As we assess some of these policy proposals we're still getting from the candidates as they take their messages to the swing states, with just a handful of days to go at this point until the election.
Eighteen You act like it's late in the game for this type of thing that be happening, Well, it got eighteen days.
Just feel a little late in the game here, But of course it's not too late to start putting together some math on this, as we have seen a number of nonpartisan groups do, and we want to get more into the math and potential economic impact of some of these policy proposals. And turn out to Ben Harris. He's former Assistant Treasury Secretary during the Biden administration. He's now
Brookings Institution Vice President and director of Economic Studies. He is here with us in our Washington, d C. Studio. Welcome to Bloomberg TV and Radio. Ben, it's good to have you.
Thanks.
If we could just begin with Donald Trump today suggesting he would at least consider not taxing veterans and first responders and members of the military some twenty million people. Layered on top of all of the other tax proposals he's put out there, things that would not get taxed. What is the baseline of how much needs to be tax to continue to fund the US government?
So more than he's proposing.
I mean, I don't have a magic number, but I mean his his approach has been to start with the TCJA extension, which costs five trillion dollars over ten years, and then to add on all of these special tax
breaks that really don't have an economic justification. You know, as you just mentioned, tax breaks for wages, sorry for tips, tax breaks for particular occupations, tax breaks for people who receive social scurity benefits, which by the way, would completely undermine Social Security and Medicare finances, were already up probably close around ten trillion dollars in counting. This isn't a realistic set of proposals. They're just far too expensive to ever make it through Congress.
You know, at one point, Ben, we had Republicans like Kevin Brady, pretty old fashioned Republicans sitting here at the table saying, Hey, there's going to be a real important debate here.
We need to make the Trump tax cuts permanent.
That was six to nine months ago, before all the other items and exemptions that we've mentioned since were rolled out. What happens to the old school responsible Republicans who were going to help usher this through on Capitol Hill.
Who wake up every day to another exemption.
I mean, there are fiscally responsible Republicans in Congress, but they must be pre lonely right now. I mean, I think the turning point was back in twenty seventeen when Republicans passed a one point five trillion dollar tax cut without paying for it, and that kind of opened the door for this idea that look, for certain types of priorities, it's okay to take on enormous amounts of debt.
And so that's what.
We saw, and that feels like where Donald Trump has left the priority. Now, what's the priority now? I think the party is winning the election, and then they'll see the composition of Congress, and then they'll come back to the drawing board. And if there's a Republican sweep, I think you can expect a wholesale extension of the TCJA with a few other Republican priorities mixed in, you know,
to be fair Republicans. Though they did pass the Limit Safe Grow Act coming out of the House, which did reduce the deficit, it was basically a combination of caps on discretionary spending plus a couple of other pay fors. So it's not as though there have been no Republican priorities that have made it through a House of Congress. It just feels like if Donald Trump's can be in the White House, He's been pretty clear he's comfortable taking on trillion dollars.
In new debt.
Ben reminding us that it's not just tax policy that we're going to see a battle over in twenty twenty five, but we're going to have to deal with the dead sealing again, as you recall back to that deal. So there's so much to look forward to. All that to say, when we look at Kamala Harris's proposals, nonpartisan organizations have two said it will add to the deficit. Perhaps less three and a half trillion dollars is what the Committee
for Responsible but Federal Budget has had to say. But Donald Trump would contend her policies will also be inflationary. Is there not some truth in that that.
Her policies will be inflationary.
She's subsidizing housing, it could drive up housing costs, If she's cutting taxes, all of these things could fuel inflation. And make the deficit go higher all the same.
Yeah, So I think on the housing policy, it's great that you brought that up, but the twenty five thousand dollars first time Home by Our tax credit was far from the only proposal that she put forward. Sorry, she also wants to expand housing supply. I think that the first time Home by Our tax credit really only makes sense if it's done in conjunction with an expansion in the housing supply. That's not really inflationary as far as her other policies go, I mean, she is taking aim
at at costs across the board. So she wants to make prescription drugs cheaper. I mean, I think that the household costs have been kind of a centerpiece of her of her policies.
Price gouging she wants to go after does not.
Work, so no.
I mean, most states have price gouging laws on the books, and for most states they are non binding. Most Americans live in a state that has price gouging laws, and as far as I can tell, they're fairly inconsequential. So I think that's, you know, pretty far down on the list of policies that matter for the American people. But she has made prices a centerpiece of her campaign.
Yeah, that's interesting because that was a that was a big rollout at the time she made it, and it's still on the backdrops and it's still on the stump speech. It's just when you start waiting priorities. I think to your point here, well, the next president of the United States, Trump or Harris have to manage a recession in their first year.
That's a great question.
I mean, what I can say now about the state of the macroeconomy. This is like the definition of a soft landing. I mean, it's when we go back twenty years and reflect on what the Fed has done with this current economy. I think will kind of be in awe of how wealth things turned out. I mean, we've got I mean I can just go list some of the highlights. We've got a higher share of people working primates people working that we've seen in over twenty years.
We've seen inflation come down to an a level where the feed is perfectly comfortable with it. We've seen a wealth explosion in this country, almost fifty trillion dollars in wealth added over the course of the pandemic.
I mean, you can kind of go on and on and on.
But we have a great economy, both relatives and prior recoveries, and also relative to the rest of the developed world. So right now, when I talk to forecasters, most of them say we have about a ten to fifteen percent chance for a session in the next year, which is kind of the unconditional average in any that's not so bad.
I'll take that at this point.
Well, so, if all of that is how this economy is shaping up right now, does this look like an economy to you that needs easier policy or is it simply an economy that doesn't need tighter policy anymore?
Are you talking about monetary policy? Yeah, well, I think that with respect to monetary policy, the FEDS at is spot. It's kind of an enviable spot right now, where it knows we're not so close to the neutral rate. The next fifty BIPs of cutting feel pretty easy, and then you start getting into the hard decisions. So markets right now I think are around a ninety percent chance of
a twenty five BIPs cut in the next meeting. I would probably take the over on that as far as probabilities go, and about a seventy five percent chance we'll get two cuts between now and December. Those are easy decisions though, inflation's way down, the labor market's weakening. I think it's pretty easy to vote for a twenty five BIPs cut. But after we get past the four and a half percent for the Fed funds rate, we get closer to four, that's when the hard decisions start coming.
Donald Trump was asked in the Univision town hall earlier this week what would happen to agriculture, jobs and other parts of the labor market if he followed through on what he calls mass deportation. He didn't use that term in this conversation, but he also didn't really answer the question. Do you have a sense of what would happen to the job market if you shut down the border and conducted a mass deportation of millions of migrants in the country.
Yeah, So these are two different policies, So let's say up them out. So both Kamala Harris and Donald Trump want to shut down the border. Kamala Harris backs the Biden Plan, which you know, essentially puts in place a whole host.
Of different policies, the Senate compromen. Yeah, exactly, So what we're really.
Talking about Now, the difference between the two candidates is what would happen if we saw mass deportation on the order of something we've never even come close to seeing this country.
We're talking about potentially.
In immigration agents, going to schools, going to place the business, potentially checkpoints. Is really unclear how you're going to find ten million people to kick them out of the country. From an economic perspective, economists don't love kicking workers out
at a time when you have worker shortages. So if you look at some of the estimates coming out of Golden if you look at estimates coming out of the Brookings Institution, non partisan estimates, you do find a hit on growth simply because we need workers and now is not the best time to kick him out.
Of our So that could hasten the recession in the first year.
Yeah, I think the probability of recession goes up if you're talking about sixty percent tariffs on Chinese goods and if you're kicking millions of people out of the country.
Yeah, So it becomes a demographic consideration, right, The US needs immigration to maintain its workforce, definitely. All right, Ben, thanks for joining USKS for having.
Me to Ben Harris back at the table.
Don't be a Stranger, Brookings Institution, former Assistant Treasury Secretary in the Biden administration
With his experience in view today in Washington.