How do Kamala Harris and Donald Trump’s economic policy proposals stack up?
How do Kamala Harris and Donald Trump’s economic policy proposals stack up?
Vice President Kamala Harris and former President Donald Trump are set to square off in their first debate tomorrow evening. While they may not get into economic nitty gritty during the 90-minute debate, both campaigns have put forth ambitious fiscal proposals. So how do these proposals actually add up?
To find out, “Marketplace Morning Report” host David Brancaccio spoke with Kent Smetters, a professor at the University of Pennsylvania’s Wharton School of Business. Smetters is also the faculty director of the Penn Wharton Budget Model, a nonpartisan initiative at the university that provides impact analysis of federal policies.
As a note, the Wharton Budget Model for Harris-Trump was published before former President Trump’s speech at the Economic Club of New York last week, where he promised trillions of dollars in spending cuts through cutting waste and fraud, as well as tax cuts he said that would lower the federal debt, among other pledges. The following is an edited transcript of Brancaccio’s conversation with Smetters.
David Brancaccio: Let’s start with the Donald Trump plan, and an analysis from your group finds households across all income groups would benefit from the plan on a conventional basis. What is that stipulation there at the end?
Kent Smetters: A conventional basis simply means a snapshot and a point in time. In particular, it really does not account for the fact that lots of these goodies here are being financed by future generations, and in particular, we can make everybody look like a winner if we simply add to the debt.
Brancaccio: Let’s turn to the Kamala Harris plan. You said the Trump plan, all income groups benefit on a conventional basis. That plan [Harris], you find benefits lower and middle-income households, but not so much higher income. Who’s higher income?
Smetters: Yeah, what we find is the bottom, call it 95%, are basically either neutral or better-off with the Harris proposals. The top 5% are going to be a bit worse off. Some of the goodies here to the bottom 95%, it’s not all being financed by the top 5%. A lot of this is still being kicked down the road to future generations who are going to have to finance some of this.
Brancaccio: All right, so to that point of you pay the piper one way or another, your model shows the federal budget deficit increases much more under the Trump plan than the Harris plan?
Smetters: The way to describe these two plans is that Trump is pretty clear, but expensive. Harris is definitely a lot cheaper, but it’s a little bit cagey in terms of exactly what she’s proposing. So Trump, we estimate, will increase the debt by about $5.8 trillion over the next 10 years, not including economic feedback effects. Whereas the Harris plan is definitely a lot cheaper in the sense that it will as officially introduce increased deficits by about $1.2 trillion over the next 10 years.
Brancaccio: Last thing, but an important thing: Voters have said repeatedly that inflation is on our minds. So I’ll ask, what did you find in calculating each campaign’s plan about effects on inflation?
Smetters: They both will increase inflation a bit, but they’re pretty spread out. Both are going to add to the debt. And the only way we can deal with this debt over time is we’re going to have to either increase taxes — that’s kind of like an inflation — we’re gonna have to take away things in terms of spending cuts, or we actually have explicit inflation where the Federal Reserve comes in and monetizes that debt. And that’s the real inflation risk. It’s not necessarily immediate, but it could just be five, six years down the road that you could actually start to see higher inflation, and then 10, 15, 20 years down the road, really significantly high inflation.
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