How Trump And Harris Would Tackle The Economy
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Hello and welcome to the FiveThirtyEight Politics Podcast. I'm Galen Druk, and let's talk about the economy. This month, both Vice President Harris and former President Trump released a slate of economic proposals in an attempt to gain the upper hand on the issue most important to voters—

Harris' plan included a so-called price-gouging ban on groceries, restrictions on medical costs, child tax credits, tax increases on the wealthy and corporations, and more. Trump pitched an extension of the tax cuts he signed in 2017, an elimination of taxes on Social Security payments and tips. The tips part, Harris has said she agrees with. He also proposed new tariffs on foreign goods and increased domestic energy prices.

production as a way to slash costs and pay down the debt. For Harris's part, these were her first major policy proposals since securing the Democratic nomination, and they aim to address one of her most vulnerable areas. According to a recent ABC News poll, Trump holds a 10-point lead over Harris on handling of the economy and inflation.

All of these economic proposals are being made against the backdrop of an economy that no one can quite make heads or tails of. Inflation is finally under 3%, a significant achievement for the Federal Reserve, but the unemployment rate is climbing. GDP growth was strong this past quarter, but broadly Americans feel like the economy is not so great.

So joining us today to make sense of all of it is friend of the podcast, Gina Smiley. She's a reporter covering the Federal Reserve and U.S. economy for The New York Times. Welcome back to the podcast, Gina. Thank you for having me.

So let's start with the state of the economy. Let's remove the perceptions and the politics just to begin. We're getting some mixed signals recently. Like I said, inflation is down, but job numbers are worse than expected. And there's also some serious stock market fluctuation this month. So how would you describe the state of the U.S. economy today?

I think this is a really complicated economy, to be honest with you. I think we're at this moment where we sit on the precipice of figuring out whether we are settling into a situation where the economy is basically getting back to normal, some sort of new steady state economy, or whether we're at this moment where the job market is about to crack.

And I think we're actually going to get a lot of information about that really just coming up at the next jobs report on September 6th. So what we know right now is that the job market has slowed down quite a bit. Hiring is not nearly as quick. There are way fewer job openings and unemployment has moved up a little bit.

But we're also starting from this really weird place. After the pandemic, the economy got really, really hot for a minute there. Job unemployment was super low and job gains were way faster than usual. So what we could be settling into is something that's just kind of normal. But I don't think we know the answer yet. We could also be at this moment where things are about to sort of fall apart. And so I think we're all holding our breath trying to figure that out.

So you're actually in Wyoming right now, and you've been covering the Fed meeting in Jackson Hole and the speech from Jerome Powell last week where he said it is finally time to start cutting rates, essentially. So what does that mean for this complicated equation that we're in and debates over whether he's taken too long or whether inflation will just come back if he cuts too quickly? Yeah.

Yeah. So I think it means that we are clearly at the place where the Fed doesn't think that inflation is going to come roaring back if they cut rates. What we don't know yet, though, is how big those rate cuts are going to be. So he was very clear that they're going to cut rates in September. He was not clear at all on the magnitude of those cuts. So we could see just a little normal 25 basis points, a quarter percentage point rate cut, or we could see a big 50 basis point, half a percentage point rate cut. And we don't know the answer to that yet.

And I think a lot of it's going to hinge on what we see with this next jobs number and then the inflation number after that. Yeah, I mean, where is the bulk of sentiment amongst economists between

between we're getting back to normal and we're on the precipice of recession. Yeah. So, you know, it's been really interesting to me out here in Jackson Hole because I'm obviously surrounded by a large group of economists and I've been having a lot of conversations. And I think actually relative to what I would have expected coming in, people are feeling much better about the economy. I talked to a lot of economists who are much more solidly in this

we're hitting the steady state camp. There are risks, but it looks good. It looks like we're nailing this soft landing. The economy's just settling into something that looks like a new, new, new normal instead of actually falling apart. And so I think that actually people are feeling pretty good about things.

And I think a lot of that's informed by what people are hearing anecdotally when they talk to people on the ground. You don't usually think of economists as people who are out there collecting a lot of anecdotal information. But certainly when you talk to people who do have some level of connection with like the real world, they'll tell you that businesses just aren't talking about mass layoffs yet. And, you know, people on the ground typically aren't talking about like losing jobs.

And so they feel fairly confident, which I will say I obviously talk to a lot of people on the ground. I spend a lot of my time doing sort of anecdotal reporting. And I think that maps fairly neatly onto what I've personally been experiencing as I talk to people around the country. I've just done a lot of reporting on Pennsylvania and Texas. And like in neither of those places have I been talking to people who are talking about like mass layoffs.

And does that match the data? Because companies get asked regularly about their hiring practices and projections into the future. It essentially does actually match the data on the corporate side. It does not fully match the data on the household side. So we have seen a couple of surveys come in

with weaker hiring expectations from households. Households saying things like, "I think I might lose my job within the next few months." Or households saying things like, "It wouldn't take as much money to lure me into a new job." So there are some signs, particularly in the New York Fed household survey, that actually households are getting a little bit less confident. But when you look at most of the employer surveys, they still feel pretty decent. People aren't planning on expanding the way they previously were, but they're also not talking about large, wide-scale layoffs.

And what's very interesting about that actually is that it spans economies. So when we look at Europe and when we look at the U.S. currently, you see in both economies that employers are talking a lot about essentially what we as consumers

economics reporters called labor hoarding. Like they got really burned during the hot labor market period. And so things are slowing down a little bit now, but they are just not willing to let those employees go because they remember how hard it was to hire and they don't want to have to fire and then rehire. And so it does seem like there's a little bit of buffer because of that. Well, and this mismatch between work

what industry is saying about the economy and sort of what the data is saying about the economy that we collect versus perceptions on the household level is, well, nothing new for the post-COVID economic era. And in fact...

Even though the economy has been pretty decent on paper now for a few years, we have seen some historically low economic sentiment. I'll just say for our part, a recent ABC News survey found that almost three quarters of Americans rate the economy negatively.

Economists also collect consumer sentiment data that is a little more specific than what we collect in sort of political polling and ask more detailed information. Where is that economic sentiment data now? Okay.

Economic sentiment data has kind of been hovering around relatively low levels. We saw it ticking up a little bit. It isn't like roaring back. I think there was some hope that like inflation came because inflation has come down substantially recently. And so I think there was some hope that inflation would come down and everybody would suddenly feel like much better about the economy. And it doesn't seem like that exactly has happened. One thing that did happen in some of the economic sentiment data

but some of the more like poll related economic sentiment data. A couple of the surveys, but not all of the surveys, suggested that after Kamala Harris got into the race, people rated the economy more highly, which is kind of interesting and suggested that this is all subjective and maybe not super tied to actual economic fundamentals. That said, that was only a couple of surveys and it wasn't matched across all the surveys. So I think you've got to read those results with a degree of caution.

Right. I mean, in political polling, we're used to motivated response by partisans. And when folks are being asked, you know, do you support Harris or Trump? They know that they're taking a political survey. So when you ask about the issues, you're

you wouldn't necessarily be surprised that people answer with a partisan frame of mind. But when, for example, the University of Michigan is asking about groceries and this and that, and maybe not explicitly mentioning the political situation, it sounds like we're still getting sort of motivated partisan responses.

Well, so they haven't they haven't really. We're still waiting on some of the more updated Michigan survey numbers. But like, no, they don't move as heavily with partisan moments. They do have a huge partisan divide, right? Like what what Democrats and Republicans say about the economy changes hugely depending on who's the White House in the White House.

in the Michigan survey specifically. But I think what we're seeing in the Michigan survey is that people are still pretty like feeling bad about the inflation situation, which is interesting. And I think really speaks to this idea that what people really care about is not inflation per se, but price levels, which is something we've consistently seen over the last couple of years. You know, when we talk about inflation slowing down, that means that prices are increasing less rapidly than they previously were. But it doesn't mean that those price levels that ratcheted up a lot after the pandemic are coming down.

And so I think what we've really seen is that people are still feeling pretty glum as a result of the run up in prices that previously had happened. Yeah. In fact, we've talked on this podcast before about sort of the half life of an inflation shock. And while we measure inflation in annual terms, oh, you know, annual inflation rate is under 3%, Americans are still looking at prices and saying, well, this is 20% higher than it was three years ago. And I don't like that.

And also, I think we've seen that Americans are more responsive to inflation in certain parts of the economy than others, although...

sort of the thing that the Fed is probably tracking most closely is not necessarily gas or food prices because those fluctuate so much. That's an example of an area where Americans are very responsive to prices in those realms. What are we seeing right now in terms of, OK, inflation is down below 3 percent? Is that across the board? Are there sort of high profile parts of the economy where that hasn't been the case? I'm thinking here sort of I know energy is down, but what about food and housing?

Yeah. So actually it is fairly across the board. That's been the really positive thing about this disinflation is it's kind of happened pretty broadly, which is why the Fed's feeling good about it. So food prices are inflating much more slowly than they previously were. Food inflation has really cooled off quite a lot and has been cool for a while now, actually. It's been quite a nice period of relatively slow food price increases. And so that should eventually trickle through to your half-life point to make people feel a little bit better at

they're not seeing these big price spikes at the grocery store anymore. And then if you look at housing, we've actually, housing's a funny one because the way that housing inflation is measured, it makes it sort of the actual inflation hit the government numbers at a substantial delay. But what we've seen in the market is if you are in most cities in America,

If you are trying to get a new lease for a rental unit, that inflation has actually been relatively low for a while now. You know, prices really reset during the pandemic and 2021 really aggressively. They jumped really high, but then those they didn't increase a lot further from that. And so I think people are probably getting starting to get used to those new normal higher prices. That said, it's housing is a much bigger or not a much bigger, but a bigger problem.

chunk of the renter's budget than it previously was. And so I imagine that still feels bad, even though it's slowed down quite a bit. So on the topic of some of this inflation, Harris released her first set of economic proposals, the first real policy proposals of her campaign. And there was a lot in there, like I mentioned at the top. In addition to what I mentioned, she's also trying to address housing costs and the likes. Is there anything from

her proposals that particularly stick out to you or maybe were the talk of the town in Jackson Hole, for example?

Yeah, so I'm biased because I'm really interested in the housing policies. So they were the talk of the town for me because I was asking everyone about them. They're interesting because we don't have enough details to really assess them fully. So the housing proposals basically say we're going to increase capacity, we're going to build 3 million units, and at the same time we're going to give first-time homebuyers $25,000 in purchase assistance.

We don't know all of the details around either side of that, though. You know, we know that they're hoping to basically use some of the Biden budget proposals to increase capacity. So things we had already heard. And then in addition to that, they're planning on dedicating $40 billion to giving the sort of first time homebuyer affordable home stock builders an incentive to make the building pencil out.

And so builder incentives on one hand, buyer incentives on the other. I think the question is, like, how do you sequence that so that the buyer incentive doesn't just go straight into the home prices? Because, like, if you don't have enough home supply in, say, you know, wherever you live, say you're living in Kalamazoo, Michigan, there aren't enough homes to go around. And then suddenly first-time homebuyers have $25,000 to dedicate to buying a home. There's a real risk that that just goes straight to prices.

And so they're saying that they're going to sequence it, but they haven't been super clear about how that would actually practically work. And so, you know, I think that we don't have all the details on that policy yet. Yeah, there is an interesting dynamic here of we've just experienced –

decades high inflation, Fed banks around the country concluded that, yes, part of it was COVID and supply chains, but also a significant portion of it was also based on government stimulus. And we're also sort of in a situation now where banks

Both presidential candidates are kind of like, well, I'm cool with more government intervention to like potentially boost demand in ways that would boost demand, which are not counterinflationary. So I don't know what that means in terms of the lessons we learned from the past three years. I mean, how does that strike you?

I think there are real questions about whether you could pay for policies as ambitious as either of them have laid out. When I say there are real questions, I mean most economists will tell you no. You couldn't use the things that they're suggesting to pay for these. They are going to add to the deficit. And it's so interesting to watch because it's like there isn't even that deep of a concern about that at all.

on a political front. And I feel like in previous administrations that I've covered, in previous campaigns that I've covered, there's just been much more worrying about the how are you going to pay for it side. And that's really gone away, which is interesting at a moment when we've just had this inflation burst and seen that there can be consequences if you spend a lot of money in a way that just kind of pumps money straight into the economy.

Not to be a cynic here and would truly be my first time on this podcast being one, but is that because nobody believes that any of these policies are going to become law? So I do think there may be some element of that here. You know, there's been a lot of reporting, not by me, but a lot of reporting out there suggesting that people...

people are telling the grocery stores that it's unlikely that the Harris price caps or whatever the price gouging rules are, are going to pass. You know, I think that these housing proposals, while very ambitious, would all have to get through Congress. And there is some bipartisan agreement that we need to do something on housing, but, you know, it's not clear that you could get something this ambitious through. It's

Really, a lot of this is going to hinge on what Congress looks like. But that's like the real question here is like these candidates are pledging things. We don't know what Congress looks like. Maybe the stuff could get through Congress. Maybe Congress lines up in such a way that this is all possible. And then I think that's a really interesting question if that happens.

If you look at Wall Street projections when they're gaming out what risk scenarios are, a lot of Wall Street firms will tell you that one of their risk scenarios is a Democratic or a Republican sweep because then things could get through Congress, which is kind of interesting. Yeah, very interesting. And that's like the biggest downside risk is unified control of government. Is that what these Wall Street firms are saying? That's their political risk. They're not worried about the election. They're worried about a sweep. Okay. Okay.

All right, we're going to get to Trump's proposals, but let's round out Harris's first. We mentioned the ban on price gouging in grocery stores, and that's actually pretty popular amongst Americans, something to the tune of three quarters of Americans support the U.S. government taking action on that.

this. You know, you mentioned that we have relatively limited details, but what details do we have and how do they jibe with what we know about how economics works? Yeah. So we know basically nothing. We know very little about how this policy would practically work. One thing that it seems to be firming up is that it could look something like what states have in place. Many states have rules against emergency price gouging in times of crisis.

So if there is a hurricane and there's a huge shortage of whatever the product may be, you can't- Bottled water. Bottled water. Toilet paper. Toilet paper, baby formula, whatever the case may be. Yeah, you can't just overnight

price gouge all of your customers because there's a shortage. And so it could be something like that. I don't think we actually know that level of detail yet. It's not totally clear how this would be implemented. It's not totally clear at what point it would kick in. So we need details before we would understand how this policy is actually going to work. But I think that what we do know is that it's very popular with the American people to blame

inflation on corporate profit gouging. I will say as somebody who writes about inflation for a living, I get a lot of reader mail basically saying like, you forgot to mention that the corporations are all price gouging and that's why we have inflation, which is not actually economically particularly well supported. And so I think that

There's a reason this is a proposal that's seen success in the polls. I think that we just don't have enough details to know how it would work. Most of the economists I've talked to have been pretty down on it. You talk to a couple who think it could potentially be a good idea or a useful thing. But again, we don't have a lot of details. So it's hard to know how it would work. I mean, yeah, back to the part of the podcast where I was calling myself a cynic is like,

It is very common in politics to release messaging bills that you either don't think will ever see the light of day or are not sure, but that it says something about your priorities and values in politics. I mean, a high profile one, the last time Democrats were in control of the House but didn't have the presidency. So we're passing legislation that they knew wouldn't see the light of day was H.R. one and sort of the changes to voting in America. It was like,

A lot of what they had been talking about for Trump's first two years in office surrounding democracy and the likes, but it was something that was a messaging bill. It was never going to see the light of day. I mean, a similar thing for like Republicans voting to repeal the Affordable Care Act. I don't even know how many dozens of times. It's a message. You know that when Obama is still in the White House, you're not going to successfully repeal the Affordable Care Act.

So I have to imagine that this is in some ways a messaging bill. But if we move on to some of the other proposals, for example, on health care, you know, capping insulin costs, which the Biden-Harris administration has already done. Harris's proposal is to cap the cost of more drugs and make more drugs eligible for Medicare. You know, that's in line with something that's already been done. What is the conclusion on how that plays out?

Yeah, so I think that's actually a really interesting point. And it brings us back to something I should have mentioned on the price gouging front. Like we could see what I think what the Harris thing could end up being on price gouging is basically what the Biden administration is also already doing on price gouging, which is there are a couple of sectors that are not particularly competitive, right? Meatpacking is the big one where the Biden White House has already been working on trying to go after sort of price collusion and price setting by the big meatpacker.

And so that could be what this policy essentially is, in which case I think there is actually wider spread agreement among economists that that has some good potential. And then I think that, you know, similarly, I think like these like more targeted price caps on particular products, I think haven't reached the same level of sort of particularly when it comes to pharmaceuticals, haven't reached the same level of outcry from the economic sphere that I think a widespread price cap would.

All right. So let's talk about taxes. It has been the Biden administration's message and policy that they wouldn't increase taxes on anyone making more than $400,000 a year. Harris has said that she will continue that, but hopes to raise trillions of dollars in increased taxes on the wealthy and corporations. It wouldn't surprise me if economists at Jackson Hole are not happy about tax increases, but also it wouldn't surprise me if they were concerned about the debt and deficit. So how do you balance those things?

I feel like this is not something that was actually talked about that much this week. But I think just in general, when you talk to economists, they will say it's important to try and pay for your proposals in a world where we have the kind of deficit and debt that we currently have. You either have to do that through tax increases or spending cuts. So I think that that's generally what people will tell you. I think that a higher corporate tax rate, it obviously could have some

side effects and sort of scaring companies away from America. But the flip side is, the corporate tax rates have always been relatively competitive in the US. And so that argument is sort of, you know, always a contentious one. But I think, yeah, I think it's an interesting set of proposals. It's not super dissimilar from what the Biden administration has occasionally proposed, right? It is a little bit more ambitious. But I think that, you know, I imagine that

The question here, as with everything else, is like, can you get it through Congress? Well, and also I found the $400,000 a year cutoff to be an interesting one. That means that what Democrats are saying is we don't want to raise taxes on 97 or 98% of Americans. And Republicans are saying we don't want to raise taxes on 100% of Americans. And broadly speaking, those are not all that important.

I mean, the sort of real progressives within the Democratic Party will maybe acknowledge that while it's not popular, that in order to raise a lot of money for the government, you want to also include the middle class in sort of any tax changes that you're making, because that's the bulk of Americans. And so...

Ultimately, Democrats, even when they're proposing raising taxes, are not doing it in a way that would necessarily raise the large sums of money they would need to fund these proposals. Is that right?

You know, I think that at least as they've put it out, they seem to think that it would raise a pretty substantial amount of money. So I think that, you know, obviously enforcement's always an issue. Like it's difficult to like heinously difficult to enforce tax increases on upper income Americans because there are lots of ways if you're a rich person that you can get paid, including in things that like sort of register as wealth and are harder to tax.

But I think that at least on paper, in theory, this would raise quite a bit of money. I think possibly one of the more interesting things on the tax front is the exemptions that both campaigns have put out. You know, I think that they've actually sort of used taxes as a messaging system in a way that we haven't always seen in elections. Like the Trump campaign has been suggesting exempting tips from taxes and the Harris campaign came up and like embraced that as well, which is an interesting and interesting choice.

And then so I think things like that, like those sort of like a la carte tax options have become a really big talking point in a way that's pretty interesting. Well, and from my quick read of it, economists argue that you don't want to incentivize certain types of work in the economy by privileging taxing.

tipped work because you're not taxing it, you're going to distort the economy and people who are sort of once upon a time you were making $50,000 a year as, I don't know, a teacher or you were making $50,000 a year as a server. All of a sudden you're incentivizing people to become servers over teachers because you don't have to pay as much taxes if you're a server or something like that.

My sense is that economists are pretty down on this idea. Is that also the sense that you have or no? I think some of the economists I've talked to see it as like a little bit gimmicky. I really haven't. I haven't heard them voicing that concern too much. I do think, you know, the tipped workforce is an interesting one because like we act like...

there's no government intervention in this workforce, but there clearly is to begin with. Like, tipped minimum wages are still set at, like, an extremely low level. I believe it's $273, although I could have that wrong. I'm just reciting it off the top of my head. So tipped minimum wages are really, really low. So there's a really low floor for, like, what a tipped worker is paid on an hourly basis already, which is very much a government policy. And obviously, companies can choose to pay more than that, but the government has set out this floor that I think

acts as sort of an anchoring device. And so I think there's a really interesting, you know, set of questions around like what you can do for that population and whether this would be an effective policy tool. Like I think the economists I've talked to haven't been positive about it, but I don't know, you know, how seriously they're taking it either. Yeah, it seems to be a theme so far. Okay, let's talk more about Trump's policies. We got the tips. He's also suggesting no tax on Social Security payments. He's also talked about tariffs quite a bit. And he said...

you know, 10% at times 20%, even up to a 60% tariff on Chinese goods. I have a feeling that economists have more to say on this. Yeah. So this one is so interesting and very much fits in the vein of this conversation as a whole, because when you talk to economists about this, they'll often say things, particularly Republican economists, particularly economists who like are somehow affiliated with or friendly towards the Trump campaign. And they will say that like, well, clearly those aren't real. Like clearly that's a bargaining chip. Like that's meant to get people to the table.

And then other economists will tell you like, no, that's totally real. He's totally willing to do it. And so I think there's like a real question, like, would he actually put 60% tariffs on China? Like, not entirely clear. Taking him at his word, if he actually did that, if he actually did 10% and 60% tariffs, that would have just like

huge implications for global trade. It would be a very big deal. Those are very large tariffs. For one thing, it would push up price levels here in the United States. It would be a one-time hit. It's not like ongoing inflation. But because of the magnitude, because they're so large, it would probably feel like ongoing inflation. It would probably take companies a while to adjust. And so consumers would see this as a steady set of increases in prices on imported goods. And so I think that's a really important thing to note. I think the other thing is

the Chinese could retaliate. You know, the Chinese still produce things that we use in, you know, batteries or in whatever it is we're producing here. And the Chinese could sort of, you know, hit back if we did this. And then the final thing to note is that this would impact other economies around the world. If you put a big tariff on China and they can't sell into the U.S. market anymore, they're going to sell into perhaps the European market more cheaply. And so that's going to affect European manufacturers. Like the butterfly wing flap here is going to have

a big sort of resounding effect on the global economy. Well, and we've been talking about, you know, things that might get proposed because they're popular, even if they won't happen. And it seems like an open question here. Obviously, Trump talked a lot about trade and tariffs when he ran in 2016, and he enacted tariffs, much to the chagrin of economists and at the time, Democrats, but

Democrats once in power also extended those tariffs. And so it seems like he has won at least a portion of the argument and also with the American public. So polling shows that people broadly support the ideas of tariffs, but the support drops dramatically.

As soon as the financial cost factors in. So, for example, 62% of Americans support the idea of tariffs on imported blue jeans. But if that tariff is going to increase the cost of those blue jeans by $10, only 34% support the tariff. So it almost cuts in half as soon as the price of the tariff is factored in.

I guess, what does that tell us about American, like, polling on Americans' preferences in the economy? I think it makes you realize that tariffs sound good as a buzzword, right? But I think it also actually underlines one of the challenges around tariffs in particular, because as a reporter who covers this stuff, I can tell you it's very difficult often to map tariffs onto price increases. So, because...

the global trading system is so big and so complex. And by the time that things get down to sort of like the product level, price changes can happen for myriad reasons. And so it's hard to point at like an increase. Like it's hard to say like, oh, those blue jeans that you bought yesterday were 15% more expensive than they would have been in the absence of all these tariffs that we enacted during the trade wars. And the

Because it's difficult to do that, I think it's actually really difficult to message around these policies. Like it's difficult to say like here's exactly what the price impact of this policy would be, which makes it an interesting policy from a political standpoint because it's like a little hard to do fact checks around it. It's a little hard to do like a completely detailed analysis of what this was going to mean for the American pocketbook.

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Continuing on the theme of taxes, Trump has suggested he supports cutting the corporate tax rate to 15%. It's currently 21%. And you mentioned Harris suggesting a possible increase in the corporate tax rate up to possibly 28%.

That's an area of tax policy that fits maybe less into this populist theme that we have been talking about. I mean, the idea of raising taxes on corporations is populist in a way and in some ways popular. But it seems like Trump is also trying to pitch himself to business leaders and sort of good for business while taking a more populist stance on things like tariffs. So what are we talking about here in terms of the direction that corporate taxes could go in America?

Yeah, I think this is interesting because it's one clearly, as you've just laid out, one of the huge divides between these two candidates economically. I think it's also really interesting because I think there are some open questions about, you know, how these things play with voters. It's interesting because I think, as you noted, it doesn't seem to fit with sort of like an overall populist take.

take on things to suggest cutting corporate tax rates drastically. And yet, you know, here we are. It's going to be really fascinating to see over the next couple of months how these two candidates make the economic case for what they're planning on doing. I imagine you're going to see people on the right warning that if you raise corporate tax rates to something like 28%, like,

What would that actually mean? Would it scare companies away? Would it cause people to relocate elsewhere? Would it sort of hold back innovation, et cetera, et cetera? I think you'll hear that from the right. I think from the left, you'll hear like, we already live in a society with rampant income and wealth inequality.

Why would you cut tax rates for these corporations to 15%? Like that is going to exacerbate the divides that we're already experiencing. And so I imagine you're going to hear both of those. And you're also going to hear from the left probably like this is corporations not paying their fair share. Like these companies are already like sort of doing quite well. A lot of them are very profitable. Why would we do this? Hopefully we're going to hear very lively debate about these two policies in the coming months because they are a huge difference for voters. Yeah.

Yeah, it's it really gets at sort of the way that the campaigns are trying to position themselves, or specifically the way that the Harris campaign has tried to position itself after taking the helm of the party, which is, you know, I'm trying to create an opportunity economy for the middle class against an opponent who is here for the corporations and the billionaires. And when you look at sort of the think tanks and the good governance groups and things like that, they'll say,

Look, in broad terms, both campaigns largely agree on government intervention in the economy, not paying down the debt and deficit. Like in sort of broad terms,

The economy of both Trump and Harris extends a lot of the trends that we've maybe seen over the past three to eight years. Sort of going even further, when Trump proposes a popular policy like no tax on tips, Harris just says, oh, me too. But on something like this, there is a big divide. And it does play into the way that sort of Harris's is messaging so far.

Another divide that is sort of interesting how the campaigns might message it, but is energy production, right? The United States is producing more domestic energy today than in the history of the country. Biden got a lot of flack for early restrictions on, you know, drilling on government land or whatnot, but ultimately has not sort of done anything that would prevent the United States from producing historic levels of energy.

Harris, who once said that she would ban fracking, has obviously pivoted on that. But Trump is now saying that his idea is he wants to increase domestic energy production so much that we sort of can mimic some of the policies of, you know, the Gulf states or the Nordic states where we can just pay off the debt and deficit with energy.

energy production and in the process, decrease energy costs significantly. We have a much larger, much more complicated economy than, you know, Saudi Arabia, for example. Is that at all realistic? You know, put the concerns about pollution or climate aside. Yeah, so I don't actually have a super great grasp on that. But I think that the thing that

most economists will point out when we talk about these issues is that energy costs are set in a global market that so much of what happens is less contingent on like what we are permitting here and more contingent on like what market signals are actually encouraging.

So like you drill baby drill when it makes economic sense for you to do so. The thing that makes companies do more oil exploration is typically that prices have moved in a global market in a way that would incentivize them to actually drill. And so it is certainly the case that the federal government can set the tone here and can, through regulation, change how low those prices need to go before it incentivizes you to do a lot of production.

But it is not the case that they are just like the omnipotent policy setters in this realm. It is the case that the global markets really, really heavily determine how much American energy producers are going to produce. And so I think that's an important caution to keep in mind going into this. And I think it's been really interesting to watch how much of the Trump sort of policy –

arena sort of hinges on this one idea that they're going to drill more. Like when he talks about lowering prices and lowering interest rates, that all for him comes back to this gas issue. Like this is his whole idea for how he's going to get these things done. He talks about like, we're going to drill more. That's going to bring gas prices down. That's going to bring prices down. When prices come down, the Fed's going to cut interest rates because inflation will be so slow.

And so that's sort of like this chain reaction that he's actually making pretty central to his whole economic pitch. And I think it is relevant to note that like the government historically has not been the like only game in town when it comes to energy policy.

All right. So I am sure that there will be more policy details and complications that will come out over the next two months and we'll have to come back to them. But wrapping up here, you know, looking historically at elections, the part of the economic cycle that is most influential on voters perceptions as relates to their votes has actually already happened. Right. The final two months of the campaign cycle.

Maybe unless there is some sort of stock market crash or something like that, don't do quite as much to solidify perceptions of the economy as, say, like the second quarter of an election year, which seemed to have been pretty strong. So my question here is, one, if it's the perception that voters have today of the economy that matters most to

What does that say about the election? And two, is there any reason to believe that it will change dramatically over the next two months?

So I think that the perception voters have of the economy today is probably as good as Democrats could have hoped for, contingent on the fact that we've had all this inflation in the last couple of years. Coming into 2024, this is as good as it could have been, basically. People started to feel quite a bit more confident as inflation started to slow down. Not a lot more confident, but an

a sufficient amount more confident possibly. And I think the job market, as you mentioned, was very strong in the second quarter. Like the period that this stuff matters, we were looking at a very nice job market. Maybe not quite as strong as we previously understood, but still solid. Like people were getting jobs, people weren't losing jobs. So I think that's probably all good news. I think that the...

next couple of months could be really important from an economic perspective. As you mentioned, I'm not sure that it's going the changes are going to be big enough or severe enough to immediately affect people's votes. So I think you could see a world where if the job market continues to slow, if we see that the job market is actually cracking, then people start getting really worried that we might be tipping into a recession and the Fed maybe cuts rates more quickly. And like a lot happens over the next couple of months. Like these could be a very big couple of months if the jobs report on September six looks bad.

Not to hinge everything on one data point, but I think it's true in this case. And so I think there could be a very worried couple of months. Will that be enough? Will that be too close to the campaign to matter? I don't actually know the answer to that. I don't think we have enough data points from history to have a really good sense of that. But it is a big wild card. All right. Well, if it all shakes out that way, you'll have to come back on and explain it all to us. But for now, thank you so much for joining me today. Yeah, thank you for having me.

My name is Galen Druk. Our producers are Shane McKeon and Cameron Chertavian, and our intern is Jayla Everett. You can get in touch by emailing us at podcasts at 538.com. You can also, of course, tweet us with any questions or comments. If you're a fan of the show, leave us a rating or review in the Apple Podcast Store or tell someone about us. Thanks for listening, and we will see you soon.