Editorial: Harris and Trump embrace economic populism

Both presidential candidates campaign on economic policies harmful to American prosperity.

Illustration by David Yang

With vice president Kamala Harris’ sudden ascent to the top of the Democratic ticket, her progressive, left-wing stances have complicated her winning-over of the dwindling number of “persuadable” voters. Harris’ campaign is based partly off of continuing Joe Biden’s agenda, but as a long-time progressive, she incorporates principles championed by her party’s strident left wing. Selecting fellow progressive Minnesota governor Tim Walz as her running mate reinforces the Democratic ticket’s leftward shift since Mr. Biden’s stepping aside. Meanwhile, Donald Trump’s running mate, senator from Ohio J.D. Vance, is a hardcore populist in the Trump mold. For Mr. Vance’s part, rather than campaigning on policies to improve Americans’ lives, he unhelpfully spouts vitriol at seemingly random constituency groups. Notably, both tickets appear most politically extreme regarding money. In an election year racked by inflation and financial uncertainty, Mr. Trump and Ms. Harris eschew the sound economic principles that guided mainstream Republicans and Democrats for decades, from tariffs to capital gains. Mr. Trump’s and Ms. Harris’ proposals on the economy are populist: they play up “ideas” of economic growth to harp on their bases’ various priorities, while in fact their proposals would detrimentally affect consumer prices, markets, or global trade. In Mr. Trump’s case, raising tariffs globally to 10-20% sounds to his supporters like being “America first” and “tough” on foreign adversaries, but in reality, tariffs to that degree would drastically raise prices. In Harris’ case, taxing unrealized capital gains sounds to voters like “cracking down” on the rich, but in reality, the tax would hurt hardest the hundreds of millions of Americans invested in the stock market. The Trump-Harris economic campaign ideas reflect either of two things: that both campaigns think Americans cannot see through their misguided proposals, or that the campaigns themselves lack an understanding of economics.

While Ms. Harris’ plan to raise the corporate tax rate to 28% from its current 21% sounds to voters like she is besting avaricious corporations for the people’s benefit, the proposal will raise prices for consumers. That’s because a higher corporate tax rate makes it more expensive for companies to operate, forcing companies to pass that cost onto consumers. Ms. Harris also seeks to increase the tax on capital gains to an all-in top rate of 33%, which will impede on investment in the economy. Capital gains are incurred when someone sells stock at a profit. Taxing profits made in the market discourages the selling of stock because one can avoid the tax if they die with the asset. The tax would also make investing in the market less appealing generally. Of course, less buying and selling of stock is not good for markets. Ms. Harris’ plan disregards the fact that strong markets are key to a strong economy in order to tell voters that she would raise taxes on the rich. 

Ms. Harris wants to tax unrealized capital gains–profits made on stocks before one even sells the asset and earns actual cash on the investment. Harris incorporates taxing unrealized capital gains into her plan to beat the rich into shape, so to speak. Billionaires exclusively own about 7% of the stock market, which equates to roughly $5 trillion. When this substantial group of shareholders, rightly, sell their stock to avoid being taxed, markets would plunge. While billionaires would likely remain financially afloat should markets tumble, the 162 million Americans invested in stocks would bear the burden of Harris’ tax. The depressed market as a result of taxing unrealized capital gains would likely stymie middle-class Americans who invest in the market to afford retirement and other financial goals.

While Ms. Harris’ economic proposals are dangerous, the greatest threat to a strong economy this election is the proposal championed by Mr. Trump. He plans to raise tariffs to a universal baseline of 10%, with some tariffs rising to 20%. Most economists, however, dislike tariffs because they tax imports, a vital part of the economy. Mr. Trump favors these drastic increases in an effort to maximize America’s industrial manufacturing base and encourage American consumers to buy American-made goods. The tariffs are also the foundation of Mr. Trump’s “tough on China” stance. But a tax on imports would directly raise prices for consumers by making cheaper goods, which may be produced abroad, more expensive. Discouraging spending would hurt the economy, and the tariffs would cause inflation and depress economic growth. Mr. Trump’s slogan “America first,” is a misnomer: the American retreat toward isolationism he espouses would burden the domestic economy, among other things. In another example of vacuous populism, Mr. Trump blusters about international economic supremacy to his supporters even though his tariffs would almost certainly derail U.S. growth.

Mr. Trump’s and Ms. Harris’ respective campaign platforms would rather stir up their party’s bases with politically extreme economic proposals than promote policies that would actually have a positive effect on the American economy. The Democrats want to raise taxes, which would foment more inflation and drive down markets, and the Republicans want to turn to isolationism and nationalism with destructive tariffs that would harm consumers. The above mentioned campaign proposals are several among many ideas that do not sit well with economists. No taxes on tips (both candidates), the child tax credit splurge (both), a mass deportation of illegal immigrants (Trump), price-controls for groceries (Harris), and a refusal to touch costly federal entitlement programs like Social Security (both) would spell varying levels of disaster for the economy. Mr. Trump’s “America first” economic plan and Ms. Harris’ “opportunity economy” agenda are singularly misnamed. Disturbingly, both party tickets see more government as the solution to myriad economic problems. This mindset, therefore, places American prosperity in danger going forward.

George Thornton