In the 1980s, critics referred to Ronald Reagan鈥檚 tax cuts as voodoo economics. This year, some of the presidential candidates鈥 proposals deserve an even stronger label.
Cuckoo economics, perhaps?
Many of the ideas coming from Kamala Harris and Donald Trump seem less about sensible policy than about pandering to specific voting groups. Take the notion, first floated by Trump and quickly seconded by Harris, that workers鈥 tips should be exempt from income tax.
There鈥檚 little reason to think a waiter at a high-end restaurant deserves a tax break more than, say, a salaried daycare worker. What鈥檚 more, both employers and employees would have an incentive to structure more compensation as tips rather than wages.
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Tax revenue would be lost and no public purpose would be served, but the idea might win votes in the swing state of Nevada, which has a lot of tipped hospitality workers.
The candidates鈥 proposals for whipping inflation are equally nonsensical. Trump contends that his proposed tariff of 10% or 20% on all imported goods would somehow bring down grocery prices, but it would almost certainly have the opposite effect.
The estimates that the tariffs imposed during Trump鈥檚 first term, and largely kept in place by his successor Joe Biden, cost the average household $625 a year.
For her part, Harris would attack inflation by banning 鈥減rice gouging鈥 in the food industry. Her proposal is vague, but economists almost unanimously agree that price controls are ineffective and will lead to shortages.
Moreover, profit margins in the grocery business are generally thin. If Harris simply intends to bring antitrust cases against companies she thinks are too profitable, her legal assault probably wouldn鈥檛 make a dent in the inflation rate.
鈥淎ntitrust intervention is a slow process,鈥 said Steven Fazzari, a Washington University economics professor. 鈥淚t鈥檚 unlikely to have any measurable effect on prices.鈥
The recent surge in inflation can be traced back to supply chain problems during the COVID-19 pandemic, compounded by the massive stimulus the government unleashed to keep the economy afloat. 鈥淭heir proposals have nothing to do with the real causes of inflation,鈥 said Glenn MacDonald, professor of economics and strategy at Washington University鈥檚 Olin Business School.
MacDonald is not impressed by the quality of economic discourse in this campaign. 鈥淎 lot of these things are coming out like they鈥檙e making them up on the spot,鈥 he said. 鈥淭hey鈥檙e not the product of much thought by anyone, certainly not by an economist.鈥
Pandering by politicians is nothing new, of course, but the number of poorly thought-out promises is especially high this year. Fazzari recalls that in 2008, with Barack Obama and Mitt Romney running for president amid a severe financial crisis, 鈥淭here were big policy differences but there was a bit of discipline. I don鈥檛 think the politics then had such a disconnection with solid analysis.鈥
Indeed, the 2024 candidates seem to have done almost no analysis on the ideas they鈥檙e floating. Trump recently said he would cap credit card interest rates at 10%, well below the current average of 21.5%.
If that happened, banks would offer cards only to their most creditworthy customers. Folks with lower credit scores would see their cards canceled and be forced to turn to pawnshops or payday lenders.
In other words, his proposed cap would hurt the very people it is supposed to help 鈥 much like the other ideas being floated in this year of cuckoo economics.
David Nicklaus is a retired Post-Dispatch columnist who continues to follow the St. 亚洲无码 business scene. Reach him at dnickstl@gmail.com.