Kamala Harris’ Affordability Agenda Is a Good Idea, Backed by Terrible Politics

If there is one thing that the last 50 years of American politics have proven, it is that voters hate inflation. If there is one thing more, it is that politicians who seek to exploit that hatred will propose counterproductive, unworkable, and unprofitable policies to counter rising prices.

The same is true for Vice President Kamala Harris.

In the weeks since she topped the Democratic presidential ticket, Harris has unveiled a series of policies she has cast as tools to lower the cost of living for middle-class Americans. Among them are a vague but potentially radical federal ban on price gouging on food and groceries and a grant of up to $25,000 for qualifying first-time homebuyers.

In other words, price regulation and subsidies. History shows that these kinds of policies, which attempt to control market outcomes through federal oversight, rarely work. And in many cases, they can lead to higher prices and shortages, the exact opposite of what Harris promises.

Harris is not wrong, however, to focus on the high cost of living, especially for middle-class essentials like health care, housing, and education. Even with some reduction in inflation, there is an affordability crisis.

But this is a crisis that a long history of government intervention has failed to fix or has exacerbated. Americans deserve a policy program that credibly seeks to eliminate the government-mandated market distortions that have made the crisis so dire.

It’s easy to see why Harris has geared her economic agenda toward middle-class affordability. Throughout Joe Biden’s presidency, Americans have consistently ranked inflation and the economy as their top policy priorities. They’ve given Harris’ GOP rival, former President Donald Trump, an edge on economic issues. (If nothing else, her agenda and message have proven that she can read the floor—or at least the polls.)

During the campaign, Trump sought to capitalize on that advantage, claiming that he had left Biden an economic “miracle” that the Democratic administration had squandered by covering up the economic turmoil he presided over during the pandemic year of 2020.

Harris’ proposals, however, leave much to be desired. Consider her proposal to ban grocery price gouging.

At best, it is completely unnecessary: Food inflation has fallen dramatically from its peak, and grocery store profit margins are already slim – net margins stood at just 1.6 percent in 2023

Defenders say it is simply a more aggressive form of antitrust enforcement that, outside of rare emergencies, is essentially useless.

Harris’ camp declined to provide details on how the policy would work, suggesting it may be more of a messaging strategy rather than a specific policy to be implemented.

But in essence, it looks a lot like other plans to enforce price caps by government decree. And in the wake of the pandemic years, in which supposedly emergency policies have become quasi-permanent, it’s easy to see how such a policy could in practice amount to a de facto set of federal price controls that stretch across the economy.

Harris would not be the first president to introduce sweeping price controls in response to rising inflation.

In the summer of 1971, President Richard Nixon issued an executive order imposing a 90-day freeze on wage and price increases that he crashed as a way to stem inflation, especially in the case of foodstuffs. Nixon’s temporary wage and price controls were not exactly comparable to what Harris proposes, but they offer a lesson about the effectiveness of even the most aggressive government efforts to curb price increases.

In the years following Nixon’s executive order, Americans stood in long lines for gas, paying for things with time rather than cash. Shortages of key goods like steel clogged the economy and made life miserable for the middle class. Inflation also remained untold.

In the late 1970s, under Jimmy Carter, annual inflation rose to 12 percent. In an October 1980 debate with his Republican opponent Ronald Reagan, Carter he defended his economic achievements, noting that inflation had come down from its peak. He boasted about his achievements in job creation, energy independence, and industrial production. And he said, “We asked for the sacrifice of the American people, and they did it very well.” American voters did not rejoice over that sacrifice. Reagan won the election handily, arguing that he would bring inflation under control.

Or consider Harris’ plan to subsidize first-time homebuyers with up to $25,000 in down payment assistance for a new home. That might sound like a welcome boost for homebuyers with limited funds. But the cash injection will likely boost home prices because many buyers will have more money to spend.

Indeed, much the same thing has happened over the past two decades in another sector – higher education. National ReviewJim Geraghty notestotal student aid has increased significantly since 2002. Students now have much greater access to financial resources. The result, however, is not that higher education has become more affordable: colleges have raised tuition fees for almost twice as high inflation rate at the same time.

The raft of tax breaks, special loans, and subsidies has done nothing to improve the fortunes of struggling middle-class college applicants: In fact, it has made the product itself more expensive, to the point that the Biden administration has spent the last few years trying to cancel hundreds of billions of dollars in student loan debt.

In fairness, Harris is also trying to increase the supply of housing; she has proposed using $40 billion in tax breaks to spur construction of 3 million new homes and rental units that he says “will be affordable to the middle class.” But Biden’s efforts to boost chip manufacturing and electric vehicle charging stations with federal subsidies and tax incentives show that kind of project is easier said than done: One of the largest recipients of CHIPS funding, new semiconductor factory in Arizona from Taiwan Semiconductor Manufacturing Company, plagued by delays, labor struggles and cost overruns. Despite $7.5 billion in federal funding to build half a million new electric vehicle charging stations, only seven were built since June.

Some of what is notable about Harris’ show is to what extent is Bidenomics trackingthough she avoided the word. But as Biden discovered, signing tax incentives is easy. Building things in the real world is hard.

This is the problem that Harris and any enterprising politician who wants to help the middle class should solve.

Harris is on the strongest ground when she talks about cutting red tape and other barriers to building new homes. But what is needed is a whole-of-government effort to remove more red tape from a thriving, dynamic economy and allow market forces to operate in sectors where they have long been stifled.

Leaving aside the skyrocketing prices of groceries during the pandemic, the roots of America’s insecurities crisis lie in three sectors: housing, health care, and education.

Not coincidentally, these are the three areas where government intervention—subsidies, tax incentives, regulations, and federal programs—has been the most in decades. And, overall, that intervention has increased.

It’s not just that student aid has increased. Most health care spending in America is already paid for through government programs, including Medicare and Medicaid. The Affordable Care Act, passed in 2010, was meant to make health insurance affordable for the middle class. But when Biden took office in 2020, even Democrats complained that health insurance was too expensive. Since then, the bill’s subsidies have been expanded, some to higher-income households, at a cost of tens of billions of dollars a year. The mortgage interest deduction already subsidizes homeownership, which favors today’s increasingly affluent homeowners.

A real affordability program would address the root causes of these dysfunctional markets: the massive, entrenched government and special-interest programs that have kept them alive and thriving for decades. It would start by acknowledging the policy mistakes governments have made and promising to fix them, rather than imposing new interventions to patch up the problems created by previous interventions.

Any politician brave enough could take up the cause. The message would be simple: the government has made many mistakes, and instead of making new ones, the first step is to fix the old ones.

Unfortunately, Harris’ opponent also intends to make these problems worse. Despite attacking Harris on inflation, Trump has pushed for a sweeping tariff that would expand on the taxes he imposed as president and, according to most economists, raise prices across the economy. Indeed, Harris stands on the firmest economic policy ground, criticizing Trump’s plan, which he describes as “basically a national sales tax on everyday products and basic necessities.”

Like so many politicians before him, Trump is pursuing a harmful economic policy idea, and an even more harmful expansion of that same idea. History is repeating itself, and we are all paying the price.