’s plan to tax unrealized capital gains. Just look at the awful incentives this policy would create. Instead of keeping their wealth in capital markets, bearing risk and facilitating growth, those experiencing unrealized capital gains would likely have to divest their position to discharge their tax liability. This policy seems designed to dry up capital markets, or else provide a beachhead for future direct wealth seizures by the government. Those objecting that the policy only applies to the hyper-rich (those with a net worth of more than $100 million) are clearly unfamiliar with the history of the income tax. Once upon a time, only high income earners paid any tax at all. Now the IRS has its tendrils everywhere. The same will eventually be true with unrealized capital gains, unless we root out this weed right away.
Lastly, her so-called home affordability plan is rubbish. Harris wants to give new homebuyers up to $25,000 in “down payment assistance.” I’m sure that phrase poll-tested well, but a subsidy by any other name is still a subsidy. If you give a family $25,000 to help purchase a home, they’ll be much better off. But the gains are much smaller if you give it to many families. Harris’s proposal would boost market demand, further driving up housing prices. Keep in mind that housing supply is generally much less responsive to price changes than housing demand. New home construction is subject to high fixed costs, significant time to build, and oftentimes zoning laws and other local restrictions. The implication is that homebuyers won’t get much of the benefit of the subsidy, since prices will go up by much more than the quantity of homes. If your goal is transferring wealth to homebuilders and existing homeowners, Harris’s plan is great. But if your goal is making housing more affordable, it’s terrible.
She keeps piling on examples. Her stated desire to throw 180 million Americans off their private health insurance plans, her eagerness to impose massive regulatory costs on energy producers, and her enthusiasm for hamstringing law enforcement come easily to mind. The result is a political-economic model guaranteed to induce malaise. Vice President Harris’s ongoing audition for Enfeebler-in-Chief proves the American left needs a hard reset. Otherwise, the “opportunity economy” they claim to want will never materialize.