Harris’s Proposed Child Tax Credit Could Work, but Price Gouging Ban a Bad Idea: Economic Expert Wei

And domestically, presidential candidate and vice president Kamala Harris has revealed her economic plans and garnered mixed reactions. She says her focus is on some of the sharpest pain points for American families. She's opposing to, she's proposing to cap prescription drug prices, help first-time homebuyers and down payments, and end what she calls grocery price gouging, among other things. So what are those mixed reactions that this is getting? And could some of the criticism be warranted? We bring in Brandon Arnold. He is the executive vice president of the National Taxpayers Union. Good morning, Brandon. Good to see you. Thank you so much for joining us. Walk me through some of the points in Harris's plan that are most notable to you. Yeah, I mean, the biggest thing that hits me is this desire to cap prices, namely in the grocery space. Unfortunately for Kamala, there really isn't that much price gouging in grocery stores. Grocery prices are extraordinarily high, as we all know way too familiarly. But the profit margins for grocers is about 1.2 percent. Relative to other products, that's actually quite low. Profit margins, generally speaking, are about 8.5 percent. So there's not a lot of room to squeeze grocers and lower those prices through price caps or through intensive government investigations. The way to lower grocery prices is the same way to lower prices across the board, and that is by encouraging more production, by having better tax and regulatory policies that will allow us to bring more food to the grocery stores, create more supply, help our farmers, help our food manufacturing base. That is the way to drive down inflation, not with price controls or this command and control type philosophy. Right. Thank you so much for also providing an alternative that you would see to get there, because this is actually gaining a lot of attention. That's right. There are some price gouging laws actually already in place, though, on a state level. And some say now what she's proposing, though, despite the little details that we might know, this sounds like price control. Can you walk me through what the problem here is with price control, specifically, and is this criticism warranted? Yeah, I think it is warranted. When you talk about price controls, listen, they've never worked. Many countries have tried them, most notably the Soviet Union in the 80s. When you look at grocery store shelves, they were completely empty. The reason you need to have the profit motive in groceries, as well as the entire economy, is because it encourages investment. It encourages businesses to go out there and create products that consumers want to buy. That is how you stimulate more production. By creating an opportunity for people to make some money. And now you don't want people to do price gouging. You don't want people to take advantage of consumers. But usually you have very competitive markets. That's certainly the case in most parts of the country. When you look at grocery stores, you have grocers on every corner. You have the ability to order groceries online now. You have other food options across the economy that are helping to provide these goods and services, so that keeps prices low as a function of just consumers placing a check on the retailer. So you don't really need the government, except in very rare instances, to come in and say, you're charging too much, you're charging too little. When the government starts to try to set prices, what that does is tell grocers, I'm not going to invest in here because if I can't make a couple bucks out of this, I don't want to play ball here. And when those grocers start to pull away from investment or create fewer stores, build fewer stores, that is when consumers really get the short end of the stick here. So price controls don't work. That's universally accepted by virtually all economists, whether they're conservative, liberal, or somewhere in the middle. And I think it's a really bad idea. Maybe good politics, but really lousy policy. I see. Well, your explanation here was very clear. Thank you for that. And let's talk about some other proposals she made, because some of them, they seem to have bipartisan support, at least to some degree. Both her and JD Vance have actually proposed to raise the child tax credit by quite a bit, for example. What could middle income families get from this if we would actually see this happen? Yeah, I mean, that's an area that I agree with them in broad strokes. I do think we should have a large child tax credit because the cost of raising kids in this economy, particularly when inflation has been so high, is really exorbitant. And we need to help families. We need to encourage people to have kids to support our country and continue our economic and cultural success. The devil's in the details here, of course. The size of the child tax credit matters quite a bit. Both JD Vance and Kamala Harris are proposing large increases. The child tax credit is currently $2,000. Unfortunately, it is scheduled to go back to $1,000 per child at the end of 2025. So we should at least consider that $2,000 level, if not even increase that a little bit. But at the same time, you need to have a child tax credit that makes sense and is more than just the size of the credit. Right now, we have work requirements. So effectively, to claim the child tax credit, you have to make a basic level of income, a minimum level of income. So you have to be working. What they did during the pandemic was get rid of that work requirement. I think that would be a mistake. And that is effectively what Kamala has proposed. So we need to design a credit that encourages people to work, to participate in the labor force, but at the same time to recognize that it's really tough to raise a child in this economy and that we should be providing tax support in the form of a child tax credit. Right. Definitely a lot of details to look out for. And what about the proposed tax break since $25,000 in down payment assistance? I think that's for first-time homebuyers. We have actually seen economists and experts being quite critical of it as well. The initial reaction or questions were whether it could drive prices up even higher. Also, depending on if supply can keep up, of course. We don't have much details on this proposal as well. But what do you think, Brandon, or what would you be looking out for to see if this proposal could potentially be working out well? Yeah, I mean, that's one of the problems. We don't have a ton of detail for this or for a lot of our other proposals. But I'll say this. You know, when you start subsidizing the purchases of homes, what you do is you drive up prices. And that's a huge concern because so many people see prices making home ownership unattainable. And that makes it very difficult to live out the American dream. High prices, high interest rates. That's a deadly combination for most Americans right now. So to drive down those prices, what I think you need to do, first of all, the Fed needs to lower interest rates, which it very well may do in a few weeks. But beyond that, you need to create more housing supply. You put more houses online, then the prices will fall. So we need to see more houses being built, whether those are multifamily, single family, all of the above. That requires the local governments, in many instances, state governments to take a look at their zoning laws to make sure that they are encouraging more home construction. Home construction really took a hit during the pandemic. We need to get it back to those pre-pandemic levels where we're building a lot of houses. That's going to lower prices. That's going to help those first-time homebuyers, the lower-income, middle-income Americans that find themselves in a really difficult place right now. As housing costs increase and it becomes more and more unaffordable to keep a roof over your head. Great points. Well, unfortunately, we're running out of time here. But for today, thank you so much, Brandon Arnold. I appreciate it. My pleasure. Thank you.