Populist “Kamalanomics” Will Make Inflation Even Worse

Unveiling her set of “populist” economic actions for her first 100 days in office, Democratic presidential nominee Kamala Harris has promised a slew of government interventions to ease economic pain for Americans. But, like all economic interventions, they’ll make the problem even worse, cutting out the free market’s natural balancing mechanisms in favor of central planning.

In the political competition for who can promise to give away the most free stuff, we noted a couple of months ago that many on the economic left felt that Biden’s plan for removing medical debt from credit reports didn’t go far enough. Like election season clockwork, Harris is now promising to eliminate outstanding medical debt entirely for millions of Americans and put an artificial cap on prescription costs. 

In an industry already racked by low competition and government intervention, striking away medical debt with the stroke of a pen will only incentivize providers to increase prices further as they search for a way to make up the difference. 

CPI: Medical care in U.S. city average, 2020-2024

Harris also promises to end what she calls “corporate price gouging,” joining the chorus of economically illiterate politicians who claim that high grocery prices simply are due to greedy retailers. The plan even includes penalties for noncompliance. But if grocery stores aren’t allowed to charge higher prices for products they themselves are paying higher wholesale prices for because of inflation, they’ll have to make up the cost in other ways: slashing benefits, cutting hours, and lowering wages, salaries, and bonuses. 

These cost-cutting measures tend to start with the lowest employees on the totem pole like cashiers, shelf stockers, and custodians. In other words, Kamalanomics will decimate the incomes of the exact people that it promises to help. 

Then there’s the promised $25,000 subsidy for new homebuyers aimed at incentivizing home ownership. Combined with an interest rate cut that will come far too soon, these interventions will overheat the market by creating artificial demand for houses. Sellers will increase their prices, knowing that first-time buyers will come armed with their $25,000 in Kamalacash. Meanwhile, already heavily-indebted buyers will take on more loans from banks that are already over-exposed to real estate, since they will be able to offer lower borrowing costs thanks to the Fed.

On one hand, politicians beg for money printing to artificially boost stocks and lower interest rates to juice real estate, making them look good in the short-term. Then when those policies cause hotter inflation later, they blame anyone but the Fed — or themselves — while groveling for even more micromanagement of the economy to fix it.

And whatever money the government makes “disappear,” it must come with an economic cost elsewhere. As Peter Schiff recently noted about recent promises on both sides to eliminate taxes on tips, these taxes should never have existed to begin with — but the government is going to look for that revenue somewhere else:

“The problem is, if you eliminate the tax on tips, well now you’ve got a bigger deficit. What tax are you going to increase because you’re no longer taxing tips?…How are you going to make up the lost revenue?”

As long as interventions boost the economy long enough for politicians to get voted back into office, who cares about the pain it causes when the bust cycle arrives? When these policies inevitably backfire, they can blame the other party, or blame “corporations” as they beg the Fed and Congress for more intervention to make themselves look like wizards who can make debt and inflation disappear. 

With a heavily-planned economy, you try to outsmart an endlessly-complex system made up of a dizzying array of relationships, the full nature of which not even mainstream economists can fully agree on. Without real price signals to accurately communicate information to the market, interventions guarantee that economic resources will be misallocated. 

This results in predictable and disastrous consequences: shortages of things people need and surpluses of things they don’t, along with general economic instability, lower-quality goods, and higher prices for struggling Americans.