Harris on Harris vs. Trump

Episode Summary

Executive Summary: Ben Harris joined Inside Economics to assess the U.S. economy, arguing it has achieved a true soft landing with inflation largely tamed, growth solid, and wealth and investment unusually strong. The conversation then centered on the election, contrasting Harris’s likely status-quo/divided-government path with Trump’s far more disruptive agenda on tariffs, immigration, deficits, and institutions.

Main Topics: U.S. economy and soft landing (Priority: 5/5): Harris described the economy as a textbook soft landing: inflation has eased, growth remains strong, wealth has risen via housing and equities, and business investment has held up better than normal at this stage of the cycle. Inflation and the Fed’s target (Priority: 5/5): The speakers discussed how inflation has changed from broad-based post-pandemic price increases to a shelter-driven problem, and Harris questioned whether shelter/OER should be part of the Fed’s inflation target. Election outlook and government control (Priority: 5/5): Harris estimated the presidential race as essentially a toss-up, with the Senate likely Republican and the House near a toss-up, making Harris+divided government and Trump+Republican sweep the most plausible outcomes. Policy contrast: Harris vs. Trump (Priority: 5/5): Trump was framed as an isolationist supply-sider (tariffs, deportations, low taxes, accommodative Fed), while Harris was framed as a pro-consumer, housing-supply-and-tax-credit agenda financed by higher taxes on capital and high earners. Tariffs, trade, and legal constraints (Priority: 4/5): The discussion emphasized Trump’s broad tariff ambitions, the expected consumer cost of tariffs, and uncertainty over whether executive authority would allow across-the-board tariffs after the Supreme Court’s Chevron decision. Immigration and macroeconomic disruption (Priority: 4/5): Harris argued border policy is more similar than different across candidates, but Trump’s mass-deportation plans would be economically and socially disruptive and likely reduce labor supply and growth. Housing policy and first-time buyer credit (Priority: 4/5): Harris defended the logic of expanding housing supply and said a first-time homebuyer tax credit could still help buyers even if some of the benefit is capitalized into prices, though the timing and market conditions matter.

Key Arguments: The U.S. economy is in a genuine soft landing: inflation is subdued, growth is solid, and the labor market is strong. Inflation should be viewed as two episodes: a broad-based post-pandemic surge and a later shelter-driven period that is much narrower. Core PCE including shelter may overstate the inflation burden on households, especially owners’ equivalent rent. The election is best understood as two likely governing scenarios, not just a presidential horse race: Harris/divided government or Trump/Republican sweep. Under Harris with a Republican Senate, confirmations and legislation would likely stall, creating stasis for much of the first two years. Trump’s policy agenda is more coherent: anti-globalization/isolationist plus low-tax/supply-side economics. Harris’s agenda is more complex and consumer-focused, centered on housing supply, family tax credits, and higher taxes on capital/high earners. Tariffs function economically like a broad retail sales tax and are generally passed through to consumers. Trump’s across-the-board tariffs and immigration crackdown would likely raise prices, reduce labor supply, and create social disruption. A federal price-gouging law is unlikely to be very consequential because many states already have similar laws and they have not been broadly binding. A tax on unrealized gains at death and some capital-gains reforms are more defensible than a minimum tax on unrealized gains for ultra-wealthy households, though administration would be difficult. Eliminating taxes on Social Security benefits would weaken the Social Security and Medicare trust funds and hasten insolvency dates. Mass deportations would be far more disruptive than border enforcement and would likely be hard to model because of their social effects. The federal government has limited but real tools to expand housing supply; the LIHTC and zoning-incentive funds are more important than the homebuyer credit. A first-time homebuyer tax credit may help buyers even if some benefits are capitalized into house prices, especially if it stimulates construction. Both election outcomes imply larger deficits, but Trump’s fiscal path would be materially more expansive than Harris’s. Persistent deficits could eventually reprice Treasuries from risk-free to risky, threatening global financial stability and the dollar’s reserve-currency role.

Data Points: U.S. inflation target (PCE): 2.0% - Mark said the September consumer expenditure deflator was expected to be 2% year over year, at the Fed’s target. Core PCE excluding owners’ equivalent rent: 1.5% - Mark noted inflation excluding OER has been running around 1.5% year over year for much of the year. Extra investment added to the economy: about $400 billion - Harris said investment has remained elevated and added roughly this amount to the economy. Harris election probability range: 40% to 60% - Harris said any estimate outside that range for either candidate would be not credible. Republican chance in the Senate: 85% - Harris said the Senate is about 85% likely to be Republican. Trump across-the-board tariff proposal: 10% to 20% - Harris summarized Trump as proposing a large universal tariff, with the campaign rhetoric centered around these levels. Potential China tariff: 60% to 100% - Harris discussed Trump’s targeted tariff rhetoric on China. Potential increase in tariffs from ending PNTR with China: about 40% - Harris said one estimate put the effect of revoking permanent normal trade relations with China at this level. Tax plan cost under Trump: about $7.5 trillion - Harris cited the Committee for a Responsible Federal Budget estimate for Trump’s plan. Tax plan cost under Harris: about $3.5 trillion - Harris referenced a lower deficit impact for Harris’s proposals. U.S. debt-to-GDP ratio: around 100% - Harris said debt is now around this level and projected to rise further. Median home price: about $400,000 - Mark used this as an example when discussing the first-time homebuyer tax credit. First-time homebuyer tax credit: $25,000 - The Harris housing proposal discussed in detail. Housing innovation fund: $40 billion - Harris described this as part of the housing supply strategy. Ultra-wealth threshold for minimum tax: $100 million net worth - Harris described the proposed minimum tax on high-net-worth households. Minimum tax rate on very wealthy households: 25% - Harris discussed a proposed minimum tax on all forms of income, including unrealized gains. Capital gains rate proposal: 28% - Harris cited a proposal to raise the capital gains rate for those with more than $1 million in income. Social Security benefit taxation tiers: 0%, 50%, 85% - Harris summarized the current tax treatment of Social Security benefits by income level. Medicare Trust Fund exhaustion date: 2036 - Harris said current projections show Medicare’s trust fund exhausting in this year. Medicare exhaustion under proposed Social Security tax changes: 2031 - He said removing Social Security benefit taxes would move the date up by five years. Social Security/DI Trust Fund exhaustion date: 2034 - Harris referenced this as the current expected exhaustion year. U.S. annual immigration under scenarios: 700,000 / 1.25 million / 1.5 million - Harris cited Goldman Sachs estimates: roughly 700k under Trump sweep, 1.25M under Trump divided government, and 1.5M under Harris divided government. First-time homebuyer credit effects in 2008 study: 1% to 4% price increase - Harris cited prior evidence from the 2008-era homebuyer credit.

Pivotal Quotes: "I think the U.S. economy, this is the definition of a soft landing." — Ben Harris: His opening assessment of current macro conditions. "Tariffs like a national retail sales tax." — Ben Harris: His core critique of broad tariff policy and its consumer incidence. "I worry more about that than literally anything else." — Ben Harris: His response on threats to democracy and political instability.

Implications: Listeners should expect either continuity or major disruption after the election: Harris likely means policy gridlock and macro stability, while Trump likely means higher tariffs, lower immigration, bigger deficits, and more institutional stress.