Last week, twenty-three Nobel prize-winning economists released a letter supporting Kamala Harris’ economic vision as being “vastly superior to the counterproductive economic agenda of Donald Trump.” While admitting that Harris’s “details of the presidential candidates’ economic programs are not fully laid out yet,” the authors imply that Vice President Harris holds the key to an economic wonderland where incomes rise for the poor and middle class, housing prices magically decline, and economic inequality shrinks to nothing. In addition, the letter suggests that, if left to his villainous devices, Mr. Trump would gleefully rule over an economy that engorges fat cats while resigning the rest of America to scraps.
Sadly, instead of writing a letter that illuminates what Nobel prize-winning economists can teach us, the authors of the letter fail to improve our understanding of economic policy. Despite their impressive credentials, their explanation of why Harris’ economic plan for the nation will trump Trump’s proposals is non-existent. The authors simply say “We’re really smart. Trust us.”
They do get a few things right: Tariffs are bad for an economy. They make goods more expensive. And that means inflation rises. Trump is simply wrong on this issue. Tariffs are not, as he would have you believe, paid by China. They are paid by consumers who buy things made overseas. However, Harris also plans to raise tariffs. Hers may not be as large as Trump’s, but then again, he has been known to exaggerate numbers.
Perhaps the most powerful criticism is that there would be significant economic consequences if Trump throws out the rule of law. Trampling the rule of law removes the incentives to start businesses, innovate, and put creative people to work. However, this would require Congress and the judicial system to roll over and allow one branch of government to supersede their power, an outcome which is extremely unlikely.
What these Nobel laureates carelessly overlook is the harm caused by Harris’ economic plans. For example, Harris’ recommendation to subsidize new home buyers will do nothing to bring the price of homes down. Instead, giving additional money to first-time home buyers will cause housing prices for starter homes to rise as demand increases, thereby making these homes more unattainable for most first time buyers. This is similar to mailing checks worth hundreds of billions of dollars to families all over America and not expecting prices to go up as we saw after the COVID relief funds.
Harris also has a plan to cut taxes. Common economic sense dictates that if you are worried about deficits, you can’t just cut taxes unless you plan on spending a lot less, and that certainly isn’t going to happen. Increasingly large U.S. deficits are a problem, but Harris doesn’t plan to spend less, just differently than Trump. Cutting taxes means less revenue. And Harris’ tax cuts for those earning less than $400,000 a year means that around 97% of households will see a tax cut. That’s great politics but not great economics. You can’t raise taxes high enough on the top 3% of earners and expect to balance the budget — as Sweden and other countries who followed a similar path demonstrated.
Harris’ plan to encourage entrepreneurship and support the technology and green energy sectors similarly has problems. Industrial policy, i.e., government intervention in markets, usually occurs in China and Russia and other communist economies where officials pick winners and losers. Economic innovation in other sectors slows as a result, and government officials often miscalculate the optimal mix of growth across sectors.
Harris’ zeal to support union jobs creates another barrier to American competitiveness around the world. While unions are important to many people, the fact is that when workers get paid more, as they do in union jobs, businesses can’t employ as many workers unless they raise their prices. And that causes inflation. When American goods get more expensive, they don’t sell as well overseas, harming the economy and creating incentives to move production to non-unionized plants overseas.
Now we come to Harris’ plan to control costs. While a national law on price gouging sounds good, it is nothing but price controls in sheep’s clothing. Price controls create shortages, a host of unintended consequences, and motivate illicit activity. Not convinced, ask the good people living in Venezuela or Zimbabwe. Better yet, talk to someone who had to wait in line for gas in America in the 1970s.
Lastly, the esteemed economists falsely aver that tax cuts are regressive. For tax cuts to be regressive, the rich would have to pay lower rates than the poor, and that simply is not, and has never been the case. Data from the Tax Foundation proves our point.
Don’t get us wrong. Trump’s economic plan has plenty of flaws, but to say that Harris is somehow going to save America from an economic fate worse than death is hyperbolic in the extreme.
If this 228-word letter was submitted as an essay response in ECON 101, we’d assign a failing grade. These Nobel laureates are asserting their privilege, not defending their positions. These economists have the intellectual chops to deliver an authoritative statement, backed by data and long-standing economic theory. But that is not why they wrote the letter. This political stunt is meant to be a headline grabber that can be propagated as a campaign talking point for the Harris campaign. We’d assign the same failing grade if the letter supported Trump if it were so devoid of sound economic analysis.
