Key Takeaways
- Both presidential nominees have released economic policy proposals. Economists have found some of the ideas polarizing.
- Removing taxes on tips, enacting high tariffs and putting price controls in place have been criticized by economists.
- One proposal both parties agree on—expanding the Child Tax Credit—is well received by economists.
Both major presidential candidates have received applause from crowds of supporters when discussing their economic policies—but if the audience were composed of economists, they might have gotten a frostier reception.
Vice President Kamala Harris, the Democratic nominee, and her Republican opponent, former president Donald Trump, have made campaign promises that have drawn criticism from economists all across the ideological spectrum. They’ve also made a few that have gotten more positive reviews.
Here are some of the more polarizing ideas they’ve put forth:
Trump’s Tariffs Proposal Gets Bad Reviews
Possibly the most widely criticized idea of the electoral campaign so far is Trump’s proposal to raise tariffs on imports. He has proposed imposing tariffs of 60% or more on Chinese imports and across-the-board tariffs of 10%.
A survey of professional economists by the National Association for Business Economics in August showed that those policies were deeply unpopular with experts. When asked to pick three of eight potential changes to U.S. trade policy, only 2% backed 60% tariffs on China, and 3% backed a broad 10% tariff.
Experts say merchants would likely pass on any increased tariffs to consumers. An analysis by economists at the Peterson Institute for International think tank found enacting Trump’s plan would cost a typical middle-income family $1,700 a year in higher prices.
An analysis by economists at Goldman Sachs found if Trump enacted a softer version of this policy, maintaining the across-the-board tariffs and raising tariffs on China by 20 percentage points, prices in the U.S. would rise 1%, and economic growth would slow down. In response to higher prices, the Federal Reserve would keep interest rates higher, meaning U.S. individuals and businesses would pay higher interest rates on mortgages, car loans, and other forms of credit.
Even Trump’s ideological allies have criticized the idea of higher tariffs. Economist Desmond Lachman, a senior fellow at the conservative American Enterprise Institute think tank, warned raising tariffs could reignite the kind of trade wars that contributed to the Great Depression.
“That is bound to invite retaliation from our trade partners that could lead us down the economically destructive road to the beggar-thy-neighbor policies of the 1930s,” he wrote in a blog post this week.
Economist Carl Schramm, a professor at Syracuse who otherwise praised Trump’s economic agenda, said the tariff proposal was a weak point.
Economists Warn Harris Against Price Controls, Citing Nixon-Era Failure
Last week, as part of a series of policies aimed at lowering everyday costs for households, Harris proposed a federal ban on price gouging by food companies, though did not provide details about what exactly that policy would consist of. And last month, the Biden-Harris administration proposed a law that would take federal tax breaks away from landlords if they raised prices more than 5% a year. Harris has not said whether she would pursue this policy as president.
To some economists, those ideas echoed the price controls instituted by Richard Nixon in the early 1970s, which backfired spectacularly. (It’s also possible that Harris’s anti-price-gouging policy would be far less extensive than that. The New York Times, citing people familiar with Harris’s thinking, said the ban would be modeled after numerous existing state laws that limit how much businesses can raise prices during disasters and emergencies.)
Schramm, a critic of Harris’s overall approach, said price controls were her worst idea.
“The real issue with price controls is who you drive out in the market,” he said. “If you put price controls on housing, no investor is going to build houses to rent.”
Schram was more bullish on one of Harris’s other proposals to cut housing costs—encouraging homebuilding by reducing regulatory red tape.
Child Tax Credits Viewed Positively
Both campaigns have proposed expanding the child tax credit—Harris would raise it to up to $3,600 per child and $6,000 for newborns, and the Trump campaign favors a credit of $5,000 per child from its current level of $2,000 per year.
When President Joe Biden temporarily expanded the credit in 2021, researchers credited it with cutting child poverty significantly. Some economists say bringing the expanded credit back would help children and the economy overall. In addition to reducing hunger and homelessness and boosting school performance, it would have long-term benefits, Mary Eschelbach Hansen, a professor of economics at American University, said in a blog post earlier this month.
“Healthier, better-educated children are more likely to work when they are adults,” she wrote. “They’ll be more productive, so they’re likely to earn more when they’re adults … From the point of view of an economist, more productive workers help sustain strong economic growth. They grow the economy.”
On the downside, researchers at the nonpartisan Tax Foundation think tank warned instituting the credits and other Harris spending proposals without cutting federal spending elsewhere or raising taxes to pay for them could stoke inflation and deepen the national debt.
Ending Taxes on Tips Could Have Unwanted Consequences
Both Trump and Harris have proposed ending taxes on tips. While giving a tax break to wait staff and other low-paid workers who rely on gratuity may be intended to help the working class, some economists say it would have some unwanted consequences.
Ending taxes on tips is “a poorly targeted proposal,” Alex Muresianu, a senior research fellow at the nonpartisan Tax Foundation, wrote in an analysis last month. For one thing, it would reach only 2.5% of the workforce and 5% of the quarter of workers who are the lowest paid, according to researchers at the Yale Budget Lab.
Secondly, if you’re baffled by who you should tip and who you shouldn’t amid the rise of tipping culture, just wait until your lawyer or accountant expects one. Ending taxes on tips would only encourage more professions to move compensation away from wages and toward tips, Muresianu wrote.
However, economists are rarely unanimous, and the tip issue is no exception: Schramm said ending tips taxation was a good idea, even if only for its symbolism.
Kicking Workers Out of the Country Could Harm Economy
Trump has repeatedly promised to round up and deport illegal immigrants.
Regardless of any humanitarian considerations, economists are skeptical that expelling immigrants would help the economy. In a question on the NABE survey asking economists to select any number of seven different immigration policies they supported, only 29% said it was a good idea to increase deportations.
John Horn, an economist at Washington University, is among those who say such a roundup would damage the economy.
“If you take millions of workers out of the economy, many industries, including food production and manufacturing assembly services, will suffer,” he said in a blog post earlier this month. “If you don’t have labor, prices go up, and the economy slows down. I’m not saying we should just let anyone in—we need to address immigration—but if you don’t have labor, prices go up and the economy slows down. That’s basic economics.”
