GMU Econ alum Alexander Salter explains that Kamala Harris’s “joy would cost US dearly.” Two slices:
American progressives are out of ideas. Instead of a bold economic agenda, all they have to offer is reruns of policy failures. Vice President Kamala Harris’s recent proposals are notable examples. Behind the facade of joy hides an alarming indifference to the immense costs her schemes would create if she wins the presidency. Economists have a duty to point out just how destructive these proposals are.
Exhibit A is her call for price controls on groceries. Ignore the rhetorical sleight-of-hand from the campaign and its defenders, who insist they only want to clamp down on “price gouging.” This is clearly a call for the government to crack down on retailers who are selling food at any price Harris and other progressive elites deem excessive.
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Perhaps most egregious is her endorsement of President Biden’s plan to tax unrealized capital gains. Just look at the awful incentives this policy would create. Instead of keeping their wealth in capital markets, bearing risk and facilitating growth, those experiencing unrealized capital gains would likely have to divest their position to discharge their tax liability. This policy seems designed to dry up capital markets, or else provide a beachhead for future direct wealth seizures by the government. Those objecting that the policy only applies to the hyper-rich (those with a net worth of more than $100 million) are clearly unfamiliar with the history of the income tax. Once upon a time, only high income earners paid any tax at all. Now the IRS has its tendrils everywhere. The same will eventually be true with unrealized capital gains, unless we root out this weed right away.
Writing in the Wall Street Journal, Amber Gunn accurately describes rent control as “a great destroyer.” Two slices:
Rent control is in vogue among Democrats. President Biden in July proposed capping landlords’ annual increases at 5%, and Kamala Harris vowed to “take on corporate landlords and cap unfair rent increases.” Those ideas are destructive, and Argentina offers the latest proof.
When President Javier Milei assumed office in December 2023, he inherited triple-digit inflation and a flailing economy. His “shock therapy” plan to resuscitate the country included eliminating government jobs, contracts and subsidies. Perhaps the most successful measure, however, was repealing a rent-control law the National Congress had passed in 2020
In a bid to provide renters more economic security, the statute locked landlords into tenant-controlled leases for a minimum of three years and capped rent. The consequences were swift and brutal: 45% of landlords reportedly elected to sell their properties. Many others either converted their units into Airbnb-type short-term rentals or increased rates prior to the law going into effect. As the Cato Institute relates, the average rent for a two-bedroom apartment in Buenos Aires rose from nearly 18,000 pesos a month at the end of 2019 to 334,000 pesos four years later, well beyond the 210,000 pesos a month if the rate had tracked inflation. Since the law’s repeal, supply has reportedly rebounded and prices have fallen by double digits.
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As Swedish economist Assar Lindbeck observed, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” No matter how many times we try, we can’t outsmart economic first principles.
Samuel Gregg reflects on “The Road to Serfdom at 80.” (HT GMU Econ alum Dominic Pino) A slice:
Neither Hayek nor Tocqueville had a deterministic conception of this drift away from liberty. Both saw, however, a rationale at work as people traded liberty—and then steadily increasing amounts of freedom—for other things they valued. Those “other things” could range from greater equality in the distribution of wealth to more state-provided economic security and stability, or the hope that the turmoil of economic life could be managed more efficiently from the top down by ostensibly apolitical technocrats and experts. In any case, the diminution of liberty is far removed from the suddenness of a military coup d’etat such as that experienced by Tocqueville in France by President Louis-Napoleon in 1851, or seizures of power akin to that staged by the Bolsheviks in Russia in October 1917 or the National Socialists in Germany between January 1933 and June 1934.
In a way, much of Road involves Hayek extending Tocqueville’s logic by showing the ratchet effect in the belief that it is worth giving up some liberty to secure other seemingly good ends. A key ingredient of Hayek’s argument is that as it becomes clear that the trade-off has not delivered what was promised (or has even produced negative unintended consequences), the response of those advocating for, say, a more equal wealth distribution is not to concede that it was a mistake to diminish liberty. Instead, they invariably insist that they require more power—and therefore that society may have to accept less freedom—to achieve the desired goal.
Economists tend to be skeptical of industrial policy because government planners lack market knowledge. Subsidies and regulations disrupt price signals, which coordinate economic activity more effectively than bureaucrats can. What’s more, industrial policy often becomes a playground for special interests, leading to cronyism and the addition of unrelated objectives. As Friedrich Hayek noted, it’s a “fatal conceit” to design what we can’t fully understand.
Bruce Yandle sees the reality of Trump and other modern politicians. A slice:
Many politicians refuse to accept findings from countless studies showing how the cost of tariffs, which include retaliation from affected countries, will always, partly, if not entirely, be carried on the backs of consumers. Just as sure as water runs downhill, higher prices cause people to buy less of the taxed good. This is precisely how tariffs deliver protection for domestic special interests who would prefer to see consumers pay a little more money and buy their own products.
Thanks to all the ways politics and the complexities of the economy can intersect and obscure things, it’s always been far too easy to deny or disbelieve such a commonsense fact. Asked about it recently, Trump responded, “a tariff is a tax on a foreign country: That’s the way it is, whether you like it or not. It’s a tax that doesn’t affect our country.”
Go figure.
Art Carden details some of the damage done by a “debauched currency.”
