Vice President Kamala Harris recently unveiled her “Opportunity Economy” plan, a mix of populist and regulatory measures that intends to address the economic challenges that disproportionately affect middle-and low-income families. In her August 16th speech, Harris aligned herself with the Biden administration’s interventionist stance, and highlighted the urgent need to address the rising cost of living.
Harris pledged to introduce further government measures, including anti-price-gouging laws, higher taxes, higher federal minimum wage, a tax on unrealized capital gains, and subsidies for first-time homebuyers. While these proposals aim to lower the costs of essential goods like food, healthcare, and housing, they reflect a deeper issue in modern policymaking: the persistent belief that state intervention can effectively solve complex economic problems. History shows that such interventions often lead to unintended consequences and undermine the very goals they seek to achieve.
Kamala Harris’s Economic Policies Would Weaken the American Economy
Kamala Harris’s economic agenda has raised concerns about its long-term impact. Her policies could fuel inflation, hurt competitiveness, increase unemployment, and slow growth. While her focus on helping the middle class and blaming big business may resonate with voters concerned about the cost of living, many proposals of hers are economically unsound.
In one of her first policy proposals, Kamala Harris called for a federal ban on “price gouging” in the food and groceries sectors, attributing grocery inflation to alleged corporate profiteering. However, facts tell a different story. Grocery profit margins were only 1.2% in 2023—far below the typical 7-9% for most businesses. This means that even slight cost increases can push stores into losses, unless they raise prices to stay solvent. Nonetheless, Harris seeks to empower the FTC to target companies she claims exploited COVID-19 disruptions.
The food industry has strongly challenged this view, arguing that rising prices stem from the unprecedented economic shifts caused by the pandemic. These disruptions wreaked havoc on the supply chains and led to the injection of significant government subsidies. Reduced supplied and inflated demand contributed to higher prices. Furthermore, many economists doubt the link between price gouging and inflation. In fact, a Federal Reserve study shows that rising markups haven’t driven inflation.
Critics also argue that Harris’s proposal reflects a misunderstanding of competitive markets. Economists like Brian Riedl of the Manhattan Institute warn that price controls—such as those implied by Harris’s policy—would be disastrous. Historical evidence, such as the failed price controls of the 1970s, serves as a cautionary example. By capping prices, Harris risks discouraging competition and reducing incentives for companies to increase supply, which could worsen food prices rather than alleviate them.
In the realm of taxation, her proposed changes in tax policy are closely aligned with President Biden’s fiscal 2025 budget and focus on raising taxes for corporations and high earners. A key component of her plan is increasing the combined corporate tax rate from 25.6 % to 32.2%, making it the second-highest in the OECD after Colombia. Further, she proposes to raise the corporate alternative minimum tax from 15% to 21% and the stock buyback tax from 1% to 4%. In regard to personal income taxes, Harris wants to raise the top federal income tax rate to 45.1%, , which reaches 47.6% after the added Medicare tax. Moreover, she plans to increase the top combined capital gains tax rate from 29.1% to 38.3%, making it the second-highest in the OECD after Denmark.
The broader economic implications of Harris’s tax agenda are significant. Analysts predict that her tax policies could reduce U.S. GDP by 2%, lower wages by 1.2%, and eliminate nearly 786,000 jobs in the long term. The higher tax burden on corporations and individuals, alongside a complex tax code, would make the U.S. one of the least competitive countries for business investment within the OECD.
Another major proposal from Harris is the $25,000 subsidy for first-time homebuyers. On the surface, this policy may seem like a win for affordability, especially for young voters, but economists warn it could backfire. By encouraging more people to buy rather than rent, demand for homes would rise and drive up prices as supply remains limited. Higher property values prompt landlords to sell, reducing rental options and raising rents. Although new buyers may benefit in the short term, renters and future buyers could face higher costs.
Similarly, Harris’s proposal to raise the minimum wage to $15 an hour would harm low-skilled workers, as employers may not hire those whose output is worth less than their salary. Historically, economists have recognized the negative impact of minimum wage increases on jobs and productivity. A paper from the National Bureau of Economic Research challenges the belief that such hikes do not affect employment and presents compelling evidence of job losses, particularly among teenagers, young adults, and the less educated.
Furthermore, research by economists Jeffrey Clemens and Michael Wither found that a 30% minimum wage increase from 2008 to 2009 led to a 0.7 percentage-point drop in employment, disproportionately affecting young adults. Similarly, studies by David Neumark and others indicate that wage increases hinder low-income households’ ability to escape poverty. The Congressional Budget Office estimates that a $15 minimum wage could eliminate 1.3 to 3.7 million jobs. If implemented, these changes may ultimately harm the very workers they intend to help.
Conclusion
Life has undoubtedly become tougher for many American households, and many just manage to stay afloat financially. Yet, Kamala Harris’s economic proposals risk worsening their condition. Her plans would likely fuel higher inflation, erode competitiveness, and strain economic resilience, setting the stage for further long-term challenges. Over time, these policies would lead to fewer jobs, stagnating wages, and slower economic growth, deepening Americans’ hardships.
Photo by Sydney Turturro
