"What candidates say they want to do versus the actual effects of their policy proposals are often not similar", researcher says

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00:00Welcome to Apropos. She's rolling out a series of policy ideas this week aimed at helping

00:07small businesses. US Vice President Kamala Harris is set to propose expanding a tax break

00:12for start-ups during a speech in New Hampshire. Her rival Donald Trump is also using the week

00:18before their highly anticipated debate to sharpen his economic messaging about who will

00:23do more for the middle class. With the details, here's Monty Francis.

00:29As a latecomer to the race, Kamala Harris has been rolling out her agenda piece by

00:34piece, focused on what she's branded the opportunity economy. Her latest proposal is to provide

00:40new small businesses with a tax credit of $50,000, expanding the current tax break by

00:46tenfold. The goal, says Harris, is to encourage entrepreneurship.

00:51So I want to see 25 million new small business applications by the end of my first term.

00:59And to help achieve this, we will lower the cost of starting a new business.

01:05Harris is also pledging to give money directly to U.S. consumers by permanently expanding

01:09the child tax credit, including a $6,000 break for parents with infants, and to give first-time

01:16homebuyers a leg up by providing a government contribution of $25,000 toward a down payment.

01:22In addition, Harris has promised a federal ban on price gouging on everyday items, including

01:28groceries.

01:29We will end America's housing shortage by building three million new homes and rentals.

01:35When it comes to housing, Harris has pledged to spur the construction of millions of new

01:40homes, largely through tax incentives. Her campaign is trying to draw a contrast on economic

01:46policy with Donald Trump, who wants to cut the corporate tax rate and extend tax breaks

01:51to the wealthy.

01:53Harris has not explicitly said how she would pay for many of her proposals, but has expressed

01:58support for President Biden's plan to raise taxes on large corporations and the rich,

02:03or those making more than $400,000 a year.

02:07Well, for more on those policy pledges, we're joined now by Christine McDaniel. She's Senior

02:13Research Fellow at the Mercatus Centre at George Mason University. Thank you so much

02:18for being with us on the programme this evening, Christine.

02:21So firstly, observers have been suggesting that Kamala Harris, she tends to veer to the

02:26left, perhaps when compared with Joe Biden. Do you think voters will be convinced by what

02:32she has to say on the economy?

02:35Well, they might be. It's election season, campaign season. Politicians, they mean well,

02:48they lie about the economy, they lie about international trade, and they will throw different

02:54things around to try to get particular votes from particular groups. So, for instance,

03:01recently former President Trump has suggested that he would not tax tips, which was clearly

03:09a play for 300,000, 350,000 workers in Nevada's hospitality industry. Well, then shortly

03:19after that, Vice President Harris said that she would do that too. So, not only is that,

03:27it's not a very sensible tax policy strategy, but also, but it's just a sort of a shameless

03:35way to try to get particular votes. And then also we saw Harris talk about a $25,000 subsidy

03:43for new homebuyers. Again, that sounds great, especially if you're sitting there thinking

03:49about buying your first home. But in reality, what that will do is it will drive up demand

03:55and it will drive up prices. So when you think through these policies, just simple economics,

04:02what the candidates say they want to do versus the actual effects of their policy proposals

04:08are often not similar. Political electioneering. A poll last month, Christine, suggested that voters

04:15trust Republicans more when it comes to the economy. Why is that and what can Democrats do about it?

04:23Yeah, well, I don't know. I'm an economist, not a politician, but there is this

04:32rule of generalization that Democrats tend to be the tax and spend party. Republicans

04:38try to reduce, trim down regulations and cut taxes and grow the economy that way.

04:46Now, over the past couple of terms, both parties have been very big spenders. And also,

04:54then the last Republican administration we had, they cut taxes and raise spending.

05:00This administration, they've kept taxes low and increased spending even more.

05:05So both parties are big spenders. We didn't see the inflation under Trump that we see under

05:13the Biden-Harris administration. That's probably just a bit of timing. But it also reflects

05:19the Biden-Harris huge COVID spending that they continued and then just a number of government,

05:26very expensive government programs. But that is an uphill battle that Democrats have.

05:31They are usually not seen as fiscally responsible, even though lately both parties have

05:39lacked that responsibility. Now, you mentioned the tax on tipping earlier. Are there particular

05:44areas where Trump and Harris have similar policies when it comes to the economy? There are, of course,

05:50many where they differ vastly. I think on international trade,

05:55they are pretty similar. Both parties agree that trade with China is a concern to the extent that

06:04China is a huge trading partner. They flout the global trading rules. Both parties seem to

06:11embrace tariffs and the Biden-Harris team embrace subsidies as well. So I think regardless of who

06:20wins in November, we'll see more tariffs. Harris will probably just be to maintain the tariffs and

06:27maybe increase them. With Trump, maintain the tariffs, increase them, but then also increase

06:34them maybe in a more sporadic fashion. Trump seems to use tariffs more as a negotiating tactic.

06:42Harris, she's also proposing expanding tax breaks for start-ups. We're due to hear about that a

06:46little bit later this evening. Where do the two candidates stand on income tax? Harris wants to

06:51raise corporate tax rates, whereas Trump actually lowered them. Right. Well, that actually that's a

06:58great topic because in 2025, the tax cuts will be expiring. So we will have a very big discussion

07:07in Washington about tax policy in our very near future. I think this is largely Congress. Congress

07:15will have a big role to play here. The president can veto or not. But remember, Trump reduced

07:21the corporate tax rate from down to 21 percent. Biden wanted to raise it back up to 28 percent.

07:28He could not get that through a Republican Congress. So it's not really clear that even

07:33though Harris says she wants to do that, if she really could do that. Everyone's looking for ways

07:40that will pay for these continued, you know, to keep the taxes lower. Some people are talking

07:46about a wealth tax, basically like an unrealized capital gains tax that that has a lot of problems

07:55that might not even be constitutional. There's so a lot of people are trying to find ways to

08:02keep those taxes low. It's not clear they're going to. But, you know, it does seem, though,

08:10that that both of them are going to have different favorites. Right. So, yeah, well,

08:17Harris might have a particular favorite group or sector in the economy. You know, Trump will have

08:22his and they're clearly not the same. But, yeah, the U.S. has a very big tax policy discussion

08:28coming up in the next 12 to 24 months. Christine, inflation, the cost of living,

08:34they're also big issues for voters, not just in the United States, but elsewhere. U.S. inflation

08:39is currently at about 3 percent. That is higher than it was when Trump left the White House. So

08:44how is all of that going to play out in this campaign? Yeah, so we have, you know, the American

08:52American shopper is facing high prices. And even though the inflation rate is coming down,

08:57prices are still just much higher than they were a year or two ago. You know, when I walk into the

09:03grocery store, you know, there's just staples that I that I always buy. And so those prices

09:08are ingrained in my mind and they are still much higher than I than I than I'm used to.

09:13And my wages have not risen that much. And so that is you know, that's what Americans are feeling.

09:20And it's the and so while Harris can say that she wants to, you know, try to address

09:31greedy corporations. But I think most voters can see past that. You know, it's inflation is

09:40not necessarily driven by greedy grocery stores, you know, but just a number of of, you know,

09:46excessive fiscal expansionary spending policies that the U.S. has had and kept in place. You know,

09:54we the Fed has clearly, you know, waited probably longer than they should have to raise interest

10:00rates. And Congress and the White House kept spending much more money than they needed to

10:07on covid. All that added up to higher prices. And then it just stayed there. And then it seeped into

10:15not only goods, but through services. And, you know, people are not comfortable with that. And

10:21so all these extra little extra fringe idea policies and and key factors that people like

10:29to talk about fine. But at the end of the day, people tend to think about when they walk into

10:34that ballot box, are they better off today than they were four years ago? And I think that's what

10:40most people will be thinking about. Christine, thank you so much for joining us on the program.

10:44That is Christine McDaniel, senior research fellow at the Mercatus Centre at George Mason

10:49University. Well, that is it from us for now. Do stay with us, though. We'll be back shortly

10:54with more world news.

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