A critique of her economic policies
By: Sebastian Southworth
The American economy is at the most fragile point it’s been in a long time. Recently, the Federal Reserve cut interest rates by fifty basis points to stimulate the economy. But according to Reuters, it was an “aggressive move.” This is because higher interest rates help protect America from volatile jumps in inflation, and any inflationary events could easily jeopardize the American economy. However, Kamala Harris still proposes policies that would increase inflation and destabilize the economy as a result. Harris’ housing policy and price gouging policy would introduce too much volatility in their respective sectors at a time when America requires stability.
Harris’s plan to subsidize housing to first-time home buyers would be ineffective and inflationary. According to Harris’ website, her “Home Ownership” policies will give up to $25,000 to first-time buyers. According to the Treasury, the root cause of the housing crisis is the “growth in housing demand exceeding growth in housing supply,” which means the lack of housing causes the issue. Giving $25,000 to first-time home buyers does not increase the supply of houses, so Harris’s policy will only create inflation, with The Hill also estimating the policy costing the government as much as $700,000,000,000. Due to the drastic cuts in interest rates, any fluctuation in inflation rates could force the Federal Bank to increase said interest rates, which slows down the economy according to the Wall Street Journal. That being said, many other parts of the “Home Ownership” policies encourage increasing the construction of houses, but that doesn’t negate the harm the $25,000 grants will inflict. Although giving $25,000 to American home buyers may sound nice on paper, it unfortunately is both ineffective and dangerously inflationary.
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Secondly, Harris’s policies on price gouging would destabilize the food sector and could cause nationwide food shortages if implemented. Harris aims to eliminate price gouging, when companies excessively increase the price of goods. Historically, preventing price gouging has entailed a price ceiling. This means the government, not the market, decides the price of goods. According to the Board of Governors of the Federal Reserve System, price ceilings fail because “governments are limited in the amount of information they can acquire and process, and make decisions slowly if at all, single market distortions are inevitable when [price] controls are effective.” In short, governments will inevitably fail to price food in accordance with the quantity supplied and the quantity demanded, which in this case leads to food shortages. The benefit of a market economy is prices almost always adjust themselves to prevent such a crisis. Likewise, when Nixon instituted a price ceiling on chickens, its meat became so scarce that poultry producers found it more profitable to slaughter baby chickens for the little meat they had instead of feeding them grain. However, the Atlantic posits that because the consequences of such a policy are so obvious, “such a law would be designed in such a way that it would have little effect on the market. But if it did have effects on the market, they would tend to be negative.” Considering the disastrous consequences of Nixon’s implementation of price ceilings, calling the effects “negative” is a bit of an understatement.
Harris’ policies on the economy are likely to hurt the economy if implemented. Unlike other policies, economic policies affect almost all Americans. Prices of goods are likely to increase because of inflation. Food is likely to become more scarce. Wages are likely to fall relative to prices. Again, this is assuming Harris’ policies will be implemented and to the degree to which she claims they will be. Her policies need to be reconsidered.
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