It’s still the economy, stupid, for Kamala Harris

Don’t get me wrong, Kamala Harris crushed Donald Trump on Tuesday night. It was one of the most one-sided debates I’ve ever seen. History may decide September 10th as a turning point in the 2024 election, Trump’s real Waterloo (he has several false Waterloos). I sincerely hope so. In the meantime, Harris has to win the election. There’s nothing about America’s cognitive polarization that makes us sure her victory will be anything but close. That means the health of the U.S. economy and voters’ perception of Harris’ understanding of the economy will be as important to the outcome as it has ever been. The economy is Harris’ Achilles heel. She’s as reticent when talking about her home economy as she is fluent about Trump’s unfitness for the presidency and the legitimacy of the Ukrainian cause. Thankfully for Harris, Trump failed to make that clear in Philadelphia on Tuesday. Her skill at confounding Trump has earned her a reprieve. But she’ll have to meet that economic condition multiple times over the next 52 days. Can she do it?

Before answering, let me clear up one misconception. Whatever the weaknesses of Harris’ economic policies, nothing she proposes can compare to the damage Trump’s plan will cause. His “Trump Tariff” policy will boost US inflation, hit middle-class incomes and potentially kill millions of jobs. Not to mention the geopolitical consequences of deglobalization going full speed ahead. Then there’s the plan to deport over 10 million illegal immigrants and his aversion to the independence of the US Federal Reserve. Taken together, Trump’s misguided missiles could push the US into recession in 2025. Nothing Harris proposes can compare to the damage Trump 2.0 will cause. But she still needs convincing.

I have been watching Harris’ various economic presentations with some bewilderment. Some of her proposals, such as extending the child tax credit, make political and economic sense. Others, such as a plan to address price gouging in the supermarket industry, may make political sense but are a terrible idea economically. The same goes for her opposition (via Joe Biden) to Nippon Steel’s acquisition of U.S. Steel. Biden’s veto puts a bomb on the whole concept of “friend-shoring” while doing nothing for American jobs. But it undoubtedly helped solidify Harris’ support with various labor unions. Other proposals, such as her proposal to impose a wealth tax on those with assets over $100 million, depend a lot on the details. A wealth tax would be notoriously difficult to administer, but it fits most people’s sense of social fairness (including mine). It made political sense that Harris proposed to lower the capital gains tax increase rate on the highest earners to 28% versus Biden’s 39.6%. Given that Trump is trying to portray Kamala as a California communist, she needs to demonstrate some centrism.

What I miss in all this is a coherent, overarching message. It’s not enough to talk about rebooting the “opportunity economy” or supporting “the American dream,” as Harris did in her opening response Tuesday night. Those sentiments are fine, but she needs to be more specific. Admittedly, she’s handicapped by not being able to distance herself too much from Biden economics, which has a pretty good track record but remains unpopular. Harris can’t criticize her boss without questioning her own role as vice president. Nor can she accept continuity, given the poll numbers favoring Trump on the economy. Her situation is difficult. A Fed rate cut next week could help some, but probably only by 0.25 percentage points, given the stubbornness of core inflation. But she also needs to help herself. Right now all I see is a confused hodgepodge of populist gimmicks, centrist reassurances, soothing rhetoric, and a lot of shape-shifting. The economy is the part of Harris’ strategy that will require the most effort.

I look to Jason Furman, a distinguished professor at Harvard University and former senior economic advisor to Barack Obama, for inspiration. Jason, like most economists, I know you hate talking about economic messaging for a presidential election. That’s the politicians’ job. So let me ask you a question: If Harris becomes the 47th president of the United States, how different should her economic policies be compared to Biden economics? Feel free to give me some political advice if you feel like it.

Recommended reading

• Naturally, this week’s column is about the debate that saw Harris measure up to Trump. “If there were any doubts about whether Harris could take on Trump, the first debate erased them,” I wrote. “This one may be the last. It says a lot that she ended Tuesday night’s debate with a call for another one.” Indeed, Trump rejected her offer for a second debate.

• As for the US election, I have yet to see what happens. A rare essay by New York Times publisher A.G. SulzbergerThe fact that he asked the Post to publish his article underscores his argument that Trump would pose a Viktor Orban-level threat to press freedom in the United States.

• Turning to another large democracy, I Interrogating Indian Opposition Leader Rahul GandhiGandhi, a scion of the Nehru-Gandhi dynasty, spoke at Georgetown University’s Walsh School of Foreign Service earlier this week. Gandhi was in surprisingly good spirits after his party’s unexpectedly strong showing in India’s recent general election, and his plan to unseat Narendra Modi of the BJP. Love Actually. His answer is worth listening to.

• lastly, FT Editor Roula Khalaf in conversation with Bill Burns and Richard Moore It was the first time the CIA director and MI6 director had appeared together on a public stage, which was newsworthy in itself, but the content was interesting. If Harris wins, I wouldn’t be surprised if Byrnes becomes Secretary of State.

Jason Furman responds

For now, it makes sense for Harris to put forward ideas that she thinks will help motivate people to vote, as long as they put forward ideas that are simply good for the economy, but unfortunately, it seems that not all voters care as much as I do about foreign direct investment in steel or market prices for food.

Governing is different because your ideas can actually come true and you have to live with the consequences. Even if the initial polls are good, it doesn’t necessarily work politically if the results are unemployment, rising prices, and high mortgage prices. The good news is that she has a lot of good material to govern with. Most of Biden’s people-centered policies, such as the child tax credit, did not pass, but they should, and they need to be paid for. She is open to very specific ideas about how to implement this, but they will need to be recalibrated.

Biden economics has moved in the right direction on a range of issues, from antitrust to industrial policy to expansionary fiscal policy, but in some cases has overshot the mark. My hope is that the combination of the pragmatism she displayed on the campaign trail and the constraints she will be subject to will result in some recalibration in these areas, while maintaining the positive direction of change without getting bogged down in the minutiae.

Your feedback

Well, a word from our Swamp folk.

Depending on “What would happen if Elon Musk ran the economy?”:
“A Trump-style ‘efficiency commission’ wouldn’t produce much value, if anything at all. Peter made the point best with the Simpson-Bowles example, because the plan has a strong political basis, and without it, very little would come to fruition. And yet it was ignored by about half. It’s just another attractive proposition to Trump supporters, like charging Mexico for a wall or being a dictator from day one. An efficiency commission would have the same influence as an airline or casino named after Trump.” Charles Cousins