Ramstad: Trump, Harris policies would expand control over economy, but without saying how much

War is spreading in the Middle East, the southeastern U.S. is challenged by weather disaster and Americans’ holidays are threatened by striking dockworkers.

So I don’t expect the presidential candidates to do much clarifying of their economic plans before the election.

Former President Donald Trump and Vice President Kamala Harris propose some big changes to the U.S. economy, particularly on tax collection and industrial policy. The things they say, however, are rife with contradictions and both have successfully avoided reporters and others who would force deeper explanations.

The closest Trump came to real fire on his plan for huge tariffs on all U.S. imports happened two weeks ago. A TV reporter in Las Vegas cleverly asked whether, if the country clubs Trump owns faced a new tax, he would pass the expense to customers.

“It sort of depends on the market. Not necessarily,” Trump said, adding the reporter looked like he might play golf.

Unfortunately, that golf remark disarmed the reporter enough that he missed a chance for a follow-up question. Something like, “Are you saying your clubs would absorb the added cost at the expense of their profits?”

Trump often says tariffs will be paid by other countries. That’s not true, and Trump was able to dodge when the reporter presented him with a scenario illustrating why.

Like all taxes, tariffs are not paid by countries but by the businesses buying or selling the goods subject to tariff. And typically businesses add those costs to the prices they charge. As a result, tariffs are ultimately paid by the end purchaser through higher prices.

That’s why Harris has called Trump’s proposal for tariffs on all imported goods a “national sales tax.” Trump says he will be able to wipe out some income taxes because of the tariffs on imports.

Harris does not envision such a radical transformation of taxes, though she favors continuing to apply tariffs in selective ways to protect U.S. industries.

However, a similar pass-along effect applies to Harris’ proposal to give $25,000 to Americans buying their first home. Knowing that a subsidy exists for someone on the other side of a transaction, home sellers will try to grab a portion of it by raising the price on their home. The result would be a more expensive sale.

To hear both Harris and Trump proposing such heavy-handed government intervention in the economy is such a change in the approach taken by recent presidents —
from Ronald Reagan to Barack Obama.

For most of my career, I believed in the dynamism unleashed by relatively lower government interference in the economy, along with falling trade barriers and globalism.

During the first decade of the 2000s while working in Asia, however, I saw what considerably more state intervention in an economy — particularly the designation of certain industries as more worthy of capital and people than others — did to make countries and people in that region so much richer.

One of the most successful American business leaders in my working life, late longtime CEO of Intel Corp. Andy Grove, noticed it too. In an essay for Bloomberg in 2010, Grove wrote America became too enamored with startups and lost sight of the importance of scaling up, working out production details and building factories that employed thousands.

“You could say, as many do, that shipping jobs overseas is no big deal because the high-value work — and much of the profits — remain in the U.S.,” Grove wrote. “That may well be so. But what kind of a society are we going to have if it consists of highly-paid people doing high-value-added work — and masses of unemployed?”

This question haunts America’s political leaders today, even though the U.S. is not losing jobs to other countries in the numbers it did 30 years ago. There’s a balance to be struck with industrial policy, and I wish we knew more from Harris and Trump where they think it is.

We know they differ in tactics, with Harris focused on incentives and Trump on penalties.

Last week, Trump threatened a 200% tariff on products John Deere makes in Mexico after hearing reports, later denied by John Deere, that it planned to transfer some production from an Iowa factory to a Mexican one. Such a tariff would violate the free trade agreement between the two countries that Trump criticized but changed only slightly as president.

A tariff like that would also rob Deere of some flexibility to deal with the current downturn in farm income, land values and equipment sales. Deere’s revenue fell 11% in the first three quarters of its current fiscal year.

Meanwhile, the number of available workers is declining in the industrial Midwest. Intel’s Grove didn’t see this coming when he wrote about industrial policy in 2010, and Trump and Harris don’t talk about it now.

As I’ve written before, Minnesota’s workforce today is about 1% smaller than at its peak in early 2020.

Iowa’s has shrunk 2.5% since then.