In her first major policy statement as the Democrat candidate for president last week, Kamala Harris doubled down on the Biden administration’s big spending liberal economic policies which ignited the spurt in inflation that made Biden the most unpopular president in recent times. But as a Washington Post editorial frankly observed, “instead of delivering a substantial plan. . . [to fix] an economy that many [Americans] feel is not working well for them, unfortunately. . . [Harris] squandered the moment on populist gimmicks. . .
“While the inflation rate has cooled substantially since the 2022 peak. . . prices remain elevated relative to the Trump years. . . So it’s a real political issue for Harris. . . Americans are clearly still anxious and angry about the high cost of groceries, housing, and [take-out food] . . .
“One way to handle it,” the editorial suggested, “might be to level with voters, telling them that inflation spiked in 2021 mainly because the pandemic snarled supply chains. . . The vice president instead opted for a less forthright route: Blaming big business. She vowed to go after ‘price gouging’ by grocery stores, landlords, pharmaceutical companies and other supposed corporate perpetrators by having the Federal Trade Commission enforce a vaguely defined ‘federal ban on price gouging’. . .
“Harris [also] says she’ll target companies that make ‘excessive’ profits, whatever that means. . . Thankfully, this gambit by Harris has been met with almost instant skepticism, with many critics citing President Richard M. Nixon’s failed price controls from the 1970s,” the editorial concluded.
When Nixon’s price controls created serious shortages and market dislocations, he was forced to lift them, which resulted in an immediate spike in prices, making the entire price control effort counterproductive.
The liberal Washington Post editorial board was far less critical of Harris’ proposals to solve “the essence of the housing-affordability problem: insufficient supply,” including “clever” tax incentives. But it expressed doubts about “her proposed $25,000 in down payment assistance for first-time home buyers. . . which risks putting upward pressure on [home] prices.”
On the other hand, the editorial declared that Harris “is on the firmest ground when she advocates increasing the child tax credit from the current level of $2,000 per kid up to $3,600 per kid for middle-class and low-income families.” That is the level where the credit was set by Biden’s $1.9 trillion March 2021 Covid stimulus package, called the American Rescue Plan, for which Harris cast the tie-breaking vote in the Senate.
WASTEFUL BIDEN-HARRIS STIMULUS SPENDING IGNITED INFLATION
That plan was best known by most voters for authorizing $1400 stimulus payments per person to accelerate the economy’s recovery from the Covid pandemic lockdowns. But the bulk of the money actually went to fund a long liberal Democrat wish list of government welfare programs, as well as $350 billion in direct aid for state and local governments, $122 billion for K-12 public schools, $86 billion to bail out insolvent, Democrat-supporting union pension funds, and a five-month federal extension of enhanced state unemployment benefits.
The massive handouts discouraged the unemployed from returning to work, created an artificial labor shortage, and fueled excess consumer spending that ignited the worst surge of rising prices in 40 years. Based upon the economic textbook definition of inflation as the result of government printing too much money, which winds up chasing too few goods, that outcome did not surprise even a liberal economist such as former Clinton administration Treasury Secretary Larry Summers. He publicly warned that passage of the Biden-Harris American Rescue Plan would lead to a major spike in prices.
Inflation peaked at 9.1% in June 2022 and was even higher for food prices at the supermarket, which reached 13.5%. Nevertheless, the Biden White House-led federal spending party continued. In November 2021, Congress passed a $1 trillion bipartisan infrastructure bill, which included a lot of money designated for “green pork” liberal spending projects and more money to bail out mostly Democrat-governed states and cities.
The massive Biden-Harris-supported spending bills were supposed to re-invigorate the pandemic-crippled industrial sector of the American economy. But despite the August 2022 passage of the $280 billion CHIPS and Science Act, intended to restore America’s technological leadership in producing advanced computer chips, industrial investment in research and development and new equipment slowed, and American manufacturing output remained lower than before the pandemic.
WORKING-CLASS FAMILIES HAVE LOST THEIR PURCHASING POWER
Because subsequent wage hikes have failed to keep up with the price increases for basic necessities such as groceries, gas at the pump, rents, and energy costs, tens of millions of working-class families lost an average of 4% of their purchasing power and suffered a decline in their standard of living since Biden and Harris took office.
However, the editorial noted that Harris’ proposed increase in the child tax credit and other new government spending initiatives to help low-income families “would cost money.” It was also appropriately skeptical that Harris could find a way to pay for them without further increasing the federal deficit, or violating “President Joe Biden’s pledge not to raise taxes on any household earning $400,000 or less annually, that excludes 80 percent of [all] taxable income.”
The editorial board of the Wall Street Journal was even more critical of Harris’ economic plan for resembling “Venezuelan-style left-wing populism. . . reveal[ing] a candidate whose economic judgment is deeply flawed.”
It called Harris’ proposed expansion of child and earned income tax credits a guaranteed income plan that serves as a disincentive for people to hold a job. It also warned that Harris’ affordable housing proposals are likely to backfire, driving up the price of homes as similar liberal proposals did in her home state of California.
The editorial also rejected Harris’ proposed “‘first-ever federal ban on price gouging on food and groceries,’ including ‘new authority’ for the Federal Trade Commission (FTC) and state attorneys general to punish companies for charging too much,” and noted that it was copied from legislation previously introduced by Massachusetts’ progressive Senator Elizabeth Warren.
It noted that Harris failed to explain what standard the FTC would use to determine what constitutes an excessive price for a gallon of milk in Omaha or a dozen eggs in Miami. It also challenged Harris to cite evidence supporting her claim “that supermarkets or other food retailers are gouging anyone.”
THE DANGERS OF PRICE CONTROLS
It also warned that “Fixing prices is a recipe for shortages, as controls would discourage grocery suppliers [leading to] empty store shelves. Price controls have led to shortages everywhere they’ve been tried, from Moscow to Caracas.”
At a recent campaign rally in Nevada, Harris admitted to her audience, that the “Cost of living is still too high. Giant corporations [are] driving up those costs every day. It’s why we’re taking on special interests, working to lower the cost of housing, of gas, of groceries, of everyday essentials,” which sounded fine, as far as it went. But when talking about proposed government programs, the devil is always in the details, and to this day, most of the details of Harris’ economic plans are still not forthcoming, which suggests that either they are being deliberately hidden from the American people, or don’t yet really exist.
By trying to shift the blame for the surge of inflation on corporate greed, Harris was seeking to distance herself from the stigma of Bidenomics in the eyes of many voters. But Harris’ opponent, former president Donald Trump, and his running mate, Ohio Senator J.D. Vance, were not willing to let her get away with it.
“DAY ONE” IN THE WHITE HOUSE FOR HARRIS STARTED THREE YEARS AGO
In a tweet Harris posted on X last week, she declared “When I am president, it will be a day one priority to bring down prices. I’ll take on big corporations that engage in illegal price gouging and corporate landlords that unfairly raise rents on working families.”
But at a news conference Trump held at his club in Bedminster, New Jersey, he set up a display of basic grocery store items and described how each of them has risen sharply in price under the Biden-Harris administration. He then questioned Harris’ promise to fight the higher prices on “Day One” of her administration, noting that “Day One for Kamala was 3 1/2 years ago [when she and Biden took office]. Where has she been?”
Trump also warned at a recent campaign rally that Harris’ proposal to raise taxes on businesses and high-income individuals could trigger a “1929-style Depression” from which Americans’ “finances will never recover,” if she becomes president.
Trump also declared that Harris’ call for the imposition of sweeping, Soviet-style government-enforced price controls on every industry, in addition to basic grocery items, indicated that she was a “communist” rather than just another San Francisco-style extreme liberal.
Similarly, Trump’s running mate, J.D. Vance told a campaign rally in Michigan, “I was listening to Kamala Harris give a rally recently where she said she’s going to ‘tackle the affordability crisis’ on Day One.
“Kamala, ‘Day One’ was January of 2021 — ‘Day One’ was four years ago!”
“Because of your policies,” Vance continued, “too many children can’t afford a nice meal.”
HOW MUCH PRICE-GOUGING IS REALLY GOING ON?
Gavin Roberts chairs the Economics Department at Weber State University. He studied the impact of the anti-price gouging laws some states passed during the pandemic. He told CNN that they tend to artificially increase consumer demand for groceries which leads to increased shortages and empty supermarket shelves. The laws also discourage new providers from entering the market, which would tend to reduce prices by increasing competition.
Former Obama administration top economist Jason Furman told the New York Times that he agrees with Roberts that Harris’ proposed price controls could wind up inadvertently harming consumers.
There is also a lively dispute between conservative and liberal economists about the extent to which price increases motivated by corporate greed rather than increased costs were responsible for the spike in inflation that began in 2021.
Researchers at the liberal Groundwork Collaborative in Washington calculated that increased corporate profit margins accounted for about half of American inflation in the second half of 2023.
But Joshua Hendrickson, an economist at the University of Mississippi disagrees. He argues that “If prices are rising on average over time and profit margins expand, that might look like price gouging, but it’s actually indicative of a broad increase in demand.”
Meanwhile, Washington Post columnist Catherine Rampell, who often writes on economic issues, stated that “it’s hard to exaggerate how bad Kamala Harris’s price-gouging proposal is.” She then suggested, “When your opponent calls you ‘communist,’ maybe don’t propose price controls.”
HARRIS’ ECONOMIC PLAN IS MISSING CRUCIAL DETAILS
Rampell cited a press release from the Harris campaign last week which promised that during the first 100 days of her presidency, she would introduce the “first-ever federal ban on price gouging on food and groceries — setting clear rules of the road to make clear that big corporations can’t unfairly exploit consumers to run up excessive corporate profits on food and groceries.”
But, Rampell wrote, the Harris press release did not explain what these “clear rules of the road” would be, or the thresholds would be set to determine when a price or profit level becomes “excessive,” and when she asked the campaign for further clarification of those points, she received no answer.
Rampell noted that other key aspects of Harris’ economic plan also remain undefined. These include the metric that the Federal Trade Commission would use, under Harris’ proposal, to enforce a ban on any “grossly excessive price” during an “atypical disruption” of a market.
Implementation of Harris’ economic plan would mean that “supply and demand would no longer determine prices or profit levels. Far-off Washington bureaucrats would.”
HOW PRICE CONTROLS CAN BOOMERANG
The history of government price controls in the U.S. and other countries shows that “at best this would lead to shortages, black markets, and hoarding, among other [market] distortions. . .At worst,” Rampell warns, “it might accidentally raise prices.
“That’s because, among other things, the legislation would ban companies from offering lower prices to a big customer. . . which means quantity discounts are in trouble.
“Worse, it would require public companies to publish detailed internal data about costs, margins, contracts, and their future pricing strategies,” which would encourage competing companies “to collude to keep prices higher.”
Rampell also suggests that “Harris’s economic advisers are either too confused or lazy to tell the difference [between] real cartel behavior vs. temporary spikes in prices and profits due to high demand or supply-chain disruptions. . . They don’t even seem terribly familiar with what’s happening to grocery prices [today], where the battle against inflation has, believe it not, pretty much already been won.”
WHERE ARE THE EXCESS SUPERMARKET PROFITS?
Contradicting Harris’ accusations, Rampell wrote, profit margins for supermarkets are notoriously thin. . . [and] remained relatively meager even when prices surged. The grocery industry’s net profit margins peaked at 3 percent in 2020, falling to 1.6 percent last year [compared to] the average net profit margin for all public companies nationwide [of] 8 percent.
Instead, Rampell suggests that the Harris campaign must explain to consumers “what actually happened with grocery inflation if not ‘price gouging,’” rather than “exploiting for demographic gain” the anger of the American people about “greed.”
Similarly, Michael Boskin, writing in the Wall Street Journal op-ed page, agreed that “voters need to know much more about Kamala Harris’ economic policies. What would she do on spending, taxes, deficits, regulation, and trade? What are her views on monetary policy, and would she back the Federal Reserve if it again had to wring inflation out of the economy?”
HARRIS’ “SHAMELESS” CAMPAIGN STRATEGY
Boskin quotes the famous British economist, John Maynard Keynes, who once said that inflation is how the government steals wealth from its citizens. Applying that maxim to the current American economy, Boskin calls it “shameless” for Harris and her campaign to “[Deflect] blame, then [take] credit for subsidies and price caps to help people pay for some things they can [no longer] afford.”
An example of this chutzpah is Harris’ affordable housing policy. When the Bidenomics policies that she supported flooded the consumer economy with money and triggered runaway inflation, forcing the Federal Reserve to sharply increase interest rates, the combination of higher home prices and soaring monthly mortgage payments made the goal of buying a home of their own out of the financial reach for most young families.
Harris’ proposed solution to the problem is to grant $25,000 in down-payment assistance for “first-time” home buyers, ignoring the likely consequences that it would only drive home prices higher. It would also encourage otherwise cash-strapped potential home buyers to sign up for high-interest mortgages whose monthly payments they still can’t afford, which is how the 2008 financial crisis got started.
WHY RENT CONTROLS DON’T WORK
Another element of Harris’ affordable housing policy is Biden’s proposal to grant tax breaks to affordable home developers on condition that they accept rent caps, ignoring the fact that such restrictions on their profit potential inevitably discourage new investment to build more of the affordable housing, leading to permanent housing shortages.
A prime example of this scenario is the history of rent control in New York City. In November 1943, at the height of World War II, the rent increases due to the war-induced shortage of new apartments in New York City prompted federal the Office of Price Administration to declare a housing emergency and freeze New York rents at their March 1, 1943 levels. When the Emergency Price Control Act expired in 1947, Congress passed a law that exempted apartment houses constructed after 1947 from rent controls but permitted the existing apartments in New York City to remain under rent controls for as long as the local housing emergency continued.
However, because of the limitations on landlord profits due to rent control, new apartment construction in New York City never caught up with the demand for them, so New York City’s housing emergency never ended. That is why, 80 years after they were first inaugurated as a temporary measure, rent controls on some apartments in older New York City apartment buildings are still in place.
Harris and Biden have also tried to deflect the blame for their disastrous open border policies by noting that Donald Trump convinced Republicans in Congress to block passage of a bipartisan immigration reform bill earlier this year. But when Biden later re-instituted by executive order some of the more successful Trump-era border control policies, because of the nationwide political uproar over the influx of illegal immigrants, he proved that he and Harris, whom Biden really did appoint to serve as his “border czar” three years ago, didn’t need the passage of that reform bill to stop the massive flow of illegal immigrants across the Mexican border.
HARRIS’ KEY ROLE IN BIDEN’S FAILED POLICIES
Boskin notes that in addition to casting the tie-breaking Senate vote that passed Biden’s American Rescue Plan, Vice President Harris enabled, in the same way, the passage of Biden’s deliberately misnamed Inflation Reduction Act in 2022. Since that time, the cost of its various green energy subsidies has tripled from the original estimate to more than a trillion dollars, while the bill’s promised benefits in reducing the generation of greenhouse gases and slowing the rate of global warming have fallen far short of the promises of its Democrat sponsors and the Biden administration.
For example, the Inflation Reduction Act provided $7.5 billion of dollars to speed up the installation of tens of thousands of electric vehicle charging stations across the country. Almost three years later, only 8 such charging stations are now in service. Similarly, the act expanded the federal tax credits for the purchase of American-made new or used electric vehicles whose batteries meet the act’s strict sourcing requirements. But to this point, only a small number of new EV models qualify for the $7500 federal tax credit, and the rate of increase in the purchase of EVs has stalled, because most American new car buyers still prefer the gasoline-powered models.
According to Fox News commentator Larry Kudlow, the increased direct spending on welfare programs and indirect spending through the federal tax code in Harris’ economic plan would cost an additional $2 trillion over the next decade, most of which will probably be added to America’s current $35 trillion federal deficit.
HARRIS CALLING FOR MORE TAX INCREASES
Biden and now Harris also support a combination of tax increases on businesses and high-income individuals which, taken together, would significantly hinder America’s economic growth and make American products less competitive in the global economy. These include, among others, an increase in the corporate tax rate from 21% to 28%, the imposition of a new tax on unrealized capital gains, and permitting the expiration of Trump’s highly successful 2017 tax cuts.
Democrats have always criticized the 2017 Trump tax cuts for primarily benefitting businesses and the wealthy at the expense of poorer taxpayers. But several studies conducted by the National Bureau of Economic Research, and economists working for the Federal Reserve, Princeton, and the University of Chicago, found that the biggest beneficiaries of the Trump tax cuts were middle class and the lower middle-class workers who found new jobs and received wage increases because the corporations and small businesses which hired them were making more money due to their lowered tax payments,
Biden and Harris have always insisted that they would not impose any tax increases on Americans earning less than $400,000 a year. But they have ignored the fact that businesses inevitably pass along such tax increases to all of their customers, regardless of their income, in the form of higher prices. Also, increasing taxes on the wealthy reduces the amount of private capital available for investments that create new jobs by financing the growth of successful businesses.
Almost a month after Harris replaced Biden as the Democrat presidential candidate, her campaign website still does not include any details of her positions on policy issues beyond the relatively sketchy economic proposals she first announced last week. Her refusal to hold press conferences or to answer spontaneous questions from members of the White House press corps means that voters curious about her positions must look up her voting record in the Senate and the positions she took during her failed 2019 run for the Democrat presidential nomination.
HARRIS RUNNING AWAY FROM HER RECORD
Some of those old positions have already caused Harris some political embarrassment. These include her 2019 campaign pledge to push, as president, for a total ban on fracking, her co-sponsorship of Senator Bernie Sanders’ Medicare-for-All bill, and her senate co-sponsorship of another bill to implement the totally impractical ultra-liberal proposals of the Green New Deal.
For example, to help Harris win the battleground state of Pennsylvania, where fracking is an important part of the energy-producing sector of its economy, the Harris campaign was forced to say that she is no longer bound by her 2019 pledge to ban the practice. But Harris herself has not yet publicly confirmed that change in her policy on fracking, enabling her to avoid criticism from the green energy purists in the progressive wing of the Democrat party.
Harris has also remained similarly evasive about the other sensitive positions she has taken in the past, to avoid, for as long as possible, alienating voters who are on either side of these issues. —
But because reporters for the mainstream media so far show no inclination to press Harris to clarify her current position on these important issues, it will be up to the Trump campaign to force her to take one side or the other, at the upcoming September 10 debate, and in Trump’s campaign ads. That would inevitably cost Harris the votes of at least some of those who disagree with the positions that she is finally forced to declare. It would also give Trump and his campaign a chance to recover the momentum they lost when Biden was forced by party leaders to drop out and he was replaced with Harris.
