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We’re now in the home straight of the US election race, and the economy looks set to play a key role in deciding who will be sat in the White House come January 2025. Despite enjoying strong economic and employment growth since the pandemic, US voters have been telling pollsters that the high cost of living is what bothers them most about life in America right now.
Both candidates are seeking to address voter’s concerns. The Democratic candidate, Kamala Harris, and her Republican counterpart, Donald Trump, agree on virtually nothing. But what they do agree on is that the federal government should be playing a bigger role in making things more affordable for American consumers.
That said, there are significant differences in how the candidates propose to bring down prices across the economy. Trump wants to force companies into creating jobs on US soil. And Harris wishes to break down the power that some companies have amassed in the marketplace.
What has Trump pledged?
At a campaign rally on September 19, Trump said: “Together, we will deliver low taxes, low regulations, low energy costs, low interest rates and low inflation so that everyone can afford groceries, a car and a home”.
Trump is promising to reduce regulation, as well as launching another big round of tax cuts for individual people and businesses. He has also pledged to make income from tips, overtime and social security payments exempt from tax altogether.
But, somewhat ironically, Trump’s overall economic approach is somewhat un-Republican. We traditionally tend to think of Republicans as the “take your hands off my economy” party. However, many of Trump’s economic policy pledges are very hands on.
He has promised tariffs of up to 20% on goods imported into the US, and 60% on all goods from China. His rationale is that by making imported goods more expensive, US companies will be encouraged to make more goods domestically, so American workers will benefit in terms of millions more well-paid manufacturing jobs at home.
Trump has also said that, if elected, he will direct his cabinet to reduce energy prices and auto insurance by at least 50%. “Prices will come down. You just watch. They’ll come down and they’ll come down fast”, he claimed during a speech in August.
He plans to intervene in the housing market, too. Trump’s strategy for lowering housing costs focuses on stopping “the unsustainable invasion of illegal aliens”, and he has pledged to deport up to 11 million immigrants who currently live in the US. This, he says, will result in a dramatic reduction in demand and bring down the cost of housing.
Perhaps Trump’s most striking policy is in relation to the Federal Reserve. He wants the elected president to have a greater say over the interest rate policy for the US economy. Lower interest rates would mean lower borrowing costs, which should subsequently reduce mortgage prices.
But a lot of economists, including former US treasury secretary Larry Summers, warn that this approach could backfire. When executives start to intervene in independent central banking, you risk setting off a spiral of rapid inflation.
What has Harris pledged?
A lot of Americans believe that grocery chains and food companies are ripping them off. Food prices are up by about 25% compared to before the pandemic, and a recent poll suggests that American consumers’ view of the grocery industry has sunk to a two-decade low.
Harris has promised to address this. At a campaign event in Raleigh, North Carolina, in August, she said: “As president, I will take on the high costs that matter most to most Americans, like the cost of food”.
She believes the food industry is too concentrated, where just a few firms have a lot of power. She wants the food industry to become more competitive, which would mean lower prices for US consumers.
Harris has proposed giving government money to start-up meatpacking companies to help them challenge the dominant players. And she also wants the Federal Trade Commission to look at mergers and other forms of consolidation in the food industry more aggressively.
This may include giving the commission additional regulatory and enforcement powers to actively look for and stop anti-competitive behaviour. For example, Harris has proposed the first federal ban on price gouging to stop companies exploiting crises to charge people more for essentials.
Harris, like Trump, has also promised to address housing costs. She wants to use federal dollars to encourage developers to build, and has set an ambitious target of building 3 million new housing units over her four-year term.
Her idea is that one way to bring down housing costs is to build a lot more housing. She also wants to give US$25,000 (£19,200) to every first-time home buyer in the country to help them with a down payment.
To help reduce child poverty, Harris says she will restore Biden’s generous tax credit for parents. And, on top of that, she wants to introduce a US$6,000 tax credit for parents of newborns, as well as planning to cap childcare costs at 7% of household income.
Both candidates have clearly listened to voters’ concerns about the cost of living, but there is little detail on how they will fund the giveaways set out in their economic policy pledges.
Harris says there will be no tax increases for anybody who makes less than US$400,000 a year. However, she has in mind a whole bunch of taxes on millionaires and big companies – the sort that Democrats are fond of targeting. Trump, on the other hand, has not set out how he will pay for any of his policies.
More than 20 US recipients of the Nobel prize for economics signed a letter on October 23 that called Harris’ economic agenda “vastly superior” to Trump’s.
But we don’t have long to wait to see which candidate’s economic pledges have resonated most with US voters.
Conor O'Kane does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
