By Smartencyclopedia & Agencies
Washington, D.C., August 18, 2024 – Vice President Kamala Harris introduced an ambitious economic agenda on Friday, aimed at curbing inflation, fixing the housing market, and providing tax relief to middle-income families. The proposals, which include a ban on grocery price gouging and a $25,000 subsidy for first-time homebuyers, have sparked mixed reactions from economists.
With the presidential election just three months away, the economy remains a top concern for voters. Although growth is slowing, it remains steady, and inflation has cooled but is still above the Federal Reserve’s target. The Harris campaign has yet to respond to requests for comment, but economists are already weighing in on three key aspects of her plan: fighting inflation, recalibrating the housing market, and cutting taxes for families.
Fighting Inflation
Harris’ campaign highlights corporate power as a major driver of inflation, particularly in sectors like groceries and prescription drugs. To combat this, she proposed a federal ban on price gouging for essential goods.
Lindsay Owens, executive director of the Groundwork Collective, praised the proposal, citing rampant price gouging in the grocery sector. “Price gouging, price fixing, and profiteering are costing families dearly,” she said.
However, some economists are skeptical. Steven Hamilton, an economics professor at George Washington University, acknowledged that corporate concentration could contribute to price increases but cautioned against overstating its impact on overall inflation. “You have to be careful not to cherry-pick,” he said. Michael Jones, an economics professor at the University of Cincinnati, warned that a price cap could lead to shortages, saying, “If there’s a restriction on prices, companies simply won’t supply them.”
Fixing the Housing Market
The housing market has been under pressure from high mortgage rates and elevated home prices, making it difficult for many to afford a home. Harris’s plan aims to address this by boosting the housing supply and offering financial assistance to first-time buyers.
The proposal to increase the supply of homes through tax incentives for builders received praise. “The reason housing prices have gone up is that supply is limited,” Hamilton said. However, the $25,000 subsidy for first-time buyers raised concerns. Jones noted that such subsidies might lead buyers to increase their bids by the subsidy amount, potentially driving up home prices further. “That policy in particular is a bad idea because it won’t bring the price of housing down,” he warned.
Mark Zandi, chief economist at Moody’s Analytics, offered a more nuanced view, suggesting that if the focus remains on increasing supply first, the combination of policies could be effective. “You’ve got to put the horse before the cart,” he said.
Cutting Taxes for Middle-Class Families
Harris’ tax proposals include restoring the expanded child tax credit of $3,600 per child and adding a new $6,000 credit for families with a child in the first year of life. These measures garnered broad support, though some economists stressed the importance of balancing tax cuts with revenue increases.
“A child tax credit expansion is fantastic and I would fully support it, as long as they find a way to pay for it,” Hamilton said. The Harris campaign indicated plans to offset these cuts by raising taxes on wealthy individuals and large corporations.
Zandi supported the tax cuts but cautioned against increasing the national debt, which could fuel inflation and negate the benefits. “I don’t think you can do anything without it being paid for,” he said. “That would be counterproductive.”
As the election nears, Harris’ economic plans will likely play a significant role in shaping the national debate. Whether they resonate with voters—and whether the criticisms from economists hold sway—remains to be seen.