Ben Harris, Director of Economic Studies at Brookings and former economic advisor, discusses the contentious 2024 election landscape. He evaluates the economic policies of Vice President Harris and former President Trump, illustrating how their differing agendas could shape future governance. Harris highlights inflation trends, the impact of price gouging proposals, and the complexities of capital gains taxation. The conversation also delves into the significance of renewable energy amid geopolitical tensions and the importance of addressing housing supply challenges for first-time buyers.
The U.S. economy appears to be stabilizing with low inflation and strong investment, suggesting a soft landing amidst ongoing geopolitical tensions.
The upcoming presidential election may result in significantly different economic policies depending on whether Kamala Harris or Donald Trump is elected.
Kamala Harris's housing policies aim to support lower-income families, though concerns exist about their potential impact on housing prices without increasing supply.
Deep dives
Overview of Current Economic Conditions
The current state of the U.S. economy is characterized as a soft landing, with positive indicators across multiple metrics. Inflation, which had been a concern, has largely been tamed, with expectations that consumer expenditure deflators will remain around the Fed's 2% target. Investment levels have remained strong, contrary to typical trends at this stage of the business cycle, indicating robust economic growth. Additionally, the wealth boom driven by rising housing prices and a strong stock market is highlighted as a significant factor contributing to the overall economic health.
Concerns Surrounding Geopolitical Stability
Geopolitical tensions, particularly related to the ongoing war in Ukraine, pose substantial risks to both economic stability and energy prices. There is apprehension regarding the U.S.'s continued support for Ukraine in light of potential political changes resulting from the upcoming elections. This uncertainty could have cascading effects on markets and economic policies, particularly in energy sectors heavily reliant on stability. Ultimately, the outcome of these geopolitical conflicts remains a key concern influencing investor confidence and economic outlook.
Potential Election Outcomes and Policy Implications
The potential outcomes of the upcoming election are closely scrutinized, with forecasts suggesting two primary scenarios: a Kamala Harris presidency with divided Congress and a Trump presidency with Republican control of the House and Senate. Each scenario holds different implications for economic policy and legislation, with divided government expected to lead to legislative stalemate and status quo. Conversely, a Trump administration is likely to initiate significant changes, particularly in trade and taxation policies, which could affect investment and economic growth. The interrelationship between the presidency and Congress will be crucial in shaping the future economic landscape.
Assessing Harris's Policy Proposals
Kamala Harris's proposed policies are primarily focused on supporting lower and middle-income Americans, with significant attention to housing supply and affordability. The plan includes measures for an expanded housing supply through regulations and tax incentives, such as a $25,000 first-time homebuyer tax credit aimed at making homeownership more accessible. However, concerns arise regarding the potential for such a tax credit to inflate housing prices without significantly increasing supply. Overall, while the proposals aim to alleviate economic pressures on lower-income households, their practical implications warrant careful assessment and debate.
Trump's Economic Agenda and Its Potential Impact
Donald Trump's economic agenda is marked by a mix of isolationist policies, aimed at retreating from globalization, and supply-side tax cuts aimed at stimulating growth. His proposals include significant tariffs on imports and a tougher stance on border control, which could lead to substantial shifts in labor markets and trade relationships. Analysts express concern that such policies could lead to social upheaval and hinder economic growth due to reduced labor supply and international cooperation. The potential for domestic and global economic ramifications is profound, emphasizing the consequential nature of his policies in a second term.
Ben Harris, Brookings’ Director of Economic Studies, joined the Inside Economics team to talk about the economy, the presidential election, and the economic policies of Vice President Harris and former President Trump. The bottom line: buckle in. The election will likely be close and contentious, and the ultimate makeup of government will result in very different directions for policy and the economy’s future performance.
Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s Analytics
Follow Mark Zandi on 'X' @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn
Email the Inside Economics team with your questions: helpeconomy@moodys.com
Questions or Comments, please email us at helpeconomy@moodys.com. We would love to hear from you.
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