Night to Wednesday Norwegian time, it finally happens: the very first presidential debate between Kamala Harris and Donald Trump. Presidential power in the world’s largest economy is at stake for the two candidates. Both know that whoever can speak most credibly about the economy also has a good chance of winning the election. For the Americans, most things now are about the fact that everything has become terribly expensive. If you look at the opinion polls, the cost of living crisis is what most Americans are concerned about. But the two candidates have very different solutions in the battle for voters: Financial aid: Harris stands for a more direct economic line, with concrete support for struggling Americans. Tariffs on goods from abroad: Trump’s plan is largely about bringing down prices in the US through a sharp increase in customs walls. Let’s take a closer look at the two candidates’ plans to solve the everyday financial lives of Americans. Last week, Trump launched what he called a “national economic renaissance.” He announced several measures: 1. Increase tariffs on foreign goods Increasing tariff walls has long been Trump’s policy, hitting working-class voters opposed to free trade agreements and flagging factories and workplaces. Trump has said he will raise tariffs by 20 percent on all imports from abroad, and up to 60 percent more on Chinese goods. These raised tariff walls come on top of increased tariffs on foreign steel and aluminium, washing machines, caps, TVs and trainers. Trump’s idea is quite simple: everything imported from abroad becomes more expensive, which makes the American consumer prefer to buy American goods, which in turn will increase the production of American goods. It will create lots of jobs, which will help American families pay for the cost of living crisis. But it is still not that simple. According to Trump, China is paying for the increased tariffs. Harris, on the other hand, has called this the “Trump tax”, which she believes the Americans must pay for. “She’s a liar. She’s making up crap (…) This is a tax on another country,” Trump has responded, among other things. But an increased tariff on a good does not act as a tax on another country. When the United States imposes tariffs on a foreign good, it is the buyers who pay the increased price – not the country of origin. According to CNN, among others, there is a theoretical possibility that the foreign company selling the goods chooses to pay the increased customs duty or reduce prices in order to remain competitive. But studies show that it is actually American consumers who have paid almost the full price for Trump’s tariff regime. Figures from the Brookings Institution show that increased tariffs under both Trump and Biden have resulted in fewer jobs and higher prices. 2. Easier rules Trump has said that for every new set of rules he introduces, he will cut ten other sets of rules. According to Trump, Tesla and Elon Musk will lead a committee to change how the American state is run, and that it will save society several thousand billion dollars. “My plan is going to bring inflation down quickly, and bring prices down and give life to explosive economic growth.” The idea is that regulations create a lot of extra work, especially for small and medium-sized companies, and through fewer regulations the companies will be able to concentrate on creating jobs. 3. Cut energy prices Trump wants to cut energy prices by increasing energy production. He has promised to halve energy prices with a fast track to quickly approve new drilling projects, pipelines, refineries and power plants in areas where local opposition is strong. But Trump’s “drill baby, drill” policy has some catches. Firstly, energy prices are set in an international market. One country has little influence. Secondly, it will not be profitable to pump up oil and gas to the price level Trump wants. 4. Tax relief for companies Trump has previously talked about cutting the tax level for companies to 15 per cent, but only for companies that produce goods and services in the USA. Trump also has proposals for more tax cuts. A popular proposal is that people who have tip-based jobs should not pay tax on tips. Such as Uber drivers or waiters. He calls this policy “no tax on tips”. Kamala’s plan Kamala Harris has a different starting point than Trump, as she has been in government for the past four years – and can thus be linked to the high price inflation Americans have faced and are facing. Because even if things are going well in the American economy, it works as if the authorities have underestimated something important: that what happens in the macro-economy is nevertheless not felt in the micro-economy – i.e. in people’s wallets. Harris has therefore chosen a more direct and concrete approach to respond to the challenges Americans now face: 1. Will strengthen competition to slow down prices Harris wants to increase competition in the American market, and thereby reduce prices. Her basic idea is that there is too little competition in the entire food industry. She wants to bring in more players in the entire value chain – through financial support for smaller players. In this way, competition will increase and prices will decrease. She will also give American competition authorities more tools in their toolbox, to crack down on behavior that weakens competition. She also wants to go after the grocery store chains, and make it illegal to raise the prices of goods that are suddenly in high demand. However, the experts are unsure of how big an effect it will have. 2. More direct financial support Harris now has a clear goal to appear as a helping hand to working and middle class families. She wants to give direct financial support to people, so that they can get better advice. She will also contribute to more housing construction, through tax breaks for developers. The goal is 3 million new homes over the next four years, which will bring down housing costs. And in addition, she will give a tax deduction of 25,000 dollars to all first-time buyers of new homes. She will also introduce major tax credits for parents, such as a tax credit of $6,000 a year for parents of newborns. 3. Billionaire tax Kamala Harris has previously stood behind sitting President Joe Biden’s proposal for tax increases totaling 5,000 billion dollars. Among other things, the proposal has been about increasing the taxes on assets owned by people who earn more than 100 million dollars a year. The Biden plan has been about increasing taxes for the very richest and for large corporations, to pay for major social reforms. However, Harris has faced a lot of opposition to this, and has made the tax plan more moderate – among other things to appear more electable to business owners. She has also scaled back her plan to increase capital gains taxation. Two different directions for the economy Trump and Harris give voters two very different options when it comes to the role of government, who will pay for it and how to solve the American cost of living crisis. According to the Financial Times, which refers to the University of Pennsylvania, both candidates’ plans will increase the US budget deficit. But where Trump’s plan will increase the deficit by $5.8 trillion, Harris’ plan will “only” increase the deficit by $1.2 trillion. In any case, much will depend on whether the candidate who wins also gains control of Congress, which has the final say in the vast majority of economic changes – such as taxes. Thus, policy will be determined by the concrete tools the winner of the election actually has – not just by what they say in the election campaign. Published 10.09.2024, at 18.42
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Ready for financial showdown tonight – Statement
