The common point between "Harris Economics" and "Trump Economics": deficits, deficits, and deficits!

At the end of July, US Vice President Harris announced her political agenda, which includes expanding housing supply, expanding child tax credits, etc. These measures increase government spending, expand the fiscal deficit, and bearish the US dollar. In addition to factors such as declining US inflation and the upcoming Fed rate cut, the US dollar continues to decline, with gold hitting a historic high, and the market's demand for safe-haven assets continues to rise.

Although both Harris and Trump have expressed their dislike for inflation, their proposed economic policies may lead to rising prices and fiscal deficits in the US.

In recent months, US inflation is slowly returning to a more sustainable level, but for many Americans, this is not enough: the post-pandemic price surge has significantly increased the cost of living. Galaxy Securities stated in a research report that economic issues are key to gaining support from moderate voters. Among all issues, inflation and employment economic issues are considered the most important by the American people.

The Democratic candidate Harris and the Republican candidate Trump have both promised to reduce the cost of living for American residents, but economists warn that their goals - including the preliminary economic policies proposed by Harris last Friday and the economic-related statements made by Trump in recent months - indicate that they may raise prices after taking office, with the price increase potentially being greater under a Trump administration. Marc Goldwein, Senior Policy Director at the Committee for a Responsible Federal Budget, said in an interview with CNN:

"From what I see now, I believe that the proposals of both campaign teams will lead to fiscal deficits. Higher deficits in the short term mean more inflationary pressure, which either means people will bear more cost increases at supermarkets, gas stations, or housing, or the Fed will have to slow down rate cuts.

For the government, higher debt in the short or long term means higher interest rates... This is a big problem because interest is now the second largest expense for the US government, with more spending on interest than on Medicare and defense."

CRFB plans to conduct a more comprehensive analysis of the proposals of both campaign teams in the coming weeks. Both CRFB and the Tax Foundation point out that as Harris's campaign team provides more detailed funding information and Trump's campaign team releases more comprehensive policy statements, their estimates may change.

Risks in Harris's Policy of Stimulating Demand

Harris's economic policy focuses on reducing the burden on the middle class, including expanding housing supply, expanding child tax credits, prohibiting price fraud, reducing healthcare costs, raising the minimum wage, etc. Harris's "agenda to lower American household costs" proposed last Friday could increase the deficit by $1.7 trillion over ten years, and if housing policies are permanently implemented, the deficit could increase to $2 trillion Among them, about $1.2 trillion of the cost comes from Harris's proposed expansion of the child tax credit.

A core part of Harris's economic plan is to make housing more affordable for residents. The plan, based on current President Biden's proposal, details measures such as building 3 million new homes, down payment assistance, and first-time homebuyer tax credits.

Economists told CNN that Harris's efforts to increase supply will help alleviate the bottlenecks currently hindering the national real estate market and causing prices to soar.

However, economists believe that simply giving people more money to buy houses will not fundamentally solve the problem. Justin Wolfers, a professor of public policy and economics at the University of Michigan, said:

"The main problem now is that too many people are chasing too few houses, and the solution is not to give people more money to buy houses."

Another factor that could drive inflation is Harris's plan to increase people's disposable income through expanding the child tax credit. This could increase consumption and push up prices.

However, Associate Professor of Economics Michelle Holder pointed out practical benefits of this policy: during the COVID-19 pandemic in the United States, expanded child tax credits helped families afford childcare expenses and living costs, and helped people, especially women, stay in the labor market.

Furthermore, economists also noted that Harris's proposal to ban price gouging could also pose problems, as similar laws have led people to purchase more goods than before.

However, the CRFB estimates that Harris's proposal to lower prescription drug costs could reduce the fiscal deficit by $0.25 trillion over 10 years.

However, Harris's campaign team countered that Harris's economic plan will not increase the deficit. In a statement provided to CNN by her campaign team, they stated: Harris supports revenue-raising measures in the "Biden-Harris 2025 Fiscal Year Budget" to ensure that billionaires and large corporations pay their fair share.

Trump's policies may reignite inflation

As of now, Trump has not released a detailed economic plan like Harris. However, his previous proposal to eliminate the payroll tax for Social Security, analyzed by the CRFB, is estimated to cost between $1.6 trillion and $1.8 trillion by 2035.

Trump's economic plans include raising tariffs on imported goods, extending tax cuts, further reducing corporate tax rates, cracking down on immigration and implementing "massive deportations," as well as expanding domestic oil and energy production.

According to analysis by the Center for American Progress Fund, Trump's agenda would increase the annual expenses of a typical American household by $3,900 In a letter in June, 16 Nobel laureate economists issued a stern warning, stating that Trump's plan will not only reignite inflation but also have a "negative impact" on America's global economic status, making the country's domestic economy even more unstable.

Economists told CNN that an increase in immigration has helped the labor market recover and boosted productivity, which helps slow down inflation. Currently, the U.S. labor market is just returning to normalcy after the supply-demand shock caused by the pandemic. Mainstream economists warn that Trump's policy of expelling immigrants may have serious consequences for the U.S. labor market, forcing businesses to raise wages and prices