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

Don’t get me wrong: Kamala Harris made mincemeat of Donald Trump on Tuesday night. It was among the most one-sided debates I have ever watched. History may settle on September 10 as the turning point in the 2024 election and therefore as Trump’s real Waterloo (he’s had a few false ones). I sincerely hope so. In the meantime, Harris has an election to win. Nothing about America’s cognitive polarisation gives me confidence that her victory would be anything other than close. Which means that the health of the US economy, and voter perceptions of Harris’s grasp of it, remains just as critical to the outcome as before. Economics is Harris’s Achilles’ heel. She is as halting in discussing kitchen-table economics as she is fluent on Trump’s unfitness to be president, or the righteousness of Ukraine’s cause. Thankfully for Harris, Trump failed to bring that out in Philadelphia on Tuesday. Her skill at messing with Trump’s head brought her a reprieve. But she will need repeatedly to check that economic box in the next 52 days. Can she do it? 

Before answering, let me clear up one easy misperception. Whatever the weaknesses in Harris’s economic pitch, nothing she has proposed would come close to the damage Trump’s plans would wreak. His “Trump tariff” agenda would push up US inflation, hit middle-class incomes, and cost potentially millions of jobs — not to mention the geopolitical fall out from full speed ahead deglobalisation. Then there are his plans to deport more than 10mn undocumented immigrants, as well as his loathing of the US Federal Reserve’s independence. Cumulatively, Trump’s misguided missiles could tip the US into recession in 2025. Nothing Harris is floating would come close to the damage of Trump 2.0. But she still needs to make the sale.

I have observed Harris’s various economic announcements with some puzzlement. A few of her proposals, such as renewing the child tax credit, make both political and economic sense. Some, such as her plans to tackle price gouging in the supermarket industry, could make political sense but are terrible economic ideas. The same applies to her opposition (via Joe Biden) to Nippon Steel’s acquisition of US Steel. Biden’s veto puts a bomb under the whole concept of “friendshoring” without doing anything for US employment. But it has doubtless helped cement Harris’s various union endorsements. Others, such as her proposal for a wealth tax on those worth more than $100mn, depend very much on the details. Wealth taxes are notoriously hard to administer but fit in with most people’s sense of social equity (including mine). It made political sense for Harris to propose a lower increase in the capital gains tax on the highest earners, setting it at 28 per cent compared to Biden’s 39.6 per cent. Given that Trump is trying to paint Kamala as a Kalifornia Kommunist, she needs to signal centrism. 

What I am missing in all of this is a coherent overarching message. It is not enough to talk about rebooting the “opportunity economy” and backing the “dreams of the American people”, as Harris did in her opening answer on Tuesday night. These sentiments are fine but she needs to make her case more tangibly than that. To be sure, she is handicapped by her inability to distance herself too much from Bidenomics, which remains unpopular even though its track record is pretty good. Harris cannot repudiate her boss without bringing her own role as vice-president into question. Nor, given the polling numbers, which remain good for Trump on the economy, can she embrace continuity. Hers is a difficult needle to thread. She may get some help next week when the Fed cuts interest rates — although given the stubbornness of core inflation, probably by only a quarter of a percentage point. But she also needs to help herself. Right now, all I see is a confusing jumble of populist gimmicks, centrist reassurances, soothing rhetoric and a lot of shape-shifting. Economics is the part of Harris’s game that requires the most work.

I am turning for inspiration to Jason Furman, renowned Harvard professor and former senior economic adviser to Barack Obama. Jason, I know, like most economists, you hate to talk about economic messaging for presidential campaigns. That’s for the politicos. So let me ask you this: if Harris becomes America’s 47th president, how different should her economic agenda be compared to Bidenomics? Feel free to give political advice if the spirit moves you!

Recommended reading 

• Naturally my column this week is about that debate, where I saw Harris taking Trump’s measure. “If there were doubts that Harris could stand up to Trump they were dispelled in their first encounter,” I write. “It may be their last. The fact that she ended Tuesday night’s debate by calling for another spoke volumes.” Indeed, Trump has rejected her overture for a second debate.

• Still on the US election, do take the time to read this lengthy and highly unusual essay by the New York Times’ publisher, AG Sulzberger, in the Washington Post. The fact that he requested the Post run his piece underlined his point that Trump would pose a Viktor Orbán-scale threat to press freedom in America.

• Turning to another large democracy, I had the chance to cross-examine Rahul Gandhi, India’s opposition leader, and scion of the Nehru-Gandhi dynasty, at Georgetown University’s Walsh School of Foreign Service earlier this week. I found Gandhi remarkably ebullient after his party’s unexpectedly strong showing in India’s recent general election. I did not expect that his plan to unseat the BJP’s Narendra Modi would so closely approximate to Love Actually. His answers are worth listening to.

• Finally, do watch the FT’s editor, Roula Khalaf, in conversation with Bill Burns and Richard Moore — the first time the CIA director and head of MI6 have ever appeared on a public stage together. That in itself was newsworthy. But the content is fascinating. If Harris wins, I would not be surprised to see Burns as her secretary of state.

Jason Furman responds

For now it makes sense for Harris to be announcing ideas that she thinks will help persuade people to vote for her. I wish that was the same as just announcing ideas that are good for the economy, but unfortunately not every voter seems to care as much about foreign direct investment in steel or market pricing in groceries as I do.

Governing is different because your ideas might actually happen and then you need to live with the consequences. Even if the initial polling was good, if the result is lost jobs or higher prices or more expensive mortgages, it will not necessarily work out for you very well politically. The good news is she has a lot of good material to work with when governing: most of Biden’s people-centred agenda, including child tax credits, were not passed — but they should be — and at the same time, it needs to be paid for. She has embraced very specific ideas about how to do this, but she will also need to do some recalibration.

Bidenomics moved in the right direction on a range of issues from antitrust to industrial policy to expansionary fiscal policy but in some cases overshot the mark. My hope is that a combination of the pragmatism she has shown on the campaign and the constraints she will be under will lead to some recalibration in these areas that retains the good direction of change without being wedded to all of the particulars. 

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And now a word from our Swampians . . .

In response to “What if Elon Musk ran the economy?”:
“No Trumpian ‘efficiency commission’ will produce much of value, if anything at all. Peter made that point best by noting Simpson-Bowles, because that plan had hard political roots — and without those roots very little is going to flower and fruit — and it was still ignored by about half. It’s just another red meat offering to his base, like charging Mexico for the wall or being a dictator on day one. An efficiency commission would have all the impact on our government and economy as the airlines and casinos that have carried Trump’s name.” — Charles Cousins