Kamala Harris's Economic Plan: The Road to Socialism

It ought to be apparent to all that presidential hopeful, Kamala Harris, doesn't know the first thing about economics. Yet the display put on by supporters at her recently-concluded rally in North Carolina has made it abundantly clear that lots of people don't care about that!

Clearly, the lessons of the twentieth century have not been disseminated to the American public. When even our "leaders" do not care to protect us from repeating this tragic history, what path is America on if not what F.A. Hayek described as The Road to Serfdom?

Despite countless Socialist disasters in Latin America, Asia, Africa and Europe––replete with famine and bloody revolution––and despite the predictable failures of Robert Owen, the Plymouth Colony and the Hutterite communes right here in America, still, an astounding 38% of Americans have a favorable view of Socialism.

Simply put, Harris and her supporters have failed to learn the greatest, most important lesson of the twentieth century: 

By no means is the United States a Socialist country. But let there be no doubt that we are headed in that direction. Already the United States has socialized many of society's most important institutions: education, banking, healthcare––incidentally the very same institutions most responsible for Americans' discontent. 

But this is no coincidence; it is the necessary result of a policy of interventionism. Even my high school economics students understand this (although, they had the peculiar advantage of being especially smart and willing to learn) and their economics education spanned a whopping four months!

Kamala Harris's economic plan would not improve any of these areas, let alone fix them. Her policies would simply add fuel to a raging fire which was sparked by government intervention in the first place. And yet, much like the Republic of Coruscant, Capitalism's death is preceded by "thunderous applause."

Kamala Harris's Economic Plan

Harris's speech today made a number of promises to voters. In short, Harris's plan is centered around reducing the cost of living. Below are the policies she proposed to accomplish this goal:

• Bringing down the cost of food by: 
• Passing a federal ban on price gouging on food;

• Bringing down healthcare costs by:
• Lowering the prices of Insulin and other prescriptions;
• Canceling medical debt for millions of Americans

• Bringing down housing costs and ending the housing shortage by:
• Building 3 million new homes and rental units by the end of her first term;
  
• Cracking down on price fixing by corporate landlords;
• Providing first-time homebuyers with $25K for down payments;
• Reducing needless regulations and red tape at the State and Local level

• Cutting taxes for 100 million Americans by:
• Restoring the Earned Income and Child tax credits;
• Not taxing tips

• Reducing the deficit by:
  • [No plan given]
    

It is impossible for these policies to achieve Harris's goal. Harris has neglected to inform her voters about the most crucial aspect of her plan: how the government is going to pay for all this.

Virtually every single promise made entails the government spending more money––money the U.S. does not have. But somehow, at the exact same time that Harris is spending more money, she is going to lower taxes for the middle class and reduce the deficit. How will this be done?

The only way in which it could be done is if she raised taxes on the wealthy or the poor, or if she reduced spending in other categories. She chastised the wealthy and corporations for "not playing by the rules" but said nothing about taxing "the 1%." Does she plan on cutting spending, then?

If so, which spending categories will be cut? She derided Trump for allegedly wanting to cut Medicare so obviously she has no plan to cut that expense. Additionally, she said nothing about reducing military spending, Social Security, Medicaid or any other expenditure. It won't be the DOE or the EPA since Harris has stated she's proud of Biden's policy to forgive student loans and their pursuit of clean energy initiatives.

According to her, then, taxes and spending will go down without cutting any government expenditures. But most importantly of all, she made no promise to balance the budget, only to "reduce the deficit." This means one thing and one thing only: the U.S. will continue to rack up the debt while continuing to inflate the money supply.

Harris's plan will not reduce the cost of living.

Reducing Food Prices

Harris's proposal to pass a "federal ban on price gouging" for food is ridiculous on its face. Price gouging is already illegal in the United States––the Sherman Antitrust Act, the Federal Trade Commission Act and the Clayton Act are all used to litigate against "anticompetitive" firms.

Harris's policy, then, must be to institute a price control of some kind to reduce the profits of the food industry. However, food industry profits are some of the lowest margins of any industry!

Maximum price controls, anyway, do not reduce the cost of living. Imposing a maximum price creates a shortage which leads to blackmarket dealings and rationing. So a price control on food may work to lower its price but it won't reduce its cost. In fact, a price control would increase the cost of food. Instead of paying a higher price for more food, you pay fewer Dollars for even less food.

So if Harris succeeds in lowering food prices, what does it matter when you still go hungry? Think back to the 1970s when Nixon placed price controls on gasoline and imagine, now, the food lines that would suddenly materialize in front of grocery stores.

All of Harris's policies reveal an utter lack of understanding for why prices have gone up. The real reason for the dramatic increase in the cost of living is inflation! not price gouging! Between January 2020 and May 2022 the Federal Reserve increased the money supply by 52%, diluting the purchasing power of the Dollar and causing prices to rise. Inflation is an increase in the quantity of money; a general increase in prices is the effect (see: Econ 101: Understanding Inflation).

Just look at the price indices below. Can you point to the part of the graph where all food suppliers suddenly decided to start price gouging?

If you somehow managed to find where this price gouging began, then please, tell me why all businesses, all at once, suddenly became greedy overnight. What were they waiting for? Why not "gouge" the public for longer and really rake in the dough? But furthermore, why price gouge at all when the Federal government has so many laws in place prohibiting it and regularly uses those laws to bankrupt and dissolve businesses in violation of them?

Reducing Healthcare Costs

Everything said about price controls applies equally to Harris's plan to reduce the prices of Insulin and other medications. Just as Biden capped the co-pay for Insulin at $35 for Medicare enrollees, further reductions would increase the cost to taxpayers and harm Medicare recipients.

Medicare is socialized medicine. Any costs incurred by the program are passed on to taxpayers and healthcare providers. Already, physicians throughout the United States cap or reduce the number of Medicare patients they accept when their compensation goes down. Further price controls cause physicians to ration healthcare to the demographic most in need of healthcare services. Additional price controls would hardly be beneficial let alone compassionate.

As for forgiving medical debt, this is a cost borne by taxpayers, too! To date, Biden has forgiven roughly $168 billion worth of student loan debt for 4.8 million people. At face value, that's a cost of $1,281 per taxpayer. But since the Federal government would likely have to finance this by issuing more debt––and at current interest rates of 3.8-4.5%––the real cost to taxpayers could be 4-27% higher depending on the length of the Treasuries issued.

If Harris follows through with her plan to forgive medical debt, taxpayers can expect a similarly sized tax bill and more inflation to go with it. This will not improve the cost of living and will exacerbate the current inflation problem.

Reducing Housing Costs

The greatest blunder of Harris's housing policy is, without question, the promise to offer $25,000 to first-time home buyers.

This is a subsidy which, like all subsidies, will increase the demand for housing and drive up the cost of housing even more. Importantly, since the supply of housing is essentially "fixed" in the short-run (inelastic in econ-speak) and severely impeded in the long-run due to zoning restrictions, a subsidy of this kind will do almost nothing to increase the quantity of available housing and would still harm homebuyers even in a perfect housing market.

Think about it: if home sellers know that first-time buyers have an extra $25,000 to spend, are they going to keep the price of their home the same? And if you're not a first-time homebuyer, why would a seller sell their home to you when first-time buyers might have more cash to blow? First-time buyers will simply bid up the cost of housing for themselves and everyone else!

Additionally, the cost borne by taxpayers in order to finance this policy is not at all insignificant. In 2023 approximately 4-5 million homes were sold. The National Association of Realtors estimates that in 2023 first-time homebuyers accounted for 32% of all homebuyers. Even assuming first-time buyers are only 20% of all homebuyers, subsidizing down payments would increase Federal spending by $20-25 billion––$152-190 per taxpayer. If first-time buyers are 30% of all homebuyers, spending increases by $30-37.5 billion––$229-286 per taxpayer.

That may not seem like much, but remember that it does nothing to increase the number of houses. After all, if subsidies really did work that way, why is the government being so stingy? Just cover the entire cost of housing! Surely that would end the crisis! Right?

The Slippery Slope

Without any specifics regarding the revenue sources required to fund these policies, or any indication of Federal expenditures to be cut, Kamala Harris's economic plan is nothing more than a debt-accumulating, inflation-generating redistributive mess. There is not only no evidence  that this plan will reduce the cost of living for Americans or usher in an era of prosperity and responsible government––in fact, it will do the exact opposite.

What is certain is that it would drastically increase the scope and power of the state––making more and more people reliant on government while perpetuating the myth that something can come from nothing. Milton Friedman's favorite refrain, after all, was "There's no such thing as a free lunch!" Americans have forgotten this fact, or perhaps, they never knew it to begin with.

Interventionism of any kind cannot produce prosperity. It cannot enlighten or uplift society. It yields only parasitism and stokes resentment and envy for those who have more or live better. It divides and impoverishes all people while maintaining an illusion of wealth and progress. That interventionism impoverishes all people indiscriminately is its only merit.

When plans like this inevitably fail and create more problems than they solve, the state will say that bad actors have broken the rules and usurped the system. The only recourse, then, is to intervene yet again: more taxation, more regulation, more redistribution, more spending, more debt. This is the logic of interventionism.

The United States is on a path toward Socialism and has been for more than a century. At any time we can turn back and choose a different path; a path that leads to Freedom and Prosperity.

But in order to realize where we ought to go, we cannot be mislead by the golden path beneath our feet. We must look down the path and recognize that what lies at its end is not an oasis but a mirage.