{"id":5503,"date":"2024-12-10T12:16:11","date_gmt":"2024-12-10T11:16:11","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=5503"},"modified":"2024-12-10T12:16:11","modified_gmt":"2024-12-10T11:16:11","slug":"whats-in-the-economic-plans-of-trump-and-harris","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2024\/12\/10\/whats-in-the-economic-plans-of-trump-and-harris\/","title":{"rendered":"What\u2019s in the Economic Plans of Trump and Harris?"},"content":{"rendered":"

Was Bill Clinton\u2019s electoral strategist right when he claimed that in the end, it\u2019s the economy that determines the outcome of elections? In the case of the 2024 U.S. presidential election, we will soon find out. Meanwhile, it\u2019s worth examining the economic programs of the two candidates. Disagreeing on everything, Harris and Trump have very different visions of the economy and the future of the United States.<\/span><\/i><\/p>\n

In a few days, Americans will choose their next president, and the battle between Kamala Harris and Donald Trump is becoming increasingly intense. There are many important issues on which the two candidates have diametrically opposing views: abortion rights, foreign policy, climate change, and gun regulation. Yet it\u2019s worth remembering the famous maxim coined by Jimmy Carville, Bill Clinton\u2019s electoral strategist in the 1990s, who warned: \u201cIt\u2019s the economy, stupid!\u201d That is, when voting, the economy ultimately determines the outcome of elections more than any other issue.<\/span><\/p>\n

The Economic Program of Trump<\/b><\/h3>\n

The approaches of the two candidates to economic issues epitomize their profoundly divergent visions for America\u2019s future.<\/span><\/p>\n

Trump\u2019s economic program aligns with the strategies outlined during his 2017 campaign. It worked then, so why change it? The cornerstone remains the aggressive trade war with China, built on pronounced protectionism aimed at shielding the U.S. manufacturing sector from the pressures of globalization and preserving jobs.<\/span><\/p>\n

But can this strategy genuinely support the incomes of American families, especially those of the middle and lower classes to whom it is explicitly directed?<\/span><\/p>\n

Trump proposes a 10% tariff on all U.S. imports and as much as a 60% tariff on those from China. His logic is that by limiting imports, American companies will boost domestic sales, creating new jobs. And the burden of this measure, he asserts, will fall on China.<\/span><\/p>\n

However, this reasoning lacks solid economic foundations. The first flaw is that trade wars tend to provoke retaliation. Although Trump doesn\u2019t mention it, when he imposed tariffs in 2018, China responded with a 25% tax on over 100 American products, severely impacting U.S. workers and companies exporting these goods.<\/span><\/p>\n

The second issue is that tariffs are applied based on the final exporting country to the U.S. Today, Chinese businesses find it increasingly easy to move production out of China. The real beneficiaries of Trump\u2019s first trade war were the countries where Chinese companies relocated their activities to avoid U.S. tariffs, particularly Vietnam, where Chinese investments nearly doubled between 2018 and 2022. Beijing is already preparing for a potential new wave of tariffs by exploring opportunities in other countries. For example, significant Chinese manufacturing groups have reportedly initiated talks with local authorities to build production facilities in Mexico. Since Mexico is part of NAFTA, a trade agreement banning tariffs between member states, exporting from there would enable Chinese companies to bypass new duties.<\/span><\/p>\n

Trump often claims that the cost of tariffs would fall on foreign countries, but economists have long demonstrated that the burden actually falls on domestic buyers\u2014businesses and consumers\u2014purchasing imported goods. Exporters typically raise their prices to offset tariffs. Consequently, what is nominally a cost to Chinese citizens becomes a de facto tax on Americans. Moreover, it\u2019s a regressive tax, disproportionately impacting lower-income households, as wealthier families allocate a larger portion of their income to services (healthcare, education, travel, and entertainment) that are not subject to tariffs.<\/span><\/p>\n

Why does Trump persist with this strategy? And why emphasize the protection of the manufacturing sector, which accounts for less than 10% of GDP, at the expense of the rest of the economy?<\/span><\/p>\n

The motivation is purely political and stems from a distortion of the American electoral system. This populist message generates support precisely where Trump needs it most: in swing states like Pennsylvania, Michigan, and Wisconsin. These states, crucial for the U.S. manufacturing sector and with a long industrial tradition, hold significant symbolic value for voters. Tariffs, although ineffective on a macroeconomic level, manage to preserve some jobs or at least give the impression of doing so.<\/span><\/p>\n

Even Kamala Harris has recognized the importance of this small but pivotal portion of the electorate. On the topic of tariffs, she maintains an ambiguous position. On one hand, she strongly emphasizes that Trump\u2019s plan could increase American household expenses by about $3,000 per year, a figure considered credible by bipartisan economists. On the other hand, she avoids openly criticizing the Biden administration\u2019s actions, which maintained Trump\u2019s tariffs and even increased them on products like electric vehicles, solar cells, and other goods.<\/span><\/p>\n

Overall, Trump\u2019s economic vision, as reflected in his program, embodies an isolationist idea that America needs no other country to thrive. This perspective assumes that halting globalization at the borders is enough to restore America\u2019s \u201cgreatness.\u201d It is a vision sharply at odds with reality. The United States has been the world\u2019s technological leader for at least four decades, primarily thanks to an open policy that has attracted top talent to its companies and universities, thereby catalyzing the most creative and ambitious entrepreneurs. By promoting free trade policies, the U.S. opened a global market in which leading American companies thrived. The result has been one of history\u2019s greatest technological revolutions, originating in Silicon Valley and benefiting the entire world, particularly poorer nations.<\/span><\/p>\n

Harris\u2019s Economy of Opportunity<\/b><\/h3>\n

Kamala Harris\u2019s economic perspective starkly contrasts with her rival\u2019s. Her campaign slogan\u2014”Building an Economy of Opportunity”\u2014reveals a notable shift in focus from combating inequality to promoting equal economic opportunities for all. During the 2013 campaign, Barack Obama identified growing income inequality as \u201cthe defining issue of our time,\u201d garnering support from Bernie Sanders and the Democratic Party\u2019s left wing. Today, Harris has chosen a more centrist position.<\/span><\/p>\n

Before the MAGA (Make America Great Again) movement and its protectionist economic ideologies took over the Republican Party, Republicans claimed a monopoly on Milton Friedman\u2019s intellectual legacy. Friedman argued that true equality means creating a level playing field rather than guaranteeing equal outcomes. Democrats, conversely, have always championed equality through fiscal redistribution. Harris has seized the opportunity left at the center by the new Republican leadership, seeking to attract moderate voters. The liberal tradition remains deeply ingrained in the United States, and the rhetoric of the American Dream continues to resonate with a broad swath of the electorate.<\/span><\/p>\n

It would be an exaggeration to claim that Harris has embraced Friedman\u2019s philosophy. The Democratic candidate intends to develop her economy of opportunity through significant government intervention\u2014an approach Friedman, a staunch critic of state involvement in the economy, would never have supported.<\/span><\/p>\n

To fully understand Harris\u2019s beliefs, it\u2019s enlightening to consider the research of two renowned economists with chairs at the University of Chicago and Harvard, respectively: Nobel laureate Jim Heckman and Raj Chetty. According to their studies, a society aspiring to ensure equal opportunities for everyone is based on two fundamental principles.<\/span><\/p>\n

First, the roots of social and economic success are planted during childhood. Children raised in healthy environments, surrounded by stable family relationships and with access to high-quality education, are in an advantageous position to achieve exceptional outcomes throughout their lives.<\/span><\/p>\n

Second, it is crucial to dismantle segregation and promote a \u201cconnected society,\u201d where individuals from diverse economic backgrounds and education levels interact and integrate. Such connections prove essential in navigating complex decisions, such as career choices, residential moves, higher education paths, or starting a business.<\/span><\/p>\n

These are undeniably agreeable considerations in theory. However, Harris\u2019s economic program leaves the methods for achieving these ambitious goals somewhat vague. Only a few strategic directions emerge clearly.<\/span><\/p>\n

First, Harris proposes a significant increase in the child tax credit for children up to their first year of age, raising it to $6,000. The aim is to enable less affluent parents to manage the additional expenses needed to ensure a good standard of family welfare. This is critical, given that well-being during the early years of life is foundational to developing children\u2019s learning abilities.<\/span><\/p>\n

Second, Harris plans to introduce substantial tax breaks for construction companies dedicated to building new affordable housing, alongside a $25,000 subsidy for first-time homebuyers. The goal is to provide disadvantaged young families with tangible opportunities to live and integrate into wealthier, safer neighborhoods with good schools and infrastructure. At the same time, these initiatives would facilitate access to homeownership, an asset that can appreciate over time, contributing to wealth creation and financial stability for families.<\/span><\/p>\n

Harris\u2019s program also includes generous support for small business owners and subsidies for those pursuing vocational training programs focused on acquiring practical skills. The emphasis is less on university education, which is often inaccessible to disadvantaged youth, and more on alternative paths that facilitate entry into the workforce, offering opportunities to those who have been unable to continue their studies.<\/span><\/p>\n

The main uncertainty in Harris\u2019s plan lies in its series of costly initiatives, for which clear funding mechanisms are not provided. Without a substantial increase in taxes\u2014likely targeting the wealthy\u2014these measures seem difficult to implement. However, raising taxes on the rich is never an easy task: these groups wield significant political influence and possess resources to legally avoid tax obligations.<\/span><\/p>\n

The concrete risk is further increasing public debt, which has already reached alarming proportions over the past fifteen years, standing at 120% of GDP\u2014almost as much as Italy\u2019s 140%. Debt represents a heavy burden for future generations and risks hindering the same economy of opportunity Harris aspires to build.<\/span><\/p>\n

The Ball Is in the Swing States\u2019 Court<\/b><\/h3>\n

In conclusion, American voters face a choice between two contrasting models. On one side is Trump\u2019s plan, shortsighted and self-destructive in the long run but cynically aimed at quickly reaping benefits for a crucial segment of the electorate. On the other side is Harris\u2019s program, focused on fostering more inclusive economic growth and shared prosperity but requiring time for its positive effects to manifest.<\/span><\/p>\n

The question, then, is whether swing state voters will be farsighted enough to recognize the value of a long-term approach or whether they will succumb to the immediate yet fleeting gains of protectionism. The verdict of the November elections rests in their hands.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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